Hello PC, I've got a rather left field question regarding accounting and tax implications of UBER. I'm currently an employee earning >$80K a year. I have a couple of days rather free in the week so wouldn't be totally against doing some UBER driving if it'll be financially beneficial - but I'm trying to see if it actually is. My current car doesn't satisfy the requirements due to year of make, I am interested in getting a new car. So here are my questions: 1. If I was to UBER, i assume I will be a contractor for tax purposes? 2. I have a few friends who are contractors (in other fields) and they claim back GST off new car purchases - effectively getting back 10% of the purchase price. If I bought a new car (say $45k - I know I can get a cheaper one but I've been eyeing off a particular car for a while) would I be able to claim back GST or is it a different ball game? 3 is there a minimum threshold in how much you have to drive for you to claim back expenses? Or is it a percentage scale. 4. Can I claim expenses like car washes, maintainance, petrol etc 5. For the accountants or any uber drivers here, have you found it worth your while? 6 please add any comments you think I may have missed or overlooked Thank you all! BSS
1. No you are a self employed individual under contract. A contractor isnt a tax definition. A contract is just a legal issue between two or more parties (uber / driver) 2 You are required to be registered for GST under the ATO Ruling regardless of turnover. To the extent of business use (logbook) the GST may be partly creditable. You need to assess this when claimed and if the use changes you may need to repay it also. 3 Deductions for the vehicle ownership + operation will be both partly deductible to the extent of a logbook and also fully deductible (eg uber related tolls, uber fee share, water, lollies and similiar costs). I encourage uber drivers to have two tags to keep work and private apart. All costs need to be adjusted for non uber use if relevant eg mobile data, phone etc. Many uber drivers have two phones for privacy and simplicity also. Total vehicle costs include depreciation, interest, repairs, insurance, rego, fuel, service, washing, cleaning etc. Then the total cost is subject to the logbook. If you do less than 5,000km annually you cannot use the logbook method and can ONLY claim a 66cent deduction per km. Uber can work well BUT it requires a very diligent approach and lots of hours. Many are keen to jump out of bed when the rate rises and fares go up. Low or even average feedback scores (for any reason!) can see you terminated. Many taxi drivers are now uber drivers as it has low entry costs v's the old plate system for taxi's.
This month's money Magazine (April 2017) had an article on ways to earn extra money including Uber, Air tasker etc
Imagine accepting a low bid from an overseas accountant (not necessarily disclosed to you) to do your bookkeeping and you email all your bank statements, TFN, etc .... Seriously though, this really attacks the predatory franchising industry. Low cost entry to starting a small business and you own your own business goodwill (through great feedback), unlike a franchisee who sweats away their life and merely builds up the Franchisor's goodwill. However, the person will not get any business coaching or compliance assistance normally available through a franchise. At least the ATO has a rudimentary education program to assist the sharing industry participants understand their obligations. However, I wonder how many have professional indemnity, workcover, etc.
I can see a day when we educate a kabastani who returns home and practices law for 40 rubles a day and charges clients 30 pesotas a hour for work that tesla pi has covered under its wordwide indemnity scheme and all the while fees are paid through paypal with nil gst.
Back to Uber - I use them quite regularly and every now and then when I'm sitting in a reasonably new car, I ask whether the driver purchased it with a view to becoming an Uber driver and how much they usually make an hour. Most nowadays are part-time Uber drivers. Then I ask whether, in calculating their hourly rate earnings calculations, they have factored in how much the extra kms that driving for Uber has reduced the resale value of their car. This is generally when the topic of conversation changes.
Most people would have no idea what their car depeciation cost is per year per month or per km. Its why people bought a hybrid. There is no logical mathematics to hybrids. I costed a camry vs a hybrid and thd hybrud camry would break even with petrol at 30+ years
IMO uber drivers (as a general rule) end up making 12-16 dollars per hour after expenses before tax.. There may be hose who operate a niche sector (times airport runs) but in general I don't see it as a viable enterprise long term. But 12-16 per hour is still better than watching tv and spending cash on powering the plasma!
The older hybrids need to battery changed at 130-150k Kms and are expensive. So dividing this into the average cost per month, not so attractive. Plus they have atrocious resale values. For a larger sedan, the newer 4 cyl Camry is quite fuel efficient for its size and not too sluggish for urban driving. We hired one when we went to the Barossa for a week. Not saying i would buy one, but it seemed economical.
That is the direction the business services accounting industry is going to my friend. I'm sure you are aware. Compliance is a product. It's a race to the bottom with prices now. Jobs that had heaps of fat in them priced at 10k getting done for 4K now. Offshoring is becoming more prevalent. Get that 10k job done for 3k. This is why I'm intrigued at the current evolutions of the acc industry. So much dead wood back of office types. The future is in the advisory space. CFO type work, consulting, monthly meetings, project work etc. - trusted advisory work. That is where the value is from a clients perspective. Us accountants get caught in the trap of producing extrodinary financials for the client, for which then don't generally understand the work that has gone into them. Not undermining that work, I pride myself on the quality of the financials and the diligence I have in maintaining a strict chart etc but the industry is headed for large changes. Many sectors have changed so much in the last 10 years. Accounting seems to have lagged, but I feel it is coming soon. The developments of apps and software integrations, cheaper software availiable to smaller clients, no longer does a client need to spend $60k on a package and still only use 20% of its capabilities. Service mate, Airtasker, themeforest, xero, pipedrive etc etc etc. a small business can have some powerful tools at low cost. Accountants seem to be stuck in the compliance safety blanket and I fear that the CPA and CA are not doing enough to push accountants into embracing more of this tech, use it themselves and assist clients with the same. Gone are the days of simple tax planning and vary the clients instalment for 4th quarter. Off on a tangent sorry..
It could be that CPA and CA policy over-represents the large firms, not really interested in SMEs that are exposed to these issues. Small practice members need to form special interest groups to raise these issues and influence their professional associations.
I personally find CPAA a waste of fees. NTAA have a far better focus on real world tax and practitioner issues. Small firm practitioners are often born in larger firms so the culture just keeps regenerating. And they all train staff they way they were trained. Several things wrong with the accounting professional IMO - Its attracts insular people with poor communication skills yet advice is a 100% communication exercise. - It relies on traditions and repetition - Encompasses complexity and poor communication skills result in poor client outcomes. It doesnt mean bad advice it means the client doesnt feel it is great advice. - Professional rules discourage creativity - Poor marketing skills Emphasis has to shift to providing knowledge, support and solutions rather than "doing" accounting and tax. Every provider I partner with has to add new value to a client + reduce my time or it fails my test - Cloud based software systems that are faster, better, smarter. And I dont mean Xero. I offer FREE business software with all the bells and whistles. - Innovative client digital signing, document management and the world best practice CRM - New video tele-conferencing (initiated this yesterday) with in-video document review and sharing. - 2017 Tax - PAS TV will be launched. Loads of video guides on demand. (Did I mention free)
Ive done some calculations on how much it costs to actually drive a car, including fuel, depreciation, servicing, licenses and registrations etc etc, the whole lot. I think the biggest factor was the price of the car. Its been a while since ive done the calcs but it worked out something around 70-77 cents per Km with a $10000 2nd hand car. Obviously there are many factors involved and each situation would be different. So to reach your break even, with a brand new car for the purpose of being an uber driver, in my opinion was not feasible or attractive. Many people go into driving for uber with out considering these unexpected expenses. Another thing that will back up the ~70c/km figure, is the amount of ads for jobs which include lots of driving will include a travel allowance of 60-70c/km. Which is a good indication in my opinion.
Just talking with a student today who is now using their 2 year old private car for Uber. She was wondering if buying a new car for "greater depreciation deductions" was a good idea. Even with a 100% tax deduction, you are still out of pocket. And I don't know many new cars that cost no more than $20k to get that instant write off. If you did not need to incur the expense in the first place (Uber permits cars up to 7 years old) then generally don't do it. Uber sets your rate, so you need to stay on top of costs to make any margin. If you are relying on greater miles to make up for smaller margins then understand the extra disproportionate costs of wear and tear and greater likelihood of accidents taking you off the road and destroying your small margin approach. So you buy the new car because you like comfort, but the smaller margins mean you are working longer hours to fund that comfort ... a lifestyle decision by sacrificing your lifestyle ?
The tax write off for assets can apply for assets that cost over $20K. Provided their is private use. Lets say a car cost $32K and has a 40% logbook for private use (60% Uber lets say). Then the cost of the car for tax purposes and the small business write off is FIRSTLY reduced by the GST...That right. Uber means you are registered. So $32K x60% = $19,200 1/11th x $19200 = $1745 So the car cost to be written off is $19200 less $1745 = $17455 Therefore $17455 is deductible in year one....Provided the vehicle is to be used for buisness use for the forseeable long term. If you change use of the vehicle later then a adjustmnet occurs and it could get expensive. Repay some GST and an assessable event for the former deduction. Ouch. Its dangerous to accelerate asset write offs without advice IMO. All it does is bring forward deductions. If anytging changes it then means a repaymnet occurs. Using Robs comment above the small business write off will mean a great deduction in year one. Nothing in year two and three etc...Sometimes a slow and strady approach may spread the deduction so that costs match the periods when you earn the income Another option is to defer the depreciation and finance the car - Assists to defer cashflow so it matches the periods when income are earned...Longer term. Loads of cars now offer sub $25K cost and capped service etc. All help to keep margins down so a profit can occur.
Hi Paul, The threshold is based upon cost (s.328-180(1) ITAA97 and ITTPA97). No consideration of taxable use proportion enters into the $20,000 threshold for access to the write-off.
Simplified depreciation - rules and calculations For pooling which is how the write off occurs it does. Under pooling only the business proportion of cost after adjusting for business proportion of GST is added to the pool.
Seems like a hot topic and experience needed in the field to fully understand it! Thanks for all the responses much to consider. Ok so I have a rather simple question: why don't more people buy a new weekend carand write it off via uber? Here's my thoughts which I assume there's a flaw somewhere: Buy a $65000 car. Immediately get back GST of approx $5900 Depreciate the car by 15% for a deduction of $9750 (approx tax return of $3500 depending on income bracket). All together that financial year saved 5900+3500 so $9400. On a $65000 car you hope to sell the next year for say $55000. So $10000 depreciation in cost minus savings/return of $9400. So you've used a brand new car for a year for $600. Is my logic flawed somewhere? The other thing about uber that's slightly open to interpretation is getting to the hotspot first. For eg we call know you get more rides if you get to the city and lurk first. But if you live in suburbs, does the drive to city count as uber usage even though not having a passenger next to you? If so how do they differentiate between private use and getting into position?
