What is a ride-sharing service?
A ride sharing service is an ongoing arrangement where:
- The driver makes the car available for public hire
- The passenger uses, for example, a website or smart phone app provided by a third party to request a ride. For example, Uber, GoCar, etc.
- You use the car to transport the passenger for payment with a view to profit.
Ride-sourcing is one example in the sharing economy.
What is ride-sharing not?
The ride-sharing definition typically does not apply to:
- Non-commercial car-pooling arrangements where passengers contribute petrol money or other arrangements where there is no view to profit.
- Car sharing arrangements where multiple users have access to a car which they use to drive themselves from one location to another.
- Arrangements that use vehicles other than cars, for example motorised tricycles.
- Arrangements where a car is used only to transport passengers for a particular purpose, for example a wedding or funeral procession, and which is not made available more generally to transport members of the public from one place to another.
Ride-sharing services and GST consequences
If you provide ride-sourcing services, you are providing taxi travel services.
Under GST law, if you carry on an enterprise and provide taxi travel services you are required to hold an ABN and be registered for GST, regardless of your turnover – the normal GST threshold test does not apply. If a passenger requested a tax invoice, one must be provided showing your own ABN – not your third party facilitator’s ABN.
What you need to do
If you run a ride-sourcing enterprises, you need to:
- Keep records
- Have an Australian Business Number (ABN)
- Be registered for GST, regardless of how much you earn
- Lodge business Activity Statements (BAS)
- Pay the GST portion of the full fare received from passengers for each rip you provide
- Include your income from ride-sourcing in your income tax returns.
Drivers are also entitled to claim income tax deductions and GST credits (for GST paid) on expenses – you may need to apportion these so you only claim amounts relating to providing ride-sourcing services.
More information
Click here for more information on applying for an ABN.
Click here for more information on registering for GST.
Click here for more information about income and deductions for business.
Click here for more information about providing ride-sourcing services and your tax obligations.
Final Thoughts
Ride-sharing can be a great way to boost your income, but there are obligations that need to ensure you don’t get in trouble with the ATO, so speaking with your BAS Agent or Tax Agent is advisable.
PS. Whenever you’re ready, here are 3 ways we can help you eradicate financial stress in your accounting firm or professional services business – faster …
Sign up to our LinkedIn newsletter, published weekly. You can sign up here: Eradicating Financial Stress
Get our book “Wow – I’m in Business! Your journey from overwhelmed to organised.” It’s full of insights, solutions and downloadable resources you can implement into your business immediately. Click here for your copy: Wow … I’m in Business! – Miss Efficiency
Book a time with me privately and we’ll do a deep dive into your Xero file to help you optimise for cash flow, efficiency and growth. Click here to book: Book a time with Sarah
