1. Apply for an ABN & Register for GST
The Tax Office has made it very clear since August 2015 that anyone who is a rideshare driver or Taxi driver needs to get an ABN & Register for GST.
You must get an ABN & register for GST regardless of how much income you earn. And yes, even if you earn under $75,000 per year, you still need to get an ABN & register for GST.
The good news is that we have made the process very simple, you can get an ABN & register for GST for free here:
2. Keep a logbook
We’re not going to lie, logbooks are a pain. They are an old fashioned way of proving to the tax office how often you use your car for business purposes.
For better or worse, it’s the system we have. So you might as well get your head around using one correctly – it will pay dividends at tax time!
Why should you care? 3 reasons…
Keeping a proper logbook means you can claim the maximum amount of car expenses as deductions.
As a Rideshare or Taxi driver – your car will most likely be your biggest tax deduction.
Once you have completed a logbook – you can keep it for 5 years!
Your Rideshare app records are not enough to meet the ATO requirements of a logbook. The ATO requires you to record your odometer readings at the beginning and end of each for each trip or session.
So you’ll still need to keep a separate logbook for 12 weeks.
Want to know more? Read our full logbook help article
3. Record all your expenses
At the end of the day, none of us want to pay more tax than we’re legally obligated to.
The simplest way to start doing this is making sure you’re keeping track of all your expenses relating to your ride sharing business.
What expenses can I claim?
In short, any cost that relates to running your ride-sharing business (with a few exceptions). The greatest deduction you’ll get is the cost of running your motor vehicle.
Keep a record of all your receipts for every car expense you have. You need the receipts to prove to the tax office that you actually paid for what you’re claiming. Seems tedious, but believe me, it will be worth it!
Want to know what you can an can't claim? Read our full expenses help article.
4. Put aside money for tax
As a ride-share or taxi driver you need to pay 2 types of tax. GST and Income Tax
GST is paid quarterly. The amount of GST you pay is calculated by completing a Business Activity Statement (BAS). You GST is roughly calculated by calculating 10% of your rideshare income and subtracting 10% of your rideshare expenses. To be safe, you should put aside 7% to 10% of your rideshare income each quarter so you have enough to pay your GST.
Want to know more about GST? Read our full GST help article.
Income tax is paid annually. The amount of income tax you pay is calculated by completing an Income Tax Return (ITR). Income tax is roughly calculated by adding up all the income you earned from all sources, and subtracting all tax deductible expenses. The result will be your taxable income, and this determines how much tax you pay.
As a rough guide:
If your taxable income for the year totals less than $18,200, you won't pay any income tax.
If your taxable income for the year totals between $20,000 and $40,000, you should save around 10% - 15% of your rideshare income for income tax.
If your taxable income for the year totals between $40,000 and $80,000, you should save around 20% of your rideshare income for income tax.
If your taxable income for the year will be over $80,000, you should save around 25% - 30% of your rideshare income for income tax.
Want to know more about Income Tax? Read our full Income Tax help article
The above are rough guides only. How much tax you pay depends on your personal situation and the other income you earn. To correctly work out yor income tax, you should lodge your income tax return with a tax agent such as Nixer.
5. Lodge your BAS once per quarter
It's important to keep up to date with your Business Activity Statements (BAS) and lodge them on time every quarter.
In simple terms, when you calculate your GST owing at the end of each quarter, you add up all the GST from the fares you have earned, and then minus all the GST you have paid on your expenses relating to ride-sharing.
Again, an easy way to work out how much GST you have paid or have collected is to divide the total amount by 11.
A very simple BAS calculation would be:
Total earnings for the quarter = $1,000
GST collected for the quarter ($1,000/11) = $90.90
GST paid on fuel purchased during the quarter ($550/11) = $50
Amount of GST you owe the ATO ($90.90 collected – $50 paid) = $40.90 you owe the tax office.
6. Lodge your tax return once per year
Your tax return is your declaration to the tax office on how much income you have earned from all sources in each financial year.
How much income tax you pay will depend on how much income you earned from both your ridesharing income and any other sources of income.
Preparing an income tax return can be tricky. You'll need to factor in your logbook and also be aware that all income and expenses are excluding GST. Thankfully the Nixer tax return is tailored especially for ride-share & taxi drivers, and you can ask us questions along the way.