- April 24, 2017
- Posted by: Melbourne Accountant
- Category: Tax Planning, Tax Tips, Taxation Rules
The ATO announced on the 20th of May 2015 that Uber drivers must register for GST. They’ve determined that under GST law, Uber, and by extension all rideshare services, meet the definition of a taxi service. This is significant because taxis have different GST rules to any other small business.
Under the GST law, if you carry on an enterprise and you provide taxi travel services in that enterprise you are required to be registered for GST regardless of your turnover. This means that, instead of only having to register when your turnover reaches $75,000, you must register from the first dollar you earn. Since it’s been confirmed that Uber fits this definition, Uber and all rideshare drivers must now register for GST from the day they start driving.
This is a game-changer. You’ll now be required to lodge quarterly BAS’s, and pay 1/11th of your gross fares less expenses to the ATO, in addition to paying income tax on the net amount. For many, this is completely new territory, and perhaps more than they bargained for when they signed up to drive.
If you’ve never calculated GST or lodged a BAS before, we can help get you registered and meet your BAS lodgment obligations.
But Isn’t Uber A Foreign Company? Shouldn’t They be Exempt from GST?
This is true, but it’s irrelevant, because they’re not the one supplying the service to riders. The transaction is directly between you and your rider. This means you, an Australian driver, are the supplier so GST is applicable. Uber have deliberately structured themselves as just a third party who arrange bookings and do the paperwork for you.
The commission that Uber charge you, on the other hand, is a supply by a foreign company. Since Uber is not an Australian company, our tax laws don’t apply, and they don’t have to pay GST to the ATO. This means there is no GST in the fees they charge to you. Therefore, since you didn’t pay any GST in the first place, you can’t claim any GST credits back on your BAS. (You can, however, claim a tax deduction for the Uber Fees on your end of year tax return).
What If I Don’t Register?
ATO Deputy Commissioner James O’Halloran has said “If those providing ridesharing have not obtained an ABN and not registered for GST, then we will undertake compliance activities – that means reviews and audits – and assessments may be raised.”
The ATO has extensive power to collect information to help them identify taxpayers who should be registered for GST. Uber will of course try to protect the privacy of their drivers, but they can be forced to provide details, or the ATO may be able to access other information sources.
The penalty for failure to register for GST is currently $3,400. The penalty for failure to lodge a BAS begins at $170 per BAS if lodged within 28 days, and can stretch up to $850 per BAS after 113 days.
With penalties as tough as these, and the resources of the ATO, it’s safe to say that avoiding GST registration carries quite a high risk.