Providing taxi travel services through ride-sourcing and your tax obligations
For GST purposes, the word taxi means a car (vehicle) made available for public hire that is used to transport passengers for fares.
State and territory laws regulating transportation of passengers contain specific definitions of the term taxi. It is possible for a vehicle to be a taxi for GST purposes, but not for state and territory regulatory purposes.
This information clarifies how the tax laws we administer apply to ride-sourcing.
We express no view about whether ride-sourcing vehicles are taxis within the state and territory specific definitions, or on the legality of ride-sourcing arrangements.
What is ride-sourcing?
Ride-sourcing is an ongoing arrangement where:
- you (a driver) make a car available for public hire
- a passenger uses, for example, a website or smart phone app provided by a third party (facilitator) to request a ride
- you use the car to transport the passenger for payment (a fare) with a view to profit.
Ride-sourcing arrangements can be enabled by a technology platform maintained by a third-party facilitator. Typically, a website or mobile device application is used to facilitate a transaction between a driver and a passenger.
Ride-sourcing is one example of collaborative consumption in the sharing economy.
This guidance does not apply in some situations
This guidance 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 a funeral procession, and which is not made available more generally to transport members of the public from one place to another.
This guidance focuses on the tax implications for drivers providing ride-sourcing services as they are the most affected.
GST consequences in providing ride-sourcing services
If you provide ride-sourcing services, you are providing taxi travel services. This is because you make a car available for public hire and use it to transport passengers for a fare.
Under GST law, if you carry on an enterprise and provide taxi travel services in that enterprise, you are required to be registered for GST regardless of your turnover.
Are you carrying on an enterprise?
An enterprise is an activity done in the form of a business.
If you provide ride-sourcing services to the public you are likely to be carrying on an enterprise. This is particularly the case if you operate in a business-like manner where, for example, you provide invoices to your customers.
If you operate infrequently or your activities are not commercial, you may not be carrying on an enterprise.
Example 1: GST calculated on full fare
If you are registered or required to be registered, GST must be calculated on the full fare, not the net amount you receive after deducting any fees or commissions.
For example, if a passenger pays $55 and the facilitator pays you $44 (after deducting an $11 commission) the GST payable is $5 (not $4).
Example 2: GST credits on business purchases
GST credits on your business purchases can be claimed, but must be apportioned between your business and private use.
For example, if you use your car 10% for ride-sourcing and 90% for private purposes, and you:
- buy a new car to use for your ride-sourcing activity for $33,000 (including $3,000 GST) - you may claim a GST credit of $300
- pay $110 for fuel (including $10 GST) - you may claim a GST credit of $1
- pay $220 for a service (including $20 GST) - you may claim a GST credit of $2.
You may be able to claim a proportion of GST credits for other business purchases you make.
End of example
What you need to do
If you do not have an Australian business number (ABN) and are not registered for GST, you must get an ABN and register for GST as soon as possible. You can get an ABN and register for GST at the same time if you register online. You will receive your ABN immediately if you provide all the information we require. We will notify you in writing of your GST registration details, including the date your registration is effective.
You should advise your facilitator that you are registered for GST. Your facilitator may issue a tax invoice for you or assist you with your GST and income tax obligations.
If a passenger requests a tax invoice, not just an invoice, for a fare over $82.50 (including GST) you must provide one. If the facilitator cannot do this on your behalf, use a tax invoice book with your ABN on it.
You are required to lodge business activity statements (BAS) and pay any GST by the due date.
Note: You may be subject to penalties if you do not comply with any of the above GST obligations and requirements.
Income tax consequences in providing ride-sourcing services
If you provide ride-sourcing services you are likely to be running a business, as you are providing your services:
- for a commercial reason
- with an intention of making a profit
- in a regular and repeated manner
- in a business-like manner including, for example, by issuing invoices to customers or engaging a facilitator to issue invoices on your behalf.
However, if you operate infrequently or your activities are otherwise non-commercial, you may not be running a business.
The income you earn or have earned from your ride-sourcing business is assessable income and must be reported in your income tax return. You can also claim deductions for expenses that you incur in relation to providing ride-sourcing services.
This applies even if you run your ride-sourcing business on a casual basis to supplement your income from another job or other business activities.
There are a few different business structures under which you can run your business. These include:
Unless you have made other formal arrangements in relation to your business structure you will be a sole trader, ie providing ride-sourcing services.
As a sole trader the operation and provision of your services are under your control. This is the case even when you source your business through a technology platform maintained by a third-party facilitator.
As a sole trader you use your tax file number (TFN) when lodging your income tax return and you pay tax at the same income tax rates for individual taxpayers.
How to avoid large bills for income tax
If you are earning regular income from your ride-sourcing business you may want to enter our pay as you go instalment system. This will allow you to pay small amounts throughout the year which will be offset against any income tax you need to pay once you have lodged your return.
Expenses you incur in running the ride-sourcing business will also be deductible. This may include expenses that relate to holding, maintaining or operating any assets used to provide the ride-sourcing services.
If you are able to claim a GST credit for the GST you paid on an expense, you can only claim the remaining amount (the total cost less GST) as an income tax deduction.
If you incur an expense that is both related to your business and is private or domestic in nature, you can only claim a deduction for the work-related proportion of the expense. Any expense claimed must not be private or domestic in nature.
For example, if you buy a meal to eat while on a break from providing ride-sourcing services it is not a business deduction; it is a private expense and cannot be claimed as an expense. If you use a mobile phone for personal use as well as to be notified of ride-sourcing work, you will be able to claim a proportion of the expenses for the mobile phone as a deduction against your business income, but only the amount that relates to its business use.
Calculating and proving how much of an expense is business-related
When you claim a portion of the expense as a business deduction you need to be able to show how you calculated the apportionment.
Common methods of showing how you apportioned expenses include:
- keeping diary entries of specific usage throughout the year
- keeping a diary of all use, separated into business and personal use, for a 12-week period to establish a pattern of use which can be used to calculate a percentage for the whole year
- claiming expenses from an itemised bill.
Records can be kept in hard copy or electronically. All records need to be kept for five years following the lodgement of your tax return.
Claiming car expenses
We anticipate that most ride-sourcing drivers will use their car for both personal and business use. This means you will need to apportion any car expenses deductions between personal and business use.
To be able to claim a deduction on car expenses, you must own or be named as the lease or hire purchaser of the vehicle. If your spouse or de-facto partner is the owner of the car we will accept that the car is a joint asset and will allow you to claim deductions for the car in those circumstances.
If you are operating as a sole trader or in a partnership there are two different methods available to you for claiming car expenses. These include either:
- cents per kilometres travelled
- keeping a logbook to calculate a proportion of car expenses claimed.
The cents-per-kilometre method is only available to you if are claiming less than 5,000 kilometres for the year. The rate that you are paid per kilometre will cover claims for all the general running costs of your car including petrol and oil, insurance, servicing and maintenance costs and depreciation. You don't need to show written evidence of how you calculated the number of kilometres that you are claiming less than 5,000 kilometres, but we can still ask how you calculated the kilometres you have claimed.
If you are claiming for more than 5,000 kilometres you must keep a logbook for a 12-week period to calculate the proportion of business expenses that you can claim in relation to your car expenses. You must keep a logbook for a 12-week period in the first year of business, recording all trips taken, kilometres travelled (odometer readings) and details of whether the trip was for personal or business reasons.
Regardless of which method you use to claim car expenses, when calculating kilometres travelled for a journey you need to remember that you cannot claim kilometres that are for personal or domestic travel. You can only claim for the kilometres travelled that are related to providing ride-sourcing services and earning that income.
Simply turning on the ride-sourcing technology platform or application while driving to places for a personal or domestic purpose does not mean that you will be able to claim all the kilometres travelled in those journeys.
Example 3: personal travel combined with providing ride-sourcing services
Gina has a job in the city and has recently signed up to be a ride-sourcing driver to earn extra income.
Gina turns on her application every morning when she drives to work. Some days Gina is notified of jobs and collects passengers and drops them off before driving to work. Other days Gina does not get notified of any jobs or she rejects jobs because she does not have time to complete the job and get to work in time.
On the days that Gina does not get jobs, or gets notified of jobs and rejects them, she cannot claim the kilometres travelled even though the application was turned on. The main purpose of the travel is for Gina to get to her main job which is for a private purpose.
On the days that Gina is notified of a job and decides to accept it, she needs to take an odometer reading at the time of accepting a job and at the time her ride-sourcing job has been completed. This is because Gina can only claim the kilometres where she was driving to collect a client and the trip for the client as they are the only kilometres associated with providing the ride-sourcing service and earning income.
Gina cannot claim the kilometres from where she dropped off the client and travelled to her main job because she is not travelling between workplaces and the main purpose of that trip is to travel to her job which is private expense.
Example 4: travel for income producing purpose turning into a personal trip
It is a Saturday night and Gina has heard that ride-sourcing drivers get a lot of work if they are available. Gina turns on the application as soon as she leaves her house and drives in and around the city for three hours and then drives home. Because Gina’s only intention of the trip was for producing ride-sourcing income she can claim all the kilometres from leaving her home up until the point she gets home three hours later.
If at some point when Gina was out looking for work she decided that business was slow and decides to go meet her friends, Gina must take an odometer reading noting the end of the business kilometres travelled at the time she decides to go meet her friends. This is because at that point the purpose of the travel changed from an income producing purpose to a personal trip.
End of example
Bridge and road tolls and parking fees
You can only claim a deduction for a bridge and road toll where you have incurred the expense while producing ride-sourcing income. You will need to be able to allocate the claim for a bridge or road toll to driving for a ride-sourcing purpose. You can do this by keeping a diary entry noting the charge and allocating it to a specific ride-sourcing service, which may include driving to pick up a ride-sourcing job.
You can only claim a deduction for parking fees where you incur the expense while doing ride-sourcing activities.
Car expenses that cannot be claimed
There are some car expenses that cannot be claimed as car or business expenses because they are personal expenses or not allowed under the law. This includes things like:
- cost of getting and maintaining a driver licence
- any fines, for example speeding or parking fines.
Example 5: claiming parking fees
Whilst running errands, Gina parks her car and incurs parking fees. As the main purpose of the trip is private she cannot claim the parking fees, even if she had the ride-sourcing application turned on and may be notified of jobs that she may accept in the course of running her errands.
Gina finishes her errands and decides that she may try and find some ride-sourcing work so she drives to the beach in the hope she may pick up a fare in the area. To save on fuel Gina parks the car in the beach parking lot and pays for one hour parking at a cost of $5. Gina sits in the car with the application on and in 30 minutes is notified and accepts a ride-sourcing job. Because the only reason Gina drove to the beach was with the intent of getting ride-sourcing work and earning income she can claim the $5 parking fee paid at the beach parking lot as a business deduction.
End of example
In limited circumstances, sole traders can offset a business loss against other income they earn, like salary and wages.
To be eligible to do this you must meet the income requirement and pass one of four tests. If you do not meet these conditions then you cannot offset your business losses against your other income. Instead you carry forward your business loss to the next year to be offset against your business income from the same or a similar business activity.
What the community is asking us
The community has raised some questions regarding the tax implications of providing ride-sourcing services. The following are some of the questions passengers and drivers are asking us.
Are ride-sourcing, ride-hailing or ride-sharing services taxable?
Yes. A driver providing taxi travel via a ride-sourcing or similar enterprise is making a taxable supply under GST legislation.
As a passenger, do I need to do anything differently?
If you do not run or work for a GST-registered business, then you do not need to do anything differently.
If the travel was part of running your GST-registered business or the business you work for then you may need to ask for a tax invoice. See the questions that follow for more detail.
Can I claim a GST credit for a fare charged to me or my employee by a ride-sourcing driver?
If you are registered for GST and the travel was part of running your enterprise, you can generally claim a GST credit for the fare charged to you. You can also generally claim a GST credit if you reimburse your employee for fares charged to them that directly relate to their employment.
For fares over $82.50, you must hold a tax invoice in order to claim a GST credit.
How much is the GST component that I can claim a GST credit?
The GST component is one-eleventh of the fare.
Will the driver give me a tax invoice?
- If the fare is more than $82.50, the driver must give you a tax invoice if you request one.
- You may get a tax invoice on behalf of the driver from the business that runs the ride-sourcing app (facilitator) and it might be delivered directly to your mobile phone. If it has the necessary information the driver does not need to give you a separate tax invoice in this situation.
- If the fare is $82.50 or less, the driver is not required to provide you with a tax invoice, but they may do so.
- If the driver does not give you a tax invoice, they might provide a receipt which you may retain as proof of your purchase. The receipt might be sent to you electronically by the business that runs the ride-sourcing app rather than the driver.
What if I don’t get a tax invoice and I need to claim a GST credit?
As a passenger, you only need a tax invoice for fares over $82.50. If you do not receive a tax invoice for fares of over $82.50 immediately, the driver has 28 days to give you the tax invoice.
If the driver does not give you a valid tax invoice within the 28-day period or gives you an incomplete tax invoice and you want to claim a GST credit, contact us for advice. In many instances your credit card statement details will be sufficient. It would be ideal if you capture the details of the car number plate and report a concern to us.
Can I claim GST credits for past rides already taken but not yet claimed?
Yes, if you are entitled to claim a GST credit for a past ride, but you have not yet claimed it, you can do so on your next activity statement. This is provided you lodge it within four years of the due date for lodging your activity statement for the tax period in which you took the ride. If the fare is more than $82.50 you need a tax invoice to be entitled to claim the credit. If the fare is $82.50 or less, an invoice or receipt is sufficient.
Why did the ATO only issue this advice recently?
We are aware of some uncertainty about how tax applies to various sharing economy models. Through consultation with relevant stakeholders, we have issued guidance to assist ride-sourcing providers to comply with their taxation obligations and assist with the uncertainty.
The ATO's view does not involve new law or policy. Our advice is about how the existing tax law applies to ride-sourcing.
The ATO advice is being challenged in court. Does the challenge change anything we expect drivers should do?
Taxpayers often challenge the Commissioner’s view but this does not affect our continued administration of the GST law. Similarly, current legal proceedings do also not change the Commissioner’s view on our published guidance. Therefore we will continue to support and advise impacted drivers on how to demonstrate their compliance with the law and the ATO position.
There are conflicting views about ride-sourcing drivers being taxi drivers. Who is correct?
Our role is to interpret the tax law and to provide advice to the community. Our advice is that drivers providing ride-sourcing services are providing taxi travel under GST law. We are administering the law on that basis.
Our view is only about how Australian Government tax laws apply and whether a particular activity is taxi travel for GST purposes. The various states and territories have different laws about what a taxi is for their own regulatory purposes and the ATO view of the tax law does not affect the interpretation of what is a taxi for state regulation purposes or for other Australian Government law purposes.
Does this advice apply to other forms of transport?
We have previously issued some interpretative decisions dealing with other forms of transport and whether or not they involve taxi travel. In summary, rickshaws and motorised tricycles are not cars which we consider a vehicle must be in order to be a taxi.
We also consider that wedding and funeral cars can be distinguished from taxis. These vehicles are not considered to be used in providing taxi travel because they are not available for public hire for general transportation from point A to B. Instead, while a wedding or funeral car is booked by a member of the public, it is available only for special occasions, and is not available to be hailed or pre-booked by the public for general transportation.
In some instances, these other businesses will have turnover of at least $75,000 and so they are required to be registered for GST under the normal rules in the GST law.
How does GST apply to fares?
The fare that is calculated by your facilitator is the full fare including GST. The GST you pay to us, less any GST on your inputs such as fuel, is one-eleventh of the total amount charged to the passenger.
Example 6: GST on fares
During the week Monday 10 August to Sunday 16 August, John does the following jobs:
The GST on the week's work is $232.18. John will be able to claim GST credits (input tax credits) on the fuel and other expenses he incurred. The facilitator will charge a commission on the full amount of $2,554.
If the facilitator takes a commission this may be a business expense for the driver and means he can claim the commission as an income tax deduction.
End of example
As a ride-sourcing driver, what category do I register my ABN?
You can use 46239 Road Passenger Transport or 46231 which covers Taxi Services.
This class consists of units mainly engaged in operating vehicles with drivers for the transportation of passengers.
We recommend you use ‘ride-sourcing’ or ‘ride sharing’ as your business description.
Can I also use the same ABN for earning other income in a different industry?
If you are already registered for GST as an individual, for example an IT contractor, you must use the same GST registration for your ride-sourcing activities.
However, if you have a GST-registered company, you need two separate GST registrations - one for you and one for the company. A company is a separate legal entity and it must report its GST separately.
Are ride-sourcing drivers employees or independent contractors?
Based on our knowledge of the ride-sourcing industry, we consider drivers to be independent contractors instead of employees.
To be classed as an employee will depend on a number of factors such as whether you supply your own vehicle and whether you are free to choose your own hours.
Are ride-sourcing drivers eligible for all small business concessions and what deductions can be claimed?
It is likely that ride-sourcing drivers are carrying on a business.
If you are carrying on a business and you bought an asset for less than $20,000 excluding GST on or after 1 July 2015, you would be entitled to claim an immediate deduction for the asset in your 2015–16 tax return.
If your purchase is used for both business and private use, you can only claim a GST credit or an income tax deduction for the part of the purchase relating to your business use. For example if you use your car 50% for your business, you can claim 50% of the GST on the fuel and other car-related expenses and 50% of the GST-exclusive cost as an income tax deduction.
You need to keep records of the income and expenses and how you apportioned for private use.
If a ride-sourcing driver borrows a car, can the driver claim depreciation on the car?
You can only claim depreciation for assets that you own. You need to be able to prove ownership, for example that the car is registered in your name.
As a driver, do I have to issue a tax invoice?
If a passenger requests a tax invoice (not just an invoice) for a fare over $82.50 (including GST) you must provide one. If the facilitator cannot do this on your behalf, use a tax invoice book with your ABN on it.
The tax invoice must contain the driver's details such as ABN. If the facilitator will issue tax invoices on your behalf, you should contact the facilitator and advise them of your GST registration status.
Can facilitators issue tax invoices on behalf of drivers?
A facilitator can issue a tax invoice to the passenger on behalf of the driver if their system allows this.
As a passenger, what can I do if I don’t receive a tax invoice?
As a passenger in ride-sourcing, you only need a tax invoice for fares over $82.50. If you do not receive a tax invoice for fares of over $82.50 immediately when you ask the ride-sourcing driver for a tax invoice, the driver has 28 days to give you the tax invoice.
If the driver does not give you a valid tax invoice within the 28-day period or gives you an incomplete tax invoice, you can ask us for permission to claim the GST credit.
To request permission to claim the credit, you can:
- email us at GSTmail@ato.gov.au
- write to us at
Australian Taxation Office
PO Box 3524
ALBURY NSW 2640
What records do ride-sourcing drivers need to keep?
Records may include logbooks of odometer readings and electronic records from your facilitator.
What is the ATO's compliance approach to ride-sourcing?
We do not want to stand in the way of people carrying on their business and we want to make it as easy as possible for you to comply.
We recognise that many drivers under ride-sourcing arrangements may not have realised they were required to be registered for GST because the business model and technology platform is new. We provided clear advice and gave drivers extra time until 1 August 2015 to get registered.
Even though our interpretation of the GST law is relevant for earlier periods, we do not plan to apply compliance measures to ride-sourcing for periods before 1 August 2015 unless there is evidence of fraud or other serious matters.
From 1 August 2015 we expect that all drivers involved in providing ride-sourcing services are registered for GST and meeting their GST obligations like any other taxpayer.
Is GST payable on a toll charge passed on to a passenger?
Yes, GST is payable on the toll passed on to the passenger, but you (the driver) are entitled to claim a GST credit for the GST included in the price of the toll charged by the tollway owner for the journey.
Example 7: GST on a toll charge
A driver transports a passenger and pays a toll of $2.20 including 20c GST. The driver claims a GST credit of 20c.
The fare is, say, $22.00 including $2.00 GST. The total charge including tolls is $24.20.
The driver's GST liability on the fare is $2.20, including 20c relating to the toll.
The driver’s GST liability on the 20c toll is exactly offset by their 20c GST credit.
End of example
What is the GST treatment of bonus and top-up payments?
GST is a tax on consumption in Australia only. If you receive a bonus or top-up payment from an overseas facilitator the service you are providing is not consumed in Australia and is GST-free.
These GST-free services may include:
- marketing and promoting the facilitator to potential customers for which you may receive bonus payment from the facilitator, for example when a new customer quotes your reference code or other identifier
- operating during certain times, such as peak hours for which you receive a top-up payment from the facilitator - the top-up payment is not part of the fare and is in addition to the fare paid by the passenger.
What are the GST consequences of delivering goods through a ride-sourcing arrangement?
If a customer orders delivered goods from an overseas facilitator, and a facilitator engages you as the driver to deliver the goods and pays you, your delivery service is consumed by a customer in Australia and is subject to GST, even though the facilitator is based overseas.
What is the GST treatment of cancellation or no show fees?
Under ride-sourcing arrangements, the customer may be obliged to pay a fee when they do not show for a trip arranged through the app (a no show). In these cases, you may drive to the location and perform other tasks in preparation to transport the customer. These services are performed for the benefit of the customer in Australia and any cancellation fee that is charged to the customer will be subject to GST.
You will need to report the income from your current activities on your income tax return.
Compliance measures regarding GST obligations for drivers prior to 1 August 2015 will only be applied if there is evidence of fraud or other significant matters.
This information is for guidance only. If you rely on this guidance and it is later found to be incorrect, you will have to pay any shortfall, but you will be protected from penalty and interest charges.
Ride-sourcing and tax webinar
We ran a free webinar on ride-sourcing and tax to help ride-sourcing drivers understand their obligations.
The webinar discussed:
- what ride-sourcing is
- what drivers need to do
- Q&A session.
Ride-sourcing is one example of the new business models and arrangements, which form what is known as the sharing economy.
Ride-sourcing services (also known as ride-sharing, ride-booking, taxi or ride-hailing services) are increasingly being used to provide taxi travel and have tax implications for those involved. If you are a driver providing this type of service and carry on an enterprise you must register for the goods and services tax (GST).