The tax landscape for Uber drivers in New Zealand is undergoing a significant transformation in 2024, with new regulations set to redefine how income is reported to the Inland Revenue Department (IRD). As specialists in providing tax services for the ride-sharing community, we're here to break down these changes, ensuring you're fully equipped to navigate this new terrain.
A cornerstone of the new regulations is the obligation for Uber to report all income earned by drivers directly to the IRD. This represents a significant shift, as the IRD will now have direct insight into who is driving for Uber and the exact amount they earn. Such transparency is designed to streamline the reporting process, emphasizing the accuracy and completeness of the income reported by Uber on behalf of its drivers. Moreover, this puts all rideshare drivers under scrutiny. The IRD will now have access to their earnings, which could lead to potential legal issues. Below, we discuss how you can protect yourself from any trouble with the IRD.
Register with the IRD
If you have not yet registered with the IRD, it is vital to do so as soon as possible. Operating as a sole trader will suffice for most drivers, and this can typically be set up over the phone directly with the IRD. Importantly, it's better to approach the IRD first and register before they come to you. Proactively contacting them will demonstrate that you are not trying to avoid your tax obligations. If the IRD has to contact you about your earnings, they may become suspicious and could scrutinize your situation more deeply or impose fines. Register now, even if you have missed a number of income tax returns. Taking action before the IRD reaches out to you is a smarter move, especially as Uber will start reporting your details directly to the IRD from 2024 onwards. Being proactive can help avoid complications and potential trouble with tax compliance.
Obtain Your Tax Summary
Transitioning away from using bank statements for income calculations is a crucial step forward. Uber drivers are advised to utilize the tax summary provided by Uber, which accurately reflects total income and the commission paid to Uber. This method ensures alignment with the figures Uber reports to the IRD, facilitating a seamless tax filing process.
Report Full Income
With the IRD gaining direct access to income data reported by Uber, it's imperative for drivers to report their full income as shown in the Uber tax summary. Any discrepancies between the reported income and the data held by the IRD could lead to complications. Drivers are cautioned against making any adjustments to the income figures provided by Uber to avoid potential audits or penalties.
Do not Include GST credits from Uber in your income tax return
One of the noteworthy changes involves the flat-rate credits provided to non-GST-registered Uber drivers. It's important to highlight that these flat-rate credits should not be included as income in your income tax return. They are considered excluded income for income tax purposes.
🚨 Alert for Your Accountant: Given that the exclusion of flat-rate credits from income might not be widely known, ensure your accountant is aware of this rule to avoid any discrepancies in your tax filings.
GST must be deducted from expenses, GST registered or not
For GST-Registered Drivers
Income and Expenses Reporting: All income earned and expenses incurred must be included in your income tax return. If you are GST-registered, it's crucial to account for income and expenses on a GST-exclusive basis. This adjustment ensures that the GST component, already accounted for in your GST returns, does not affect your income tax calculations.
For Non-GST Registered Drivers
Income Reporting: Your income must also be accounted for on a GST-exclusive basis. This means that even if you're not registered for GST, the gross income reported should exclude any GST component.
Deducting Expenses: For expenses related to income earned through an online marketplace, deduct these expenses on a GST-exclusive basis. The rationale here is the flat-rate credits you receive recognize the GST on the costs you incur in generating this income. Consequently, all business expenses, regardless of your GST registration status, will now need to have GST deducted from them.
From now on, irrespective of whether you are GST-registered your expenses must have the GST component removed.
Keep Proof of Expenses
In light of the IRD's closer scrutiny of Uber drivers' tax filings, keeping detailed evidence of all deductible expenses is more important than ever. Comprehensive records and receipts for expenses such as fuel, vehicle maintenance, and others will be indispensable for substantiating claims and ensuring compliance under the new tax regime.
Know What Expenses You Can Claim
Expenses are the best way to reduce your tax bill, and now it's more important than ever to educate yourself on what the allowable expenses are for drivers. Understanding which expenses are deductible and how to accurately document them can significantly decrease your taxable income. Familiarizing yourself with the specifics can ensure you're not missing out on legitimate deductions, from vehicle-related costs to necessary operational expenses.
Separate Your Personal Bank Account from Uber
We strongly recommend having a separate bank account for all your Uber-related transactions. This account should be the repository for your Uber income and the outflow for related expenses. Maintaining this separation will prove invaluable not only for filing your taxes but also in the event the IRD requires more information or conducts an audit. Mixing personal spending and income with your Uber earnings can create confusion and potentially lead to issues with tax compliance.
Our Role in Your Journey
As your trusted tax services provider, we're committed to guiding you through these changes. From interpreting your tax summary to navigating GST registration, our team is here to provide the expertise and support you need to thrive under the new regulations. We understand the challenges and opportunities these changes represent and are dedicated to helping you optimize your tax position. Click here to contact us.
Uber Tax - Whats Ahead
The introduction of these new reporting requirements heralds a significant shift in the way Uber drivers manage their tax obligations. By adapting to these changes—through accurate income reporting, meticulous record-keeping, and utilizing Uber's tax summary—drivers can ensure compliance and mitigate the risk of penalties. Our firm is committed to supporting the ride-sharing community through this transition, providing the expertise and guidance needed to navigate the evolving tax landscape confidently. Together, we can embrace these changes, leveraging them for a more straightforward and transparent tax reporting process. If you have any questions or need assistance with your taxes Click here to contact us.