The Australian Taxation Office is focusing its attention on those new business models using the share economy platform. ATO targeted a business model like UBER in August 2015, when ATO issued letters to around 30,000 UBER businesses asking them to register for GST. In this article, we as a professional CPA accountant and tax agents will provide guidelines to UBER drivers about the issues surrounding GST and how to complete the end-of-year UBER tax return and GST.
UBER in the United States appealed the decision arguing that UBER is not in the taxi industry and given that most of the UBER drivers’ incomes are under $75,000, it is not essential to register for GST, the court case is to be heard by Federal Court in July 2016.
According to the GST Act 1999, the requirement to register for GST is that the business’s expected turnover is over $75,000. If your business is under $75,000, you can elect to register for GST, and choose the annual reporting method, however, if your GST is over the $75,000 threshold, then your business must register for GST, and you can only choose either quarterly or monthly reporting frequency. The monthly reporting frequency is for businesses whose turnover is over 20 million dollars.
The exception to this rule is the taxi industry, according to Section 144 of the GST Act 1999, if you are a taxi operator or operating in the taxi industry, then you need to register for GST regardless of the turnover. The arguments for UBER United States are that the UBER drivers do not wear UBER uniforms, nor were their vehicles modified for taxi usage or carried UBER signs. However, the ATO argued that if it smells or sounds like a taxi, it is a taxi.
If businesses are registered for GST, then the next thing they need to do is to report the GST for every sale transaction and claim back all the input tax credits in which they make capital and noncapital purchases. The business model of UBER is as follows:
Guide for every UBER driver when doing tax return
The passenger would book the trip via an online app and pay the fare, and then UBER in the United States would contact the particular driver to perform the trip. The full fare (say X) will go to UBER in the Netherlands, then 15% to 20% (Say Y) will be retained by UBER in the Netherlands and 75% to 80% (Y1) of the fare will be then paid to the UBER drivers in Australia. UBER Netherlands also has a presence in Australia called UBER Australia, and UBER in the Netherlands will pay 5% for the full fare plus the cost of operation to UBER Australia.
If we assume the full fare is $100, and if the UBER drivers in Australia only receive 75% to 80% of the full fare, then common sense depicts that they only need to report that amount as sales and give back to ATO the 1/11 of sale as GST, hence the fare of $100 need to increase to factor into the GST, hence it will become $110, as UBER drivers only receive $88, then one would think that the reported sales figure should be $88. However, ATO had made a ruling that the total full fare must be reported by the UBER driver, meaning that the UBER driver needs to report $110 in the sales, however, can they claim back the $20 or 20% of the $110 as input tax credit? The answer to that question is a yes, however, at the moment, it seems that UBER Netherland is saying that those fares were generated overseas, and it covers marketing, administration, and other expenses, hence it is GST-free and does not have any input tax credit, if that is the case, then UBER drivers in Australia needs to pay and bear extra GST obligation for the UBER Netherland, which to be frank is unfair.
The end-of-year UBER tax return is quite simple as well, we need to compute the net GST position for all of the sales and purchases incurred during the year and compute the net profit position accordingly. It is important to keep all of the invoices for car expenses including the log book, petrol, repair, pink slip, vehicle registration, and insurance, the most important part is to include the 20% to 25% of the full fare charge by UBER Netherlands as expenses after factoring out the GST component.
If you are running a UBER business, please contact EndureGo Tax via 02-8958-1959, or email us at firstname.lastname@example.org, and our highly qualified professional CPA accountant will be able to go through the business, and maximize your GST and tax refund for you.