Airtax allows sole traders of all kinds the ability to complete their tax on their mobile in minutes without the need to visit an accountant. This includes rideshare drivers and taxi drivers operating as sole traders.
Unlike other sole traders in different industries, such as freelancers or consultants, rideshare drivers who are carrying on an enterprise must:
- Have an Australian Business Number (ABN) and be registered for Good and Services Tax (GST).
- Submit a Business Activity Statement (BAS) even when earning less than the regular GST threshold of $75,000.
- And like all individuals with BAS/GST obligations they must ensure they pay any GST liabilities to the Australian Taxation Office (ATO) by each due date.
Given these additional requirements for rideshare drivers, we’ve got some handy tips to help you best manage your tax compliance.
1. Get set up correctly from the outset
To set yourself up as a sole trader for ridesharing purposes, you need to obtain an ABN and register for GST with the ATO.
This can be done in a few easy steps using Airtax.
2. Understand what you can and cannot claim as a deduction against your rideshare income
You are entitled to claim a deduction for most expenses which directly relate to earning your income. These must be expenses that you paid for yourself and for which you weren't reimbursed.
You can claim a deduction for a percentage of expenses that represent the proportion related to you earning income (as opposed to private or domestic expenses). This is commonly referred to as your business use percentage.
The following are examples of expenses which you might be able to claim as a rideshare driver earning income from rideshare activities:
- Costs of becoming a rideshare driver such as application fees and rideshare license.
- Car maintenance expenses such as cleaning and servicing.
- Petrol and oil.
- Mobile phone usage.
- Subscriptions to music services such as Spotify.
- Parking and tolls.
- Lease expense of a rented vehicle.
Remember, you can only claim the proportion of these expenses that related to your ride sharing activity. For example, if you use your car for rideshare driving 50% of the time, you can claim up to 50% of expenses incurred but no more.
The simple form in Airtax allows you to add individual expenses and attribute a business use percentage to each.
3. How to manage your car related expenses
The ATO provides two methods of tracking car related expenses. These are the cents per kilometer method and the logbook method, both are explained in detail here.
4. Other things you might be able to claim
Being self-employed, rideshare drivers have GST obligations. However, they may also get the benefit of tax concessions for small businesses owners.
If you’ve purchased an asset related to your business operations (e.g. a vehicle), from 12 May 2015 you may be able to claim an up front deduction for the cost of the car if it was purchased for less than $20,000. Remember though, you can only claim the percentage of the asset which relates to business use.
5. GST may apply to the sale of your vehicle
It is important to note that if you sell a vehicle you’ve been using for the purpose of rideshare driving, you may be liable to pay GST on the sale. This will occur if you claimed a GST credit at the time you purchased the car or became registered for GST.
Using Airtax, you can determine the amount of GST that needs to be paid in relation to the sale.
6. Get a tool to help manage your tax in the palm of your hand
Airtax allows you to keep up with your tax obligations on your mobile when it’s most convenient for you.
You no longer need to spend time compiling your quarterly business information and driving across town to visit your accountant to do your BAS!