GST implications in a company context
Scenario:
I am a mortgage broker and adviser trading in a company structure. I am a director and shareholder of the company. My wife is also a shareholder, director and employee of the company. The company is not registered for GST as the total turnover so far is less than $75,000.
Now, I have also started to be an Uber driver and am earning income from this activity under the company’s Australia business number (ABN). However, the car is owned in my name.
- Does the company now have to register for GST as it has started earning Uber driving income even though the turnover is still less than $75,000 per annum? If so, will the company then have to charge GST on the mortgage broking business as well?
- How can the company claim the car expenses and GST incurred for this Uber driving income? Can the company reimburse me for the car expenses incurred based on the receipts and then claim the GST and expenses in the company’s business activity statement, accounts and tax return respectively? If so, what is the basis for reimbursement of these car expenses? Will it have to be based on a logbook kept by me for the Uber driving business purposes of the car?
- Can the company retain its profit and be taxed at its tax rate for both my mortgage broking and Uber driving income? For the mortgage broking income, the company is paid a commission on the loan amount sold or settled.
Explanation:
Based on the abovementioned facts, it appears that the company is operating the Uber enterprise. So, based on the decision handed down by the Federal Court in Uber B.V. v FC of T [2017] ECA 110, the company would be required to register for GST. Also, under s 9-5, the company would be making taxable supplies of broking services. So, it would need to account for GST on these services as well. The only reason why the supplies of broking services did not attract GST before was that the supplier was not registered or required to be registered for GST. Since that condition would now be met, the supplies will attract GST.Since the car is under your name, you are entitled to a deduction for the business use of the vehicle Under Div. 28 of ITAA 1997, you can claim using the cents per kilometre method or the logbook method. However, the cents per kilometre method only applies to the first 5,000km that you travel - any distance in excess of 5,000km per year is disregarded. The company can certainly reimburse you for the use of the vehicle, but in order for the company to claim the input tax credit for the reimbursement, the use of the vehicle for the Uber would need to be substantiated (a logbook would probably be the best option). The input tax credit claimed by the company would then proceed under Div. 111 of the GST Act, which allows the company to claim the input tax credit based on tax invoices held by the employee (you).
And Yes, the income earned by the company from the mortgage broking business and the Uber enterprise will be taxable at the company's tax rate.