Tax & The Sharing Economy
The boom of online resources in the last few years has opened up a world of opportunity for cheaper travel, ride sharing and outsourcing.Termed ‘The Sharing Economy’, apps like Uber, AirBNB and Airtasker, have revolutionised the gig economy and supported a growing subset of freelance workers and landlords looking to boost their income in convenient and regulated environments.
The concepts of outsourcing and sharing resources aren’t new concepts, however the nature and availability of modern technological advancements has provided an unprecedented availability of viable options for additional or primary income. It’s important to understand and fulfill your obligations for reporting and paying tax when utilising these apps, as they tend to bypass conventional systems used by traditional business.
There are two different ways that the Australian Taxation Office (ATO) classifies the exchange of goods and services online;
– As a hobby
– As a business
The differentiating factor of the two is that a hobby is undertaken for enjoyment, with the proceeds not amounting to a profit. More information on the classification criteria can be found here .
For example, Irene knits stuffed animals in her spare time and sells them for the cost of the wool and buttons she uses. This is a hobby. If Irene were to begin accounting for her time and effort in the price of her animals, upping the price to profit after the price of materials, this is a business.
If your online activity is judged to be a business by the ATO, you will be required to have an ABN and report your taxable income. Once you have registered for an ABN, your taxation obligations will begin.
If you are renting out your home (or a portion of your home) using AirBNB, Stayz or another room-sharing or ‘couch surfing’ platform, you will have to report your income as you would a typical rental property. You are able to claim deductions for the portion of the year that your property was rented out, proportionate to the percentage of the home you have been letting.
Deductions can be claimed on:
– Fees charged by the facilitator or carriage service (AirBNB or otherwise!)
– Council Rates
– Interest on your home loan
– Utility Bills
– Property and maintenance fees (including professional cleaners to get the place back to it’s normal gleaming self!)
Likewise, there are a range of deductions that you can claim on most of the activities you undertake. A list of common deductions can be found on the ATO website .
It’s essential that you do your preparation and plan ahead with your tax so that you don’t get hit with a bill at EOFY! If you anticipate that you will be earning more than $4000 a year, you can voluntarily enroll in the PAYG scheme, where you will pay your tax throughout the year in installments. You’ll settle the balance, or claim excess, when you complete your tax return. The ATO has handy tax tables for you to calculate what your forecasted payments should be, find them here !
It’s simple to get on top of your tax and deductions with some handy detective work on the ATO website. If you’re having trouble wrapping your head around all the figures, or want to make sure that you are REALLY maximising your potential for deductions, see an accountant who can help translate all of the financial jargon.