Uber Driver Tax Deductions For 2021: All Your Questions Answered
Uber and other ridesharing platforms have become a daily part of life in Australia. Uber drivers take people from point A to point B in a quick, safe, and convenient way, with the flexibility to work their choice of hours and use their own vehicle. In addition to ridesharing, Uber drivers also offer services like package delivery, food delivery through Uber Eats and more, providing enterprising drivers with plenty of opportunities to boost their earnings.
Just like anyone with an income in Australia, an Uber driver needs to pay taxes – there’s no way to avoid this, even when you’re self-employed. And just like any other employee, entrepreneur, or freelancer, Uber drivers want to take advantage of all the applicable tax deductions for rideshare drivers, helping them hold onto as much of their earnings as possible.
If you’re an Uber driver – or planning to become one – this article is a must-read resource to help you with your tax planning. We’ve put together some information to help you identify which expenses you can claim on tax in Australia and what proof you’ll need for a valid claim.
Of course, it’s always a good idea to talk to an experienced tax accountant in your area, ensuring you get all the tax deductions you’re entitled to for the 2020 – 2021 financial year. However, this guide to rideshare driver tax deductions is a great place to start.
What Can an Uber Driver Claim on Taxes in Australia?
If you’re an Uber driver in Australia or plan to start driving with Uber, these are the expenses the ATO considers tax-deductible.
Rideshare drivers can deduct several kinds of vehicle expenses on their taxes each year. If you own your vehicle, you can also claim deductions for the car’s depreciation, and you may be eligible for temporary full expensing (instant asset write-off). For more on depreciation for Uber drivers, see the guidelines on the ATO website or speak to your accountant for all the details.
Eager to find out which car expenses are tax-deductible for Uber drivers? Keep reading to find out exactly which you can claim this year.
Can Uber Drivers Claim Fuel Expenses on Tax in Australia?
Yes, you can deduct fuel expenses if you drive for Uber or another rideshare/delivery service. However, you only deduct fuel costs that are part of your Uber business; that is, the fuel consumed from picking up and delivering passengers, food or parcels through an Uber booking. In addition, certain other fuel expenses – such as meeting up with potential Uber drivers for sign-up – are also something you may be able to claim on your tax return.
Can Uber Drivers Claim Car Washes on Tax in Australia?
As an Uber driver, you can deduct car washes on your taxes. It’s best to keep receipts for your car cleaning expenses, but if you’re unable to get physical proof of your expenses, keeping a diary of your vehicle maintenance costs is also considered valid.
You can also include car cleaning and hygiene products as another vehicle-related expense. This includes cleaning supplies used to keep your vehicle in a sanitary condition, such as antibacterial wipes and disinfectant.
Can Uber Drivers Claim Car Payments on Tax in Australia?
If you’re an Uber driver, you are considered self-employed, and your car is the most important piece of equipment for running your business. A common question for Uber and Uber Eats drivers is whether car loan repayments, interest or car hire costs are therefore tax-deductible.
If you are leasing your car to drive for Uber, you can deduct the portion of the lease costs proportional to the business use of the car. For example, if you use your car 75% for driving with Uber and 25% for personal use after hours, you can claim a deduction for 75% of your lease payment.
Leasing a vehicle means you cannot claim depreciation or access the Instant Asset Write-Off / Temporary Full Expensing, which only applies to an asset purchase.
If you’re paying off a car loan, you can claim a deduction for interest expenses representing your business use of the vehicle. You can also claim depreciation of your vehicle over five years, or you may be eligible for Temporary Full Expensing (preciously called the Instant Asset Write-Off), allowing you to deduct the total cost of your vehicle purchase in the 2020-21 financial year.
Ensure you keep copies of all documentation related to your car’s purchase price and your repayments.
Can Uber Drivers Claim Car Insurance on Tax in Australia?
Car insurance is critical to running your business as a rideshare driver. In fact, in most cases, you can’t drive without having your car insured. You can claim a tax deduction on car insurance premiums; however, you can only deduct the percentage proportional to your business use of the vehicle.
For example, imagine you’re paying annual car insurance of $1620. If you’re using your car for Uber driving 30% of the time, you can claim $486 – which is 30% – on your tax return.
Can Uber Drivers Claim Car Rego on Tax in Australia?
You can deduct the business use percentage of your vehicle’s registration costs. Make sure you keep the receipt on hand as evidence of your vehicle registration payment.
Can Uber Drivers Claim Car Repairs on Tax in Australia?
You deduct the ‘business use’ portion of any maintenance and repair costs as part of being an Uber driver. For example, you can deduct costs for new tyre purchase, brake pad replacements, oil changes, inspections, and other repairs and maintenance that may be necessary. These are important to keep your car in optimal shape for your rideshare business, but that doesn’t mean the ATO won’t scrutinise the costs, so inflating repair costs or claiming for non-essential upgrades isn’t a good strategy.
You cannot deduct the full amount for car repair and maintenance costs if you’re using the same car for personal use. You’ll need to ensure you keep both the receipts associated with vehicle maintenance and valid records of your car’s business usage.
As an Uber or Uber Eats driver, you may incur expenses while you’re driving your passenger (or their dinner) to the destination. You can also claim tax deductions on several day-to-day costs associated with being a rideshare driver.
Can Uber Drivers Claim Parking Fees on Tax in Australia?
Parking fees, including parking meter charges, are tax-deductible for rideshare drivers. However, this only applies to parking fees incurred on Uber-related business, including picking up or dropping off passengers.
Charges for personal parking – even those you incur on the same day or same afternoon you’re driving for Uber – are not tax-deductible. If you stop for lunch between Uber trips and pay for parking at the restaurant, you can’t claim this amount on your taxes.
Can Uber Drivers Claim Toll Fees on Tax in Australia?
Similar to parking fees, you can deduct the cost of toll fees if they aren’t paid directly by the passenger. However, you should only deduct the cost of tolls you pass through while on Uber-related trips.
For example, if you spend $140 a month on toll fees crossing one of your city’s bridges with Uber passengers in the car, you’d be accumulating $1680 worth of expenses during the year. You can deduct 100% of the fees when tax time comes.
However, if you pay any toll fees during ‘off duty’ hours, you can’t claim these costs as a tax deduction. For that reason, it’s essential to keep proper records rather than assuming you can claim all of your toll fees on tax.
Can Uber Drivers Claim Driver’s License Fees on Tax in Australia?
Only the cost of getting a commercial driver’s license is considered tax-deductible. You cannot claim costs for obtaining and maintaining a private driver’s license, even if you use that license as an Uber driver. This is considered a personal or private expense and therefore can’t be claimed on tax.
Can Uber Drivers Claim Speeding Fines and Parking Fines on Tax in Australia?
Unfortunately, fees resulting from speeding tickets and parking fines are not deductible on your tax return, even if you’re a professional driver or rideshare driver.
In fact, Australian tax law specifically disallows you from claiming tax deductions on fines related to breaching Australian traffic laws.
Here are some miscellaneous Uber driver tax deductions that you may be eligible to claim.
Can Uber Drivers Claim Uber Fees on Tax in Australia?
As an Uber driver, you can claim tax deductions on Uber-related fees, including:
- commissions, service, and licensing fees paid to Uber and its digital platform
- expenses relating to your application as an Uber driver
- bank fees, if you have a separate Uber account
- fee for accountants and tax agents
Can Uber Drivers Claim Meal Expenses on Tax in Australia?
Just like everyone else, rideshare drivers need to eat, including when they’re out working. However, meals are considered a personal expense and are not tax-deductible. You can’t claim any meal expenses on your taxes, even if you’re out driving for Uber or in the middle of a trip.
Can Uber Drivers Claim Snacks on Tax in Australia?
Unlike personal meal expenses, providing snacks or other amenities for passengers – including hand sanitiser, tissues, water or mints – is a deductible expense for rideshare drivers. Because this is an operational or business expense, the cost of refreshments for your passengers is tax-deductible, but your own meals and snacks are not.
Can Uber Drivers Claim Phone Expenses on Tax in Australia?
As Uber rideshare bookings rely on a mobile app, having a well-functioning smartphone is vital. You can claim a deduction for the cost of the smartphone as well as your monthly phone bill – though be aware that the same ‘business use portion’ rules apply. You’ll need to calculate the proportion of business usage for both your handset purchase and your phone plan.
You can deduct the cost of phone accessories related to your ridesharing business such as mounts, cradles, and chargers.
Check with your phone service provider about obtaining an itemised bill. Match this against your Uber driving records and determine which costs on your phone bill are deductible.
It can simplify your annual tax needs to have a dedicated smartphone (and plan) for your Uber or ridesharing business. In that way, you can write off your total bill without needing to apportion private and business usage.
How Can Uber Drivers Calculate Car Expenses in Australia?
Most people who drive for Uber will use their car for both their ride-sharing business and personal use. For that reason, you need to apportion your vehicle expenses rather than claiming the full cost of fuel, maintenance and cleaning.
There are two ways to calculate the business use of a vehicle in Australia:
By Cents per Kilometre Travelled
You are eligible for a claim up to a maximum of 5000 business kilometres per vehicle per income year. The set rate per business kilometre already covers general costs such as fuel, depreciation, insurance, and maintenance. That means you don’t need to claim deductions for these costs separately.
By Keeping a Logbook of Car Expenses to Be Claimed
Through the logbook method, you can claim Uber-business related car expenses at actual cost rather than using a set rate. These expenses include depreciation, interest, and running costs. However, capital costs like the purchase price of your car or the amount of money you borrowed to purchase your vehicle are excluded.
With the logbook method, you record odometer readings for a minimum period of 12 weeks. After that, your logbook is valid for 5 years, although you can use a new logbook any time your vehicle use changes. In addition, written evidence (ie. receipts) of your expenses are required if you’re using the logbook method.
You can utilize ATO’s myDeductions tool for work-related car expenses, use different methods for different cars, or change methods from one year to another. It’s a good idea to talk to a small business accountant to find out which method will be best for your needs.
Claiming deductions using the two methods above is only applicable for a car you own or lease. You’re also considered the vehicle’s owner if your car is under a hire-purchase agreement. If someone else owns the car or you’re leasing the car from someone else, your vehicle expenses are not tax-deductible.
If you’re using someone else’s car for ridesharing purposes (e.g. borrowing a family member’s car for your Uber vehicle), you’ll only be able to claim direct costs such as fuel expenses.
Uber Driver Tax FAQs
Here are some common questions regarding Uber driver tax deductions.
Do Uber Drivers Pay GST?
Since the ruling in August 2015, the ATO requires all Uber drivers to register for GST. You’ll need to submit the GST portion of your Uber fares to the ATO in addition to the tax you pay for your income as an Uber driver.
This also means Uber drivers can claim GST credits on certain expenses, though you can only claim the remaining amount of the expense (i.e. the full expense minus GST) as a tax deduction.
Do You Have to Report Uber Income in Australia?
You are required to report Uber income on your annual tax return, whether your ridesharing business is full time or part-time, and regardless of how much (or how little) you earn. Assessable income from your ridesharing business includes fares, tips, and bonuses.
Are Uber Drivers Considered Self-Employed?
The company considers Uber drivers to be independent contractors, not employees of Uber. Therefore, Uber drivers in Australia are legally self-employed and operating as a business. This also means rideshare drivers may be eligible for certain small business tax concessions.
Recently, several high-profile legal cases have arisen regarding whether rideshare and food delivery drivers should be considered employees. Until there is an official announcement on the subject, or unless legislation is passed to change how Uber drivers are classified, they continue to be independent contractors.
What Happens if You Don’t Report Uber Income?
It’s a legal requirement to report your income as an Uber driver in Australia, and it must be included as assessable income on your tax return. All of your income with Uber is recorded via the Uber app, so it’s not a good idea to under-report your earnings.
The ATO takes the under-presentation of earnings seriously, and failing to report your income accurately can mean that fines and interest charges apply.
If tax requirements for Uber drivers leave you feeling confused, a small business tax accountant can help you meet all your legal obligations. As a bonus, the cost of accounting services is also tax-deductible – another great reason that talking to an expert is the best strategy.
This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent financial advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.
Aaron is a Chartered Accountant with over 15 years experience in the accounting industry. Aaron has been able to provide advice around structuring, cashflow, tax compliance and working with clients to develop strategies.