How is GST calculated?
GST is relatively simple to calculate. It’s a 10% tax on goods and services.The easiest way to calculate the amount of GST you need to set aside is to divide by 11.
So if you earn $110 as a driver, the GST would be $10 ($110/11 = $10). If the fare was $55, the GST would be $5, and so on.
The Australian Tax Office (ATO) has said that GST must be calculated on the whole fare, before the ride-share company takes their cut.
What does this mean for me?
As it stands today you need to be putting aside 1/11th of your ride-sharing income. So if you divide your income by 11, this is the amount of GST the ATO wants you to collect.
Effectively, this is tax you are collecting that you will need to pass on to the ATO. The ATO has stated that this amount must be collected from 1st August 2015 onwards.
What about the GST I am paying on expenses to run my ride-sharing business?
Because you are registered for GST, you can also claim back (get refunded by the ATO) the GST you are paying to run your ride-sharing business.You can claim most expenses you incur from operating your car as a ride-sharing service.The GST is claimed when you lodge a Business Activity Statement (BAS) at the end of every quarter.
Again, an easy way to work out how much GST you have paid is to divide the total amount by 11.
So let’s say you spend $550 on fuel for ride-sharing services during the next two months (01/08/2015 to 30/09/2015), you would claim back $550/11 = $50.
How do I calculate a Business Activity Statement (BAS)
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.
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.
This is a very simple calculation BUT to do it correctly you need to make sure you are only claiming back the portion of expenses that are for business use.
The best advice at this stage is to start keeping all your receipts and maintaining good records, that way you’ll claim back the maximum amount of GST and only pay what you need to.