Is GST a Compulsion for Uber Drivers in Australia?

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Uber – A Legal Taxi Service?

The court battle between Uber, an Australian company and ATO is a topic of hot debate. In 2015, ATO announced that GST registration for all the Uber drivers is a must. As per the GST law and the definition of an ideal taxi service, any rideshare services must register for GST.

Uber highlighted the fact that no Uber drivers wait at taxi ranks and do not use the taxi meters.

However, ATO claimed that the vehicles the Uber drivers use are available for the public hire. It also states that any public hire taxi service that transports passengers for fares holds true for GST law. The public uses their taxi service with the Uber app on smartphones. Being a different approach than the conventional taxi service, it still serves the same purpose.

Thus, by all means, Uber is a taxi service and is bound to register under GST obligations.

How Can The ATO Tax Uber If It Is Illegal?

Uber provides a ride-sharing service all across the country. The legality of such services is still a debatable topic. Some states have endorsed in such services, while for the rest, it is still illegal.

As per a recent update, Uber is now accepted as a legal service in all states. The Tax legislation makes no such distinction between the source of income from the legal and illegal activities. So, irrespective of the legality, Uber is still taxable. Regardless, the income of the Uber drivers will be under the taxable log.

On the other end, under ATO’s statement, it does not express any view on the legality of the ride-sourcing arrangements.

Despite the laws, this still remains a heated discussion amongst the Uber, drivers and ATO.

UberShouldn’t Uber be Exempted from GST?

Uber is an Australian company that supplies services to the riders. They have clarified that they

are the third party who arrange the bookings and maintain the paperwork for the people using their services. Moreover, they have claimed they are not responsible for the transactions between the customer and rider.

As per Uber, GST should be applicable to the suppliers. Thus, the Uber drivers must register and pay the GST fees. But in no case, Uber falls under the GST obligations.

Is GST Registration Necessary for Uber Drivers?

Under the revised GST law, if you own an enterprise that provides taxi services, you are liable for the GST registration irrespective of your turnover. Since, Uber fits into the category of taxi services, the company and all the rideshare drivers must register for GST from the first day itself. As per the law, they need to lodge the Business Activity Statements (BAS) quarterly and pay the 1/11th of their gross fare as GST.

Effective from December 1st, 2017, Uber has switched to an Australian company. Thus, it must charge GST on the customers’ Uber fees. However, the Uber customers can claim back the GST on their quarterly BAS from the ATO.

ATO has shared some comprehensive information on their website regarding the ABN requirements and GST registration. You can visit their Ridesourcing and Tax page if you need a confirmation directly from the ATO about GST.

What Are the Repercussions If any Uber Driver Does Not Register For The GST?

If the ride-sharing service providers have not registered for GST or do not have a legal ABN, then ATO can undertake strict compliance activities. They will strictly review, assess and audit the service providers and the suppliers.

ATO may also indulge in activities such as sending letters to the Uber drivers who have yet not registered for GST. If anyone refrains from registering for GST, the ATO has the power to collect any information about the taxpayers. In such cases, even if Uber tries to protect the privacy of their drivers, ATO can enforce legal actions to access the information. They are liable to forge penalty of $3,400.

Thus, it is safer to pay back taxes and undergo GST registration than pay high penalties of the ATO.

What’s The Next Step?

If you have been driving for a while or new to the Uber driver club, get yourself registered for GST first. Sort your Uber Tax Obligations and manage your GST and taxes. Here is a not of the mandatory points:

  • ATO assures the drivers that if they register for GST by August 1st, it would not take any further action.
  • Apply for an ABN. Your ABN should be backdated to when you started driving for Uber. Once you meet the basic requirements for the enterprise, then you have to possess an ABN irrespective of the GST.
  • Establish a system to manage your Uber income that covers both GST and Income Tax.
  • Every Uber driver must follow the instructions provided by Uber with respect to your GST registration. It is essential to maintain the records to provide a tax invoice if your riders request for one.
  • You will have to declare your total Uber expenses and income at the end of the financial year. You can complete this within your regular tax return.

As per ATO guidelines and strict rules, every Uber driver must register and pay for the GST. You can follow the Uber GST guidelines to enjoy the smooth benefits. You can consult with any accountant or tax service provider. Also, take note of the ATO website. All you need to do is get yourself updated with the rules before you kickstart with your first ride.

Better to be safe than sorry with legal troubles.