The ATO has recently highlighted an intention to focus on the tax compliance of those who work in the 'sharing economy.' With tens of thousands of Australians now offering services through organisations like Uber, Airbnb, Airtasker and others, it's never been more important to wrap your head around how the tax laws apply to these new ways of working. Our recent research shows around 50% of Australians aren't aware that sharing economy work is taxable. So, to help fill the knowledge gap, we've prepared a comprehensive guide to understanding how the sharing economy affects your taxes.
If you're involved in the sharing economy, you need to consider if:
You're carrying on an enterprise
You need an ABN
You need to register for GST and lodge BAS
The price of the goods or services you provide includes GST
And when you need to provide tax invoices for your sales
You need to declare your income in your income tax return
Declaring Airbnb income
When you rent out all or part of your residential house or unit through a website or app like Airbnb, Stayz or similar, you need to:
Keep records of all income earned and declare it in your income tax return
Keep records of expenses you can claim as deductions
Do I Need to Pay Tax on Airbnb Income?
The short answer is yes. If you rent out all or part of your house or unit, the payments you receive are assessable income, which means you have to declare it in your tax return. Once you declare the income, you can claim associated expenses for the year as rental income in your tax return. When you sell the house or unit, you may also need to pay capital gains tax (CGT). Even if the residence is your main address, renting out any part of it usually means losing part of your CGT main residence exemption.
Tax Deductions for Airbnb
If you rent out all or part of your place using a sharing economy site or app, the types of expenses you can claim for are the same as if you had a rental property.
Among some common expenses you can claim are:
Fees or commission charged by the facilitator or administrator
Council rates
Interest on a loan for the property
Electricity and gas
Property insurance
Cleaning and maintenance costs (products used or hiring a commercial cleaner)
Whether all or part of the expense can be claimed is dependant on:
The proportion of the year you rent out the house or property
The portion of the property you have rented out (for example, a room or the whole property)
Whether you use the home or part of the house for personal use when it's not rented
If you're only renting part of your home, you can only claim expenses related to renting out that part of the house.
Declaring Uber Income
The income you earn from driving for Uber or other ride-sourcing services is assessable, which means you must report it in your income tax return. You can also claim expenses which relate to your Uber activities.. Basically, as an Uber driver, the ATO views you as self-employed. This gives you access to all tax concessions available to small businesses, including the $20,000 instant asset write-off for capital assets. You can immediately deduct the cost of any plant, tools or equipment you use in your business, including items such as computers and even motor vehicles, provided the cost is less than $20,000. This is very handy for Uber drivers buying second-hand cars.
Do I Need to Pay GST on Uber Income?
If you're an Uber driver, you'll need to register for GST with the ATO and start charging GST on all your fares from the first dollar. You can also claim GST credits on work-related purchases. You'll need to submit a BAS form every quarter. As a driver, being registered for GST might impact on the GST status of other business activities you're involved in. If you run a small business as a sole trader with a turnover of less than $75,000, you may have to start accounting for GST in relation to that business as well.
Tax Deductions for Uber
If you're operating through the ride sharing economy, you can claim deductions for the business use proportion of the following:
Commissions, licensing or service fees paid to Uber.
Costs of becoming an Uber driver - once you've started the official application process, such as medical and police checks, application fees etc. Costs incurred before becoming an Uber driver, or before the application process starts (such as attending information nights) are not deductible
Passenger costs such as water and mints or fuel for the car
Tolls
Parking
Vehicle licensing or registration
Mobile phone bills
Safety equipment (such as hi-vis vests)
Costs of cleaning, servicing and repairing the vehicle
Insurance
Tax agent/accountants fee
Bank fees (if you maintain a separate account for your Uber work)
Claiming a Deduction for Business Use of Your Car
When claiming deductions for business use of your car, you've got two options:
1. Cents per kilometre
Use this method if you travel less than 5,000 business kms. If this fits your bill, you can claim 66c per kilometre from 1 July 2016.
2. Logbook Method
Use this method to base your claim on the business use percentage of each actual car expense. This is determined by a logbook that you're required to keep for a minimum 12 weeks and updated every 5 years.
Declaring Airtasker Income
If you're earning a side income using Airtasker, this amounts to assessable income. The good news is – you can claim expenses you incur in generating your Airtasker income. Remember to keep a record of the tasks you've completed in case the ATO asks questions. We've collected all the info you need in order to make the most of your Airtasker income.
If you earn less than $75,000 a year, you don't need to register for GST. However, as the money earned via Airtasker is an income, you need to include it on your tax return.
Do I Need To Pay Tax On Airtasker Income?
The answer is yes. If you're earning an income from providing services through Airtasker then you need to pay tax on that income.
You'll need to keep an accurate record of all your Airtasker activities and the amounts you earn from those tasks and disclose it as business income on your tax return. Remember to record the gross amount (task price) that customers (job posters) pay you, not the net amount you receive after the Service Fee is removed.
Tax Deductions for Airtasker
You can claim deductions on your Airtasker income; any expenses you incur in your Airtasker earnings are tax deductible. It's also possible to claim an instant deduction for all capital assets acquired for use in your business with a cost of $20,000 or less. Note that this relief is available until 30 June 2018, so take advantage of this by purchasing items like computers, phones, tablets, tools and even some motor vehicles.
Deductions can also be claimed for the business use proportion of the following:
Commissions or fees paid to Airtasker e.g. the Service Fee
Costs of travelling to and from an Airtasker task and between jobs including:
Parking
Fuel
Public Transport
Flights and accommodation if the job is interstate
Mobile phone bills
Safety equipment (such as hi-vis vests)
Work-related clothing such as overalls and work boots (link to uniform related article)
Sunglasses if you work outside
Insurance
Tax agent/accountants fee
Bank fees (if you maintain a separate account for your business)
Costs of running a home office if your business is operated from home (link to home-office article)
Airtasker Car Expenses
If you use your car as part of your Airtasker pursuits, you can claim a deduction for the business use of your car in one of two ways:
1. Cents per kilometre
Use this method if you travel less than 5,000 business kms. If this applies to you, you can claim 66c per kilometre from 1 July 2016.
2. Logbook Method
Use this method to claim based on the business use percentage of each car expense. These costs are determined by a logbook that must have been kept for a minimum 12 week period and updated every 5 years.
For each deduction, you must prove that all expenses are business-related, so remember to keep invoices, receipts, bank statements and logbooks.
How Do I Report All My Income from the Sharing Economy?
Detail your relevant income in your tax return, which, if you're completing your own, needs to be submitted by 31 October. If you decide to use a tax agent like GBS Accountants, you'll have an extended period to lodge which could run as late as 15 May the following year.
What Happens If I Make a Mistake in My Tax Return?
The ATO has been keeping a close eye on people earning income from shared economy services like those listed above. With this in mind, it's essential to accurately disclose all your income and expenses earned through sharing economy platforms. If you don't, you could face an ATO audit and be liable for interest and penalties on any unpaid or underpaid tax.
If you need help or advice, please visit our office locator and find your local GBS Accountants.
Happy tax claiming!
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