What Is The Sharing Economy?
We are commenting on U.S legislation.
The term “sharing economy” refers to an emerging societal concept that uses the internet to connect individuals with others who are willing to provide services in exchange for monetary compensation.
Both the recipient and provider of these services could be subject to GST and income tax repercussions depending on the circumstances.
Taxi metres were first changed to reflect Goods and Services Tax (GST) after the 1st of July 2000.
This meant that even if some drivers were registered while others were not, the higher rate would be collected from all customers.
The contention of the Australian Taxation Office that ride-sourcing is equivalent to “taxi travel” was challenged before the Federal Court in 2017.
In most cases, arrangements within the sharing economy are made through the use of a mobile application (such as Uber, Menulog, Airtasker, or Airbnb), which acts as a mediator. The following are examples of sharing economy services:
- Putting a place up for rent or finding a subtenant for it.
- Providing transportation for a fee to members of the general public using a car.
- Providing parking spots for rent to customers.
- Doing services for the household, such as cleaning or acting as a handyman.
- Services that deliver food to customers.
Both the recipient and the provider of these services could be subject to GST and income tax repercussions depending on the circumstances.
The ATO is continuing to data matching activities to the user information that you’ve given these providers. Do not be caught with an unexpected tax bill because you were unaware of your obligations – let Bookkept help you. Contact us today on (03) 8568 3606.
Ride-sourcing – Uber, Didi, Ola & GST
The Australian Taxation Office (ATO) is of the opinion that individuals who provide ride-sourcing services do, in fact, generate income that is subject to taxation, regardless of whether or not they are “carrying on a business.” As a consequence of this, the driver will be obliged to report the money earned on their own tax return, but they will be allowed to claim deductions such as the depreciation of their car, the running costs, the facilitator commission, and so on.
According to the regulations of the Goods and Services Tax (GST), you are only required to register for GST if you are operating a business and your annual revenue is more than $75,000. Nevertheless, there is a carve out: if your business involves providing “taxi transport,” then you are required to register for GST regardless of how much money you make. This system was put into place in order to implement the mandatory registration of taxi drivers for a number of reasons, including the following:
- In order to avoid the confusion that was caused by the fact that certain cabs did not charge GST, and the fares were, therefore, varied from one another
- In order to avoid the additional complication that would occur if a passenger used a taxi for a business trip and wished to claim back GST, this policy was implemented.
- After the 1st of July, 2000, all taxi metres were changed to reflect the Goods and Services Tax (GST). This meant that even if some drivers were registered while others were not, the higher rate would be collected from all customers.
The contention of the Australian Taxation Office (ATO) that ride-sourcing is equivalent to “taxi travel” was challenged before the Federal Court in 2017, however, the court ruled in favour of the ATO.
Renting Accommodation – Airbnb
Individuals who have unused rooms or properties can capitalise on the opportunities presented by the sharing economy by renting out their space and generating rental revenue through the use of intermediaries such as Airbnb. The income that can be generated from short-term rentals can be significantly higher in locations that see a high volume of tourists.
The Internal Revenue Code applies to money obtained in this manner in the same manner that it applies to income acquired through a normal rental arrangement mediated by a real estate agent. In most cases, the money that was obtained from the clients needs to be reported as income.
Deductions that pertain to making the room or property available can also be claimed. Some examples of these deductions are the Airbnb fee, the entirety or a portion of the interest on a mortgage, and holding costs.
In a similar vein, the GST regulations apply to investment property in an identical manner as they do to traditional residential property. Because renting out a residential property is considered an input taxable supply, there is no GST paid on the rent, and GST credits cannot be claimed on any expenses related with making the room or property available for rent (e.g. electricity).
Delivery Services – Menulog, Ubereats etc
Regardless of whether you are an employee, independent contractor, carrying on a business, or none of the above, if you provide services in exchange for a fee, the income you earn is taxable and must be reported in your income tax return – even if the payment was a one-time payment. This is the case even if you only received a single payment.
In addition, if you are operating a business, your responsibilities with regard to taxes are the same regardless of whether you obtain your labour through the sharing economy or through more conventional channels, such as bids, contracts, or word of mouth. These conventional channels include:
Because of this, many delivery drivers are uninformed of the tax duties they are required to fulfil, and the ATO is comparing the information that you have provided to Ubereats, Deliveroo, or Menulog based on the data that it has collected.
Choosing an accountant is one of the most critical choices a small business owner will have to make, and once you start participating in the sharing economy, you are technically considered a small business owner. Take your time in your quest, and do not get into a relationship under any circumstances, especially around tax season.
Whether you are an employee, independent contractor, carrying on a business, or none of the above, if you provide services in exchange for a fee, the income you earn is taxable and must be reported. This is the case even if you only received a single payment.
If you are looking for an accountant or thinking it’s time you made a change, please give us a call on (03) 8568 3606. With over ten years of combined experience working with a diverse range of clients, Bookkept is well equipped to assist your business & personal income taxes.