Uber and other ride sharing service drivers have six months to get their tax affairs in order before the ATO takes audit action.
Confusion still surrounds how operators should set up and run their businesses in this relatively new part of the economy.
One-third of drivers involved with ride-sharing services such as Uber are yet to register for GST or to fully declare their income, according to ATO data.
While taxi drivers have always been required to register and pay GST, Uber initially argued that it was not a taxi service and, therefore, its drivers did not have to register for GST if their annual turnover was less than $75,000.
The ATO brought down a ruling in August 2015 requiring all Uber drivers to register for GST. Uber challenged the ruling, but in February the Federal Court sided with the ATO.
As a result, Uber and other ride-sharing drivers must now collect and report GST regardless of whether they fall under the $75,000 turnover threshold.
The ATO has written to 60,000 ride-sharing drivers reminding them of their obligations.
Currently the ATO is trying to educate drivers and give them time to get their tax affairs in order.
But the patience will not last forever. Ride sharing drivers not registered and properly reporting their GST and income by Christmas may face ATO compliance action, including reviews and audits.
The starting point for all drivers is to apply for an Australian Business Number (ABN) and register for GST.
Those not confident of how to properly register an ABN, or properly report their income and GST, should seek the advice of a registered taxation specialist.
But signing up these reporting obligations is not all bad news.
A registered taxation specialist can show drivers how claim tax deductions and GST credits for business expenses, such as car fuel, servicing and your smartphone and data usage.
These expenses often need to be properly apportioned between business and private usage.
Using a taxation specialist also will help avoid common mistakes being made, such as only reporting the net income received from Uber, rather than declaring the gross fare and then deducting the Uber fee as part of expenses.
Uber fees are GST free, but many drivers mistakenly claim GST input credits against this amount.
The ATO collects more than 650 million pieces of data each year and has recently started receiving information about ride sharing services.
The experienced tax team at Affinitas Accounting can help with your GST registration and business reporting obligations.
Contact firstname.lastname@example.org or 07 33595244.