Changes proposed to allow Private-Hire Drivers to deduct car expenses for taxes

Private-hire drivers have a mega reason to celebrate.

The Ministry of Finance has announced on June 20 that they are seeking feedback on the proposal to allow private-hire drivers to deduct car-related expenses against their driving income.

The announcement came as a surprise as, during the recent Committee of Supply debate on Budget 2018, Senior Minister for State for Finance Indranee Rajah said that the Government would not change their policy to allow private-hire car drivers to claim tax deductions for expenses incurred from providing private-hire service.

Unlike taxi drivers, private-hire car drivers are not allowed to deduct expenses such as car rental, petrol and parking. These expenses make up a significant percentage of driver’s earnings. The most common expense that private-hire drivers can deduct is the commission paid to the ride-hailing operator.

As a result, private-hire car drivers pay much higher taxes than their taxi counterparts when they have similar earnings.

Car insuranceThe Proposed ChangesĀ 

There are 2 proposed changes that allow private-hire drivers to declare expenses for tax deductions.

  1. Claim 40% of all driving income minus service fee to the ride-hailing operator (Currently service fee can be expensed off).
  2. Claim based on actual amount of running expense and service fees incurred in earning private-hire service income.

The first option would be more direct and allow minimum administrative work when filing tax as a private-hire driver. It would also benefit private-hire drivers who are able to keep their driving expenses lower than the 40% of driving income.

The second option would require drivers to document and keep proper records of all expenses incurred. Drivers must keep all receipts and produce them for checks if they are called up by IRAS for checks.

Drivers can opt into the auto-inclusion tax filing system where Grab will file the driver’s total earnings for the year into IRAS tax portal.

When will it take effect

The changes, if approved, will take effect from year of assessment 2019. It means all approved car-related expenses will be allowed tax-deduction for the year 2018. Private-hire drivers are advised to start keeping all your receipts for tax-deductions if the changes are approved.