What Is The Sharing Economy?
The sharing economy is an emerging social concept that connects people via the internet to those who will share services for money.
Sharing economy arrangements are generally booked through a middleman (such as Uber, Menulog, Airtasker,Airbnb) using an app. Sharing economy services include:
- Renting out or subletting a room.
- Using a car to transport the general public for a fee.
- Renting out a car-parking space.
- Completing household services like cleaning or as a handy-man.
- Food delivery services.
These services may or may not have GST and income tax implications for both the user and the provider.
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 ATO is of the view that providers of ride-sourcing services are earning assessable income regardless of whether or not they are ‘carrying on a business’. Consequently, the driver will be required to declare the money earned in their personal income tax return, but will be permitted to claim deductions such as depreciation of their vehicle, running costs, facilitator commission etc.
Under GST provisions, you are only required to register for GST where you are carrying on an enterprise and your annual turnover is $75,000 or more. However there is a carve out – where you provide ‘taxi travel’ you must register for GST irrespective of the level of turnover. This system was introduced to apply compulsory registration to taxi drivers for several reasons including:
- To avoid the confusion where some taxis did not charge GST, and the fares were different
- Avoiding the added problem that would arise if a passenger was using a taxi for a business trip & wanted to claim back GST
- After 1 July 2000, all taxi meters were adjusted to reflect GST – if some drivers were registered but others were not, all would be collecting the higher rate.
The ATO’s interpretation that ride-sourcing constitutes ‘taxi travel’ was appealed to the Federal Court but was held in the ATO’s favour in 2017.
Renting Accommodation – Airbnb
The sharing economy provides a great chance for individuals with spare rooms or spare properties to rent out space and earn rental income using facilitators such as Airbnb. In high tourist areas, the income gained can be much greater than regular tenancy agreements.
Income Tax law applies in the same way to income received in this way as it does to a standard rental arrangement through a real estate agent. The amounts received from the customers must generally be declared as income. Deductions relating to making the room/property available can also be claimed, such as Airbnb fee, all or part of the interest on a mortgage, and holding costs.
Likewise, the GST rules apply in the same way as conventional residential property. Renting out a residential property is an input taxed supply, so no GST is charged on the rent, and no GST credits can be claimed on any associated expenses in making the room/property available for rent (e.g. electricity).
Delivery Services – Menulog, Ubereats etc
Whether you are an employee, independent contractor, carrying on a business, or none of the above – when you provide services in return for a fee, the income you earn is assessable and needs to be reported in your income tax return – even if it’s a one-off payment.
In addition, if you are carrying on a business, your tax obligations are the same whether you source your work through the sharing economy or through traditional methods, such as tenders, contracts or word-of-mouth.
Choosing an accountant is one of the most important decisions a small business owner will make, and once you take part in the share economy – you’re actually a small business owner! Take your time with your search, do not just rush into a relationship during tax season.
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.