Tax deduction you need to be aware of as uber drivers
In Australia, ridesharing services like Uber and others are become commonplace. Uber drivers offer a swift, secure, and convenient means of transportation, as well as the freedom to choose their own hours and use their own vehicles. Uber drivers not only provide ridesharing but also other services like package delivery, food delivery through Uber Eats, and more, giving entrepreneurial drivers several chances to increase their income.
There is no way to escape paying taxes as an Uber driver in Australia; even if you are self-employed, you must do so. Uber drivers want to take use of all the available tax deductions for rideshare drivers in order to keep as much of their earnings as they can, just like any other worker, business owner, or independent contractor.
This article is a must-read for anyone who drives for Uber or who intends to do so in order to assist them with their tax planning. We’ve included some information to assist you in determining which costs you can deduct from your taxes in Australia and what documentation you’ll need to support your claim.
Of course, it’s a good idea to speak with a local, seasoned tax accountant to be sure you’re getting all the tax breaks you’re eligible for for the 2021–2022 fiscal year. However, an excellent place to start is with this article on rideshare driver tax deductions.
Continue reading to find out more about Australian rideshare drivers’ tax deductions.
What Tax Claims Can an Uber Driver Make in Australia?
These are the costs that the ATO deems tax deductible if you currently drive for Uber in Australia or intend to do so.
Tax deductions for Australian Uber drivers include the following:
- Vehicle costs (including deprecation, car lease payments or loan interest)
- Fuel prices
- Vehicle registration and insurance fees
- Auto repair
- Cleaning expenses
- Tolls and parking charges while traveling
- Costs for a mobile phone and plan
- Charges made to Uber
Only the percentage of these costs that are related to your job or “business use” is eligible for a tax deduction, therefore keeping a car logbook and having receipts on hand are essential.
The following expenses are not tax deductible for Uber drivers:
- Fines for parking or speeding
- Costs for personal driver’s licenses
- Snacks and meals for oneself
The details of these rideshare tax deductions are provided below.
Car expenses
Each year, rideshare drivers are eligible to deduct a variety of vehicle-related expenses from their taxes. If you own your car, you can deduct the depreciation from your taxes and you might be qualified for temporary full expensing (instant asset write-off). See the ATO’s instructions or see your accountant for further information on depreciation for Uber drivers.
Can Uber drivers in Australia claim fuel expenses on their taxes?
If you work as a driver for Uber or another rideshare or delivery service, you can deduct your gasoline costs as long as you keep a thorough vehicle logbook. However, you can only deduct fuel expenses that are directly related to your Uber business, such as those incurred while picking up and dropping off orders for food, packages, or passengers. Additionally, you might be able to deduct certain additional gasoline costs from your taxes, such as traveling to meet potential Uber drivers.
Can Uber drivers in Australia claim car washes as a tax deduction?
Tax deductions for cleaning costs are available to Uber drivers. Only the total cleaning cost can be claimed for unique instances; for recurring cleaning charges, your logbook percentage must be taken into account.
The price of supplies like hand sanitizer or disinfection wipes that you buy for your ridesharing vehicle qualifies as cleaning and sanitation expenses.
Can Uber drivers in Australia claim car payments as a tax deduction?
Tax deductions for some automotive payments, such as interest on a car loan or the cost of a lease, are available to Uber drivers. Depreciation may also be utilized, as well as Temporary Full Expensing, as a tax deduction.
As a self-employed Uber driver, your car serves as the most crucial piece of equipment for managing your business. If automobile loan repayments, interest, or rental fees are consequently tax deductible, that is a question that Uber and Uber Eats drivers frequently ask.
The appropriate percentage of the lease costs proportionate to the commercial use of the vehicle, as documented in your logbook, may be written off if you are leasing the vehicle in order to drive for Uber. For instance, if you use your car 25% for personal use after hours and 75% for driving for Uber, you can deduct 75% of your lease price.
Depreciation and the Instant Asset Write-Off / Temporary Full Expensing, which are exclusively available for asset purchases, are not available if you lease a vehicle.
You can deduct interest costs incurred while paying off a car loan if you used the vehicle for business purposes. You may be eligible for Temporary Full Expensing, also known as the Instant Asset Write-Off, which would allow you to deduct the full cost of your vehicle purchase in the 2021–2022 fiscal year. You can also claim depreciation of your vehicle over a five-year period.
Keep copies of all paperwork pertaining to the cost of purchasing your car and your repayments.
Can Uber drivers in Australia claim car insurance as a tax deduction?
Tax deductions for car insurance premiums are available to Uber drivers, although they are limited to the fraction of the cost that corresponds to the vehicle’s use for business purposes. You can calculate the percentage of your insurance costs related to “business use” by keeping a logbook.
Consider paying $1620 a year for your car insurance as an example. You can deduct $486, or 30% of your income, from your taxes If you use your car for Uber driving 30% of the time or more. To qualify for a deduction, make sure you maintain all documentation and receipts pertaining to the insurance on your rideshare vehicle.
In order to operate your business as a rideshare driver, you must have car insurance. This is seen as a necessary business expense because Third Party Property Damage (TPPD) insurance is a requirement for driving for Uber. Compulsory Third Party (CTP) insurance is also required for all registered vehicles operating on Australian roads. It is also adequate to drive for Uber if you choose Comprehensive Cover, which goes above and beyond what TPPD insurance covers.
However, having your own auto insurance is still recommended. Uber does offer partner support insurance for drivers. Additionally, as conventional auto insurance policies do not cover any damage sustained while on fares, you will need an insurance policy that covers ridesharing explicitly.
Can Uber drivers in Australia claim car rego on their taxes?
The portion of the registration fees for your car that relates to business use is deductible. Keep the receipt as proof that you paid for your vehicle’s registration.
Can Uber drivers in Australia claim car repairs as a tax deduction?
As an Uber driver, you can deduct the fraction of maintenance and repair costs that are for “business usage”. You can write off the cost of new tires, new brake pads, oil changes, inspections, and other potential maintenance and repair expenses. These are necessary to keep your car in top condition for your rideshare service, but the ATO will still examine the prices, so exaggerating repair charges or claiming for enhancements that aren’t necessary isn’t a wise move.
If you use the same vehicle for personal use, you cannot deduct the whole cost of car maintenance and repairs. You must make sure you retain both car maintenance receipts and valid records of business usage.
DRIVING COSTS
You can have expenses while transporting your passenger (or their food) as an Uber or Uber Eats driver. Additionally, you can deduct some daily expenses that come with being a rideshare driver from your taxes.
Can Uber drivers in Australia claim parking fees as a tax deduction?
For rideshare drivers, parking costs, including parking meter fees, are tax deductible. But only parking charges incurred for Uber-related activities, such as picking up or dropping off clients, are covered by this.
Personal parking fees are not tax deductible, even if they are paid on the same day or in the same afternoon that you are driving for Uber. You cannot deduct this sum from your taxes if you park at a restaurant while stopping for lunch in between Uber rides.
Can Uber drivers in Australia claim toll fees as tax?
If the passenger doesn’t pay the toll directly, you can deduct the amount of the toll just like you do with parking payments. Only the tolls you pay while traveling with Uber should be subtracted, though.
For instance, if you pay $140 a month in tolls to cross a bridge in your city with Uber passengers inside the vehicle, your annual expenses would total $1680. When it comes to taxes, you can write off all of the costs.
However, if you pay tolls when “off duty,” you cannot deduct these expenses from your taxes. Because of this, it’s critical to maintain accurate records rather than presuming you may deduct all of your toll costs from your taxes.
Can Uber Drivers in Australia Reclaim Driver’s License Fees?
Tax deductions only apply to the expense of obtaining a commercial driver’s license. Even if you utilize your private driver’s license to drive for Uber, you cannot deduct the expenditures associated with getting and keeping the license. This cannot be deducted from taxes since it is regarded as a personal or private expense.
Can Uber drivers in Australia claim speeding and parking tickets as a tax deduction?
Unfortunately, even if you’re a professional driver or rideshare driver, the costs associated with speeding tickets and parking fines are not tax deductible.
In fact, Australian tax law expressly forbids you from deducting fines for breaking Australian driving regulations from your taxes.
DISCONTINUOUS COSTS
Here are a few additional tax deductions for Uber drivers that you might be able to use.
Can Australian Uber drivers claim their fees as a tax deduction?
You can deduct certain fees associated with driving for Uber from your taxes, such as:
- Payments made to Uber and its digital platform in the form of commissions, services, and license costs
- Expenditures associated with your application to drive for Uber
- If you have a separate Uber account, bank fees may apply.
- Cost for tax and accounting professionals
Can Uber drivers in Australia claim meal expenses on their taxes?
Rideshare drivers, like everyone else, must eat, even when they are on the job. Meals, however, are not tax deductible because they are regarded as personal expenses. Even if you’re out driving for Uber or in the middle of a journey, you cannot deduct any food expenses from your taxes.
Can Uber drivers in Australia claim snacks as a tax deduction?
Providing passengers with snacks or other amenities, such as hand sanitizer, tissues, water, or mints, is a deductible expense for rideshare drivers, in contrast to personal meal expenses. The cost of refreshments for your passengers is deductible as a business or operational expense, but the cost of your personal meals and snacks is not.
Can Uber drivers in Australia claim phone costs as a tax deduction?
Because Uber ridesharing reservations are made through a mobile app, having a functional smartphone is essential. You can deduct the cost of the smartphone in addition to your monthly phone bill, but keep in mind that the same “business usage part” regulations still apply. Calculating the percentage of business usage will be necessary when choosing a phone and a plan.
The price of phone mounts, cradles, and chargers that are linked to your ridesharing business is deductible.
Ask your phone service provider if you may get an itemized bill. The charges on your phone bill that are deductible should be determined by comparing this to your Uber driving history.
Having a specific smartphone (and plan) for your Uber or ridesharing business might ease your annual tax requirements. In this manner, you can write off the entire bill without having to divide it into portions for personal and business use.
How Do Uber Drivers in Australia Calculate Car Costs?
Most Uber drivers utilize their vehicle for both personal and work-related transportation. You should allocate your vehicle expenses rather than claiming the full amount for fuel, maintenance, and cleaning because of this.
In Australia, there are two techniques to determine a vehicle’s business use:
BY CENTS PER KILOMARE RELEVANTLY TRAVELED
Up to 5000 business kilometers per vehicle each income year are allowed for a claim. General expenses like gasoline, depreciation, insurance, and maintenance are already covered by the predetermined amount per business kilometer. Therefore, you are not required to separately claim deductions for these expenses.
By maintaining a logbook of upcoming car expenses
You can deduct car expenses for Uber-related business purposes using the logbook approach at real cost as opposed to a predetermined rate. Depreciation, interest, and operating costs are some of these charges. Capital expenses, such as the cost of your car or the amount of money you borrowed to buy it, are eliminated.
The logbook approach requires you to keep track of your odometer readings for a minimum of 12 weeks. Your logbook is still valid for another five years after that, but you can use a fresh one if you change how you operate your vehicle. In addition, if you’re using the logbook technique, you must provide written documentation (such as receipts) of your spending.
For automotive expenses related to your job, you can utilize the ATO’s my Deductions tool, apply multiple strategies for various vehicles, or switch strategies from one year to the next. To determine which approach will suit your needs the best, it is a good idea to speak with a small company accountant.
The two techniques mentioned above can only be used to claim deductions for a car that you own or lease. If your car is covered by a hire-purchase contract, you are also regarded as the owner. Your vehicle expenses are not tax deductible if the car is owned by someone else or if you are leasing it from them.
You can only deduct direct costs like fuel costs if you use someone else’s automobile for ridesharing (for example, by borrowing a family member’s car for your Uber vehicle).
FAQs on Uber Driver Tax
Here are some frequently asked questions about tax deductions for Uber drivers.
DO DRIVERS PAY FOR UBER GST?
Since the August 2015 judgement, the ATO has mandated that all Uber drivers register for GST. In addition to the tax you pay on your income as an Uber driver, you’ll also need to submit the GST part of your Uber fares to the ATO.
Additionally, this means that Uber drivers may deduct only the remaining portion of their expenses—that is, the total expense less GST—from their taxes.
DOES UBER INCOME NEED TO BE REPORTED IN AUSTRALIA?
Whether your ridesharing business is full-time or part-time, and regardless of how much (or how little) you earn, you must record Uber income on your annual tax return. Fares, tips, and bonuses from your ridesharing business are all taxable income.
ARE UBER DRIVING PERSONNEL VIEWED AS SELF-EMPLOYED?
The business views Uber drivers as independent contractors, not as Uber employees. As a result, Uber drivers in Australia are legitimately independent contractors and running a company. This implies that drivers for ridesharing services can qualify for some small company tax breaks.
Recent high-profile legal disputes have centered on the question of whether drivers for ridesharing services and food delivery services should be regarded as employees. They will continue to be categorised as independent contractors until a formal announcement is made about the matter or until legislation is implemented to modify the status of Uber drivers.
IF YOU DO NOT REPORT YOUR UBER INCOME, WHAT HAPPENS?
In Australia, it is necessary to declare your income as an Uber driver and to include it as assessable income on your tax return. It’s not a good idea to under-report your wages because the Uber app tracks all of your profits.
The under-presentation of wages is taken seriously by the ATO, and failing to appropriately disclose your income may result in fines and interest charges.
An Uber driver’s tax obligations can be confusing, but a small business tax professional can help you comply with all legal requirements. Talking to an expert is the best course of action because, as an added bonus, the cost of accounting services is tax deductible.