Hey there! So, you've started driving for Uber in New Zealand and you want to make sure you're on top of your tax obligations. Don't worry, it's not as complicated as it sounds! Let's go over some things you need to know.
Choosing a business structure
It is important to select a business structure as soon as you start driving, for most uber drivers becoming a sole trader will be the best choice. We will discuss below why that is the case.
Setting up a sole trader business structure is a simple process that can be easily done through an accountant, the IRD portal, or even a phone call to the IRD. Unlike forming a limited liability company, there are no upfront costs or annual fees associated with establishing a sole trader business. This makes it a more cost-effective option for Uber drivers who may not have the financial resources to start a company. Additionally, sole traders have greater flexibility in paying themselves and are not subject to the same level of regulatory requirements as LLCs. As independent contractors, Uber drivers often require a business structure that allows for greater autonomy and ease of operation, which makes being a sole trader a suitable choice.
There are rare cases where a limited liability company can be beneficial for Uber drivers but from our experience, most drivers should opt to become a sole trader.
I only drive part time do I have to file a tax return?
We often receive this question: "Do I have to file a tax return if I only drive part-time?" Unfortunately, the answer is yes, even if you are only driving part-time.
Tax filing Due date
Uber drivers in New Zealand are required to file their taxes by July 7th each year. It's important to note that this is only the filing deadline and not the actual payment deadline. However, for those who may require more time to prepare their financials, signing up with 93 Accounting can be beneficial. By doing so, the due date for taxes can be extended to March 31st of the following year, giving Uber drivers several additional months to prepare and file their financials.
This can be a great option for those who may be busy with work or other obligations and need more time to complete their tax obligations. By taking advantage of this option, Uber drivers can avoid the risk of incurring late filing penalties or other consequences for failing to meet the July 7th deadline
Tax payment due date
For Uber drivers in New Zealand, the deadline to pay their income tax is February 7th each year. It's crucial to make sure payments are made by this date, as the IRD may start charging interest and late fees for unpaid taxes. In the event that an Uber driver is unable to meet this deadline, it's important to contact the IRD as soon as possible to avoid penalties. Monthly payment arrangements can be made to help ease the burden of debt over time. At 93 Accounting, we regularly assist clients with this process.
By signing up with 93 Accounting, Uber drivers can benefit from an extended payment due date of April 7th each year. This provides additional time to organize their finances and make payments towards their tax obligations. With the support of our experienced team, Uber drivers can enjoy greater peace of mind and confidence in their financial management.
What information do I need to complete my tax return.
To complete your tax return as an Uber driver in New Zealand, you'll need to provide details of your income, expenses, and assets. It's important to note that you must keep evidence of everything on your tax return.
Uber will provide a tax summary of your earnings and commissions each year, which will be available on the Uber app.
Expenses are costs that were incurred while trying to gain taxable income, and are the most important aspect of your tax return. It's crucial to track your expenses as you earn income, and keep receipts and invoices for all expenses you plan to claim. A simple spreadsheet in Excel is often sufficient for most drivers, though more sophisticated programs like Xero or specialized apps can be useful, however drivers can find themselfs locked into these services as their data can get locked away behind a subscription. We also find that drivers end up needing assistance in maintaining these apps, adding to their accounting costs. We reccomend a simple spreadsheet either on excel or google sheets, Your data can be extracted easily, they are easy to maintain and google sheets is completly free.
In addition to expenses, keep a detailed record of any assets you buy for your business, such as a vehicle. This includes the date of purchase, cost of purchase, and evidence of purchase. Your accountant will claim a depreciation expense on these assets and provide you with a depreciation schedule along with your financial statements.
These three components - income, expenses, and assets - are the basic building blocks of a tax return for Uber drivers in New Zealand, though additional information may be required depending on your individual circumstances.
How is my tax calculated?
To give a general idea of how your tax will be calculated, your accountant will prepare a set of financial statements that include a profit and loss statement. This report will detail your gross income (total business earnings), expenses, and net profit, which is calculated by subtracting your expenses from your gross profit. Your tax liability will be based on your net profit. As evident from this process, claiming expenses is crucial to reducing your tax liability, and having a solid understanding of what expenses you can claim is essential for all Uber drivers in New Zealand.
The current personal income tax rates in New Zealand are as follows:
10.5% on income up to NZD $14,000
17.5% on income between NZD $14,001 and $48,000
30% on income between NZD $48,001 and $70,000
33% on income above NZD $70,000
Do I need an accountant can I file my own tax?
You can certainly file your own tax return, the IRD have a great online portal to file and manage your taxes. While it is possible to file your own tax return using the IRD's online portal, there are significant reasons why you may want to consider hiring an accountant. A good accountant can help you save a significant amount of tax and may even provide you with extra time to file and pay your tax obligations.
That's it for now! Remember, tax season doesn't have to be scary. With a little bit of organization and some help from the professionals, you'll be all set. Happy driving!