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Re: PTY LTD company and ride sharing

Initiate

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Replies 8

Hi,

I have been consulting to various industries under my company (a PTY LTD company) for quite some time. I draw a monthly salary from my company. My company owns and maintains a company car for business purposes.

 

Consulting occupies most of my time with across a range of industries and clients, however to help during quieter periods between clients my plan was for the company to make better use of the car and set-up ridesharing under the companies name (with me as it's Director and the driver).

 

My salary would not change and I would not be claiming any personal expenses because my company would carry these expenses. The whole idea is a better use of the car and my time. However I was recently informed that the ATO would not allow my company to claim any of the vehicle related expenses before calculating the company tax liability at the end of the financial year and I must also set-up as a sole trader to do any ride-sharing.

 

I am very confused by this advice. I can't see anywhere, including in the law (I'm a regulatory specialist) and on the ATO website why my proposal would not be allowed.

 

Can someone please explain the reason for this information coming out of the ATO?

 

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ATO Certified Response

Community Manager

Replies 4

Hi @Morphy1,

 

We have heard back from our specialists.

 

As far the company is concerned, the company is entitled to deductions for car expenses incurred in providing a car to its director for  use in the company’s business and for other exclusive use by the director. The company will be providing a car fringe benefit for which the company will  need to calculate its FBT obligations in respect of allowing you to use the company’s car.

 

On the second point the ATO takes the approach that under ride sourcing arrangements it is the individual driver that derives the income from ride sourcing activities, and that neither who owns the car nor what party is registered on the platform  is  determinative of who earns the income from ride sourcing.  A specific rule states that deductions are not allowed for employees for car expenses for employer provided vehicles that are subject to FBT for the employer.  Hence, expenses like fuel or repairs would not be  deductible to you even though they may be partly attributable to your ride sourcing driving.  However, your ride sourcing  activities and car expense payments made by you can be taken into account in calculating car fringe benefit value for your employer company under the Fringe Benefits car rules.  

 

All ride-sharing drivers need to have an Australian business number (ABN) and be registered for GST. The standard GST registration rule for GST turnover (of $75,000 or more) does not apply when it comes to ride-sharing. Further information on ride-sharing can be found on our website.

 

Hope this helps, let us know if you had any further questions.

 

Thanks, NateH

 

8 REPLIES 8

Community Manager

Replies 7

Hi @Morphy1,

 

Thanks for getting in touch. We're going to send this one off to a specialist area to get an answer for you and we'll get back to you soon.

 

Thanks, NateH

Initiate

Replies 6

Thanks NateH for letting me know.

Also, by way of clarification, there isn't any change to by salary and I won't be personally claiming any expenses. The intent that any money earn't by ride sharing is paid directly to the company and not me personally. While it is inferred in my post, it wasn't explicitly stated.

Community Manager

Replies 0

Thanks for letting us know, I'll pass that information on as well Smiley Happy

Most helpful response

ATO Certified Response

Community Manager

Replies 4

Hi @Morphy1,

 

We have heard back from our specialists.

 

As far the company is concerned, the company is entitled to deductions for car expenses incurred in providing a car to its director for  use in the company’s business and for other exclusive use by the director. The company will be providing a car fringe benefit for which the company will  need to calculate its FBT obligations in respect of allowing you to use the company’s car.

 

On the second point the ATO takes the approach that under ride sourcing arrangements it is the individual driver that derives the income from ride sourcing activities, and that neither who owns the car nor what party is registered on the platform  is  determinative of who earns the income from ride sourcing.  A specific rule states that deductions are not allowed for employees for car expenses for employer provided vehicles that are subject to FBT for the employer.  Hence, expenses like fuel or repairs would not be  deductible to you even though they may be partly attributable to your ride sourcing driving.  However, your ride sourcing  activities and car expense payments made by you can be taken into account in calculating car fringe benefit value for your employer company under the Fringe Benefits car rules.  

 

All ride-sharing drivers need to have an Australian business number (ABN) and be registered for GST. The standard GST registration rule for GST turnover (of $75,000 or more) does not apply when it comes to ride-sharing. Further information on ride-sharing can be found on our website.

 

Hope this helps, let us know if you had any further questions.

 

Thanks, NateH

 

Initiate

Replies 3

Hi NateH,

Thanks heaps for your response. I replied to your email on my email, but realised you probably won't get that so thought I should ask through here.

 

So from your response I think I can conclude that my proposal would work and be compliant because I will not be claiming any expenses nor will I be earning any income from ridesharing companies like Uber or Didi.

 

If the Pty Ltd company is paid by the ride share providers and also vehicle expenses, it will pay company tax (27.5%) on total business income less expenses. In the same way as the company is paid for providing consulting services to a varity of industries.

Also, as I said earlier I currently get paid a salary and that won't be changing and I pay income tax on that salary.

 

Am I missing sometjhing, because from my read of the answer I am ok?? 

 

Initiate

Replies 0

Hi NateH,

Any response from last question?

Community Moderator

Replies 1

Hi @Morphy1,

 

Thanks for your patience.

 

Ride sharing cannot be registered to a company. The proposed scenario could work but the use of the car would need to be apportioned between ride sharing and the current company. The income and apportioned expenses would be allocated to the ride sharing ABN.

 

In short you would be  running two separate entities and apportioning the use of the car between the two.

 

Thanks

 

KylieS

 

 

 

 

Initiate

Replies 0

Thank you for your response KylieS. It is pretty much where I got to, but information on ATO website isn't very definitive.

Thank you again.