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Uber: A Threat and a Lucrative Opportunity

Uber can be a tremendous opportunity, with the benefits of it derived by those who approach it with an entrepreneurial mind.  The optimum results derived by the one who takes this journey with the right information and at the right time.

With the taxi industry, the capital intensive items are vehicles and the taxi plates used in these vehicles. In a capitalist system this ensures the driver or renter of the taxi cabs earns a small wage or return and the owner/entrepreneur the balance. The emergence of Uber enables a person who has the desire to be an owner driver to come into this space and compete for customers who use the service of taxis.

An Uber driver is a business, and like the taxi drivers, needs to apply for an ABN and be registered for GST purposes.  The vehicle which is being used for ride sourcing now becomes a capital item.  For the purposes of this exercise lets assume the Uber driver uses the car 90% for business purposes (as per logbook). In that scenario any interest portion of any repayments becomes a business expense and a deduction.  Also as per the depreciation rules of such a vehicle, the owner driver gets a 33.33% depreciation write off (multiplied by the business portion) in the very first year of use.

In the United States, Uber has recently started experimenting on driverless vehicles. With the large scale availability of these vehicles the downward pressure on prices will lead to an increase in demand from people who were not previously using this service, i.e. the elderly. With the advance of technology most of these vehicles are likely to be electric vehicles, even solar powered, so operating costs will fall further. The Uber driver who has an entrepreneurial mind set has the opportunity of making use of an economy that provides low interest rate loans to his benefit and expands his fleet of these vehicles in a short space of time.

By Nishan Senaratne from Success Tax Professionals Kewdale