Tax and the sharing economy
Many of us participate in the sharing economy without being aware of the tax consequences. And there are different tax consequences, depending on how you are earning that income.
This year, the Tax Office (ATO) is focussing on rental property owners - especially those who use their own property for personal holidays – to make sure they are claiming any deductions correctly.
Holiday homes - tax issues
These are the main mistakes that you could make:
Claiming deductions ( ie expenses ) for your holiday home when:
o It is not genuinely available for rent ( you don’t advertise),
o It is only available to friends and family ( or you make it rent-free),
o The expenses are greater than the rent received (you're only charging mates rates),
· Making an unusual claim and hoping the Tax Office won’t notice, or
· Failing to keep records of income, expenses, and rental (market rates).
How to avoid mistakes
· Make sure that your records are up to date and accurate, and
· Use an app -like the free Tax Office app - to keep all your income records and tax deductions in one place.
The sharing economy and tax
However, the rules are different if you provide goods and services via a (sharing economy) app or website, and you have to consider how income tax, GST or any other tax applies to your earnings.
Renting out (all or part of) your home
If you’re renting out your private residence, the tax rules are different to those for holiday homes. Renting out through an app or website like Airbnb or Stayz means you need to:
· Keep records of all income and declare this on your tax return
· Keep records of expenses to claim as deductions
· Don’t pay GST on residential rent
If you’re renting and worried about a large bill at tax –time , you can make voluntary pre-payments towards your tax before it is due. And the Tax Office advises that if you expect to earn more than $4,000 a year from renting out our home, you could consider a voluntary PAYG ( pay as you go instalment) to cover any tax you may owe.
Tax and GST for other parts of the sharing economy
Any payments you receive through the sharing economy are assessable, so you need to:
· Declare income in your tax return, and
· Keep records of expenses to claim deductions.
You should keep records of income and expenses, regardless of how much you earn . You can use the free Tax Office app .
Assessable income can include payments you receive from:
· food delivery services or ride –sourcing
· renting out a parking space
· sharing a car
· carrying on a business arranged through a sharing economy platform
Registering for GST
If your turnover is less than $75,000 you don’t have to register for GST.
However, you can’t claim a GST credit for the GST (tax) you pay on service fees or commission, if you’re not registered for GST.
Special rules for ride –sourcing services
Special rules apply for ride-sourcing - and you must have an ABN and register for GST regardless of turnover.
Not sure about all this?
Please feel free to email or phone me anytime for a chat to find out more.