Latest Update – 2 October 2018
The changes to the Income Tax Act has been passed in Parliament on 2 October 2018. Private-hire drivers will be allowed to claim tax deductions on car-related expenses.
What does it mean for Private-Hire Drivers
Private-hire Drivers will be able to enjoy the same tax treatment of their taxi counterparts to enjoy on car-related expenses. 60 per cent of the income derived from driving can be considered as expenses.
For example – A drivers who make $70,000 in fares and incentives will be able to declare $42,000 as car-related expenses. The taxable amount will become – $70,000 – $42,000 = $28,000.
The Resident Tax Rates for a taxable income of $28,000 is $160 before any other eligible tax deductions like parenthood rebate etc.
We are glad that common sense and justice finally prevailed after a long time.
10 September 2018
Private-Hire Drivers to be allowed to claim tax deduction under proposed changes
Private-hire car drivers (PDVL) may soon be able to claim tax deductions for car expenses. Channel NewsAsia reported that the Ministry of Finance announced that they have accepted public feedback on proposed amendments to the Income Tax Act.
Proposed changes floated back in June 2018 when the Ministry of Finance announced they were 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 Committee of Supply debate on Budget 2018, Senior Minister for State for Finance Indranee Rajah maintained their stance would not change to allow private-hire car drivers to claim tax deductions for expenses incurred from providing private-hire service.
Private-Hire vs Taxi
Unlike their taxi drivers, private-hire car drivers are not allowed to claim tax-deductions for driving-related expenses such as car rental, petrol and parking. Although private-hire drivers and taxi drivers are very similar in business nature, the difference in tax treatment results in private-hire drivers paying significantly higher taxes.
Private-hire car drivers can use a prescribed expense ratio to deduct their allowable deductible expenses. Service fee paid to operators will all be included in the prescribe expense ratio.
Expense ratio will also be increased from 40 per cent to 60 per cent after MOF’s consultation with the National Taxi Association and National Private Hire Vehicle Association (NPHVA).
The newly proposed expense ratio of 60 per cent will be applicable to both private-hire and taxi drivers.
Adopting a prescribed 60 per cent expense ratio is the simplest way for taxpayers to be compliant.
Proposed revisions to the Income Tax (Amendment) Bill will be introduced in Parliament on September 10, 2018. We wait with bated breath for the official revision to be passed. Stay Tuned