# Small Business Income Tax Offset reduces tax on Uber income



## Jack Malarkey

Did you know that as an Uber driver you should be eligible for the Small Business Income Tax Offset? This offset first applies from the 2015-16 income year and reduces tax payable by up to $1,000. It is available to individuals and other non-company entities with aggregated business turnover of less than $2 million.

For the 2015-16 income year, the discount is 5% of the income tax (excluding Medicare levy) otherwise payable on the net small business income up to a maximum tax saving of $1,000.

The Tax Office works out your offset from the information you provide in your tax return.

Here is an example that illustrates how this tax saving works:

Jacinta has a taxable income of $57,000. This comprises $37,000 from her main (salaried) job and net income (gross income minus related deductions) of $20,000 from Uber driving. The tax payable on the net Uber income would normally be $6,500 ($20,000 x 32.5%). The Small Business Income Tax Offset is $325 ($6,500 x 5%). This reduces the tax payable on the net Uber income from $6,500 to $6,175.

Subject to parliamentary approval, the rate of the offset will increase from the 2016-17 income year to 8% and be based on aggregated business turnover of less than $5 million.


----------



## Jack Malarkey

Here is a link to Australian Taxation Office information about the Small Business Income Tax Offset: https://atotaxrates.info/tax-offset/small-business-tax-discount-offset/.


----------



## Jack Malarkey

Here are the tax rates for the 2015-16 income year for resident individuals: https://www.ato.gov.au/rates/individual-income-tax-rates/.

Don't forget to add Medicare levy (usually 2% of taxable income).


----------



## GUberX

Jack Malarkey said:


> Did you know that as an Uber driver you should be eligible for the Small Business Income Tax Offset? This offset first applies from the 2015-16 income year and reduces tax payable by up to $1,000. It is available to individuals and other non-company entities with aggregated business turnover of less than $2 million.
> 
> For the 2015-16 income year, the discount is 5% of the income tax (excluding Medicare levy) otherwise payable on the net small business income up to a maximum tax saving of $1,000.
> 
> The Tax Office works out your offset from the information you provide in your tax return.
> 
> Here is an example that illustrates how this tax saving works:
> 
> Jacinta has a taxable income of $57,000. This comprises $37,000 from her main (salaried) job and net income (gross income minus related deductions) of $20,000 from Uber driving. The tax payable on the net Uber income would normally be $6,500 ($20,000 x 32.5%). The Small Business Income Tax Offset is $325 ($6,500 x 5%). This reduces the tax payable on the net Uber income from $6,500 to $6,175.
> 
> Subject to parliamentary approval, the rate of the offset will increase from the 2016-17 income year to 8% and be based on aggregated business turnover of less than $5 million.


Does ATO apply this discount automatically using the details on our tax return?

Would you care to explain this little bit?
"The total amount of net small business income cannot be greater than taxable income, nor can it be less than zero"


----------



## Jack Malarkey

GUberX said:


> Does ATO apply this discount automatically using the details on our tax return?
> 
> Would you care to explain this little bit?
> "The total amount of net small business income cannot be greater than taxable income, nor can it be less than zero"


Thanks, GUberX, for your questions.

Yes, the ATO applies this discount automatically using the details in our tax return. The offset will appear separately on our notices of assessment. It's essential that we provide all information requested and at the correct label or labels in the income tax return to enable this to happen.

It would be rare that the total amount of net small business income exceeds taxable income but it is possible. Let's say you have net Uber income of $25,000 and a loss of $5,000 from a rental property (but no other income or deductions). Your taxable income is $20,000. Because your net small business income ($25,000) exceeds your taxable income ($20,000), you are ineligible for the offset (discount).

If your net small business income is less than zero, you in fact have a loss so there's no relevant tax payable to reduce by 5%, so once again you're ineligible for the offset (discount).


----------



## GUberX

Thanks Jack, I didn't think about the situation where you make a loss from another source. And ur explanation cleared the confusion easily .

And also can I ask another question since u seems knowledgeable in the area?
When we report total business income in the tax return, should we put down the whole amount and deduct GST paid through other business expenses, or should we just report amount excluding GST as total income?


----------



## Jack Malarkey

GUberX said:


> Thanks Jack, I didn't think about the situation where you make a loss from another source. And ur explanation cleared the confusion easily .
> 
> And also can I ask another question since u seems knowledgeable in the area?
> When we report total business income in the tax return, should we put down the whole amount and deduct GST paid through other business expenses, or should we just report amount excluding GST as total income?


GUberX, we should just report the amount excluding the GST as total income.

See this information sheet from the Tax Office: https://www.ato.gov.au/Business/Inc.../What-to-exclude-from-your-assessable-income/.


----------



## GUberX

Thanks heaps mate.


----------

