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2018-05-19
Small business: Uber driver and tour guide


I recently met an Uber driver on the way to work. The Uber driver also registered as a tour guide after doing a two month training course.

He asked about taxes and also obtaining a letter from his accountant, confirming his income. I offered to write a blog entry, not mentioning his name to describe his income tax situation and the way forward.

Before having a tax problem one needs to generate an income. So i will also quickly deal with that.

Uber drivers / Tour guides and marketing

Uber drivers doing trips to the airport meet a lot of foreign tourists who might also want to do day trips. This could be anywhere in the Western Cape. We have the Winelands, the West Coast, Whale watching in Hermanus, Shark cage diving in Gansbaai, Robbeneiland and of course Table Mountain. People offering day trips often will have these places and activities, well described on their websites.

The Uber drivers who offer these aditional services normally displays their touriste guide badge or their business card in a manner clearly visible to their passengers.

How can one do it better?

One needs to be pasionate about Cape Town and surrounds. One needs to be passionate about people and servicing tourists with your guiding services. It will help greatly if you do get a website and share your own pictures and experiences, testimonials from previous clients. With todays web design software this is easy . Ask Buddy Web Design for help with getting started.

The reason the Uber Driver and Tour Guide needs a letter of income is because he wants to apply for a bond. Being newly self-employed this might possibly entail the drafting of a business plan which includes a 12 month cash flow budget. Even if the loan application is unsuccessful the process of drafting a business plan is a good idea. It forces you to set clear goals and to establish a realistic roadmap to reach those goals. You will have to consider your marketing efforts, plan and budget for it.

I will assist with this business plan and cash flow forecast. This cash flow forecast will also deal with taxes like provisional tax making it easier to understand.

Income taxes

Turnover tax

We will consider whether this small (Micro) business qualifies to register for Turnover tax.

Turnover tax for micro businesses is a simplifiedturnover-based tax system substituting income tax and Capital Gains Tax. Turnover tax is an elective tax applicable to sole proprietors, partnerships and companies that meet certain criteria and have a turnover of less than R1 million per year.

Turnover Tax rates for 2019 (1 March 2018 to 28 February 2019)

Taxable Turnover Rates of tax
R0-R335,000 0%
R335,001 - R500,000 1% of the amount above R335,000
R550,001-R750,000 R1,650 + 2% of the amount above R500,000
R750,001 - R1,000,000 R6,650 + 3% of the amount above R750,000

Unless the Uber driving and the tour guiding services are seen as professional services this business would qualify to register for turnover tax which would make life much easier. Here is a good definition of what constitutes professional services in terms of turnover tax from the South African Institute of Tax consultants. Link

SARS Turnover Tax Guide

Provisional tax

Quoting from a nifty tax guide by The Aliwal Road Group : Provisional tax is payable by all taxpayers except natural persons if:

That person does not dervive any income from the carrying on of any business, and

Taxable income of that person for the year of assesment will not exceed the tax threshold*, or

The taxable income of that person for the year of assessment which is derived from interest, foreign dividends and renatl will not exceed R30,000.

*Tax Threshold for 2019

For natural persons below 65 it is R78,150 and for persons older than 65 , younger than 75 it is R121,000.

Most Uber drivers who do not own their own vehicles income will fall below this tax threshold. Currently the weekly rental averages between R2K and R2,5K. That is before the cost of fuel.

The Uber driver who approach me for advice said that his gross income (Turnover) during the off season will average R15K per month , while it will average R20k per month during the busy months. I need to check this because it seems a bit low. More experienced Uber drivers should get a higher turnover. (They know where and when to drive and they have met some regular returning customers.)

Say 4 months in Cape Town is off season and the rest high season. This will result in a turnover of R220,000 . (4 x R15K) + (8 x R20K)

Expenses which can be deducted from this income would include:

  • Vehicle rented if not owned
  • Finances charges on your own vehicle
  • Wear and Tear (Cash Cost Price / 5 years) - In this instance +- R40,000
  • Fuel
  • Telephone needed to run Uber business
  • Airtime and Data needed to run Uber business
  • Insurance on vehicle
  • Repairs and services of vehicle

Because the Uber driver is also a Tour guide he will also be able to deduct the following expenses from his income:

  • Entertainment cost
  • Cost of accommodation if on tour for business purposes
  • Advertising and marketing expenses
  • Accounting fees
  • Admin salary (Often with a small business this function is performed by a spouse)
  • Professional membership fees
  • Wear and tear of camera equipment
  • Wear and tear of computer equipment
  • Printing and stationery

Met with Uber driver this morning and the bottom line is:

For now Uber is keeping him busy enough and no aspirations to grow tour business too big that requires long working hours. His average gross income for the past 4 months were R23,200. I advised him to visit SARS in person and register for Turnover tax. That would simplify matters and be the most economical option for him. Otherwhise he has to pay an accountant, and feep detailed records of all expenses. At the end of the day also possible pay more tax. Maybe also no tax but tax to the accountant who advises him in the form of accountin and consulting fees.

 



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