The Australian Taxation Office is focusing its attention on those new business models using the share economy platform.
Business model like UBER was targeted by ATO 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 agent 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 driver’s 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 expected turnover of the business is to be 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 it is compulsory for your business to 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 $20million dollars.
The exception to this rule is the taxi industry, according to Section 144 of GST Act 1999, if you are a taxi operator or operating in 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 uniform, nor were their vehicle modified for taxi usage or carried UBER sign. However, the ATO argued that if it smells or sounds like a taxi, then it is a taxi.
If a 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 credit in which they make capital and non capital purchase. 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 on-line app and paid the fare, then UBER in United States will contact the particular driver to perform the trip. The full fare (say X) will got to UBER in Netherlands, then 15% to 20% (Say Y) will be retained by UBER in Netherlands and the 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 Netherland 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 in 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 in oversea, 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 then 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 insurances, 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 an UBER business, please contact EndureGO Tax via 02-8958-1959, or email us on firstname.lastname@example.org, and our highly qualified professional CPA accountant will be able to go through with you the business, and maximize your GST and tax refund for you.