The sharing economy has become a big part of daily life. It’s become easy to hop on an app for a ride-share, find a place to stay or hire someone with skills you don’t have to help you (flat pack furniture assembly anyone?). Whether for some extra cash, or as your main job, you might be thinking about offering your services as well.
If you do, there’s some basic administration you should be aware of.
Here are three tips on success in the sharing economy
1. Paying tax on your earnings
You may need to pay tax on any income you earn from the sharing economy. The Australian Taxation Office recommends you keep records of all the income you earn and any expenses you have. In some cases, you might be able to claim deductions and you can find more information on this at ATO.gov.au.
Remember that your earnings from the sharing economy count as part of your overall annual income if you have another job, or work multiple share economy gigs, so will influence your marginal tax rate.
There are a few ways you can manage tax payments. Some may choose to make periodic payments (on a time period you choose, such as monthly or quarterly), while others may decide to make a lump sum payment at the end of the financial year. Making a regular payment using a system like PAYG can be a helpful way of keeping track of and staying on top of payments. Otherwise, consider allocating a certain amount into a separate account to ensure you have the money ready to pay your tax when its due.
Those renting residential property (or rooms in a property), may also need to consider Capital Gains Tax (CGT). Even if the property is otherwise your main residence, the portion of time you rent it out for gain can result in CGT being applied if you sell the property (see more information).
If you already have insurance on your property or car, renting out a room or ride-sharing can affect your insurance policy. Check in with your provider to ensure you have the right protection for you and adjust your policy if you need to.
For those who don’t already have insurance, it may be helpful to investigate different options with insurance providers to make sure you are protected in case of damage to your property, or any accidents that could occur while you are doing your job. Some third party providers like Uber and AirBnB also offer some limited insurance coverage when you partner with them, however, you should review their policy and any restrictions before relying on these as your primary cover.
3. Registering as a business and paying GST
When you decide to work in the sharing economy, you may need to consider registering as a business or sole trader to receive an Australian Business Number. You can register at ato.gov.au.
In addition, you might need to register for GST if your income from the sharing economy is $75,000 or more, or if you are working as a driver for a ride-share company. GST also applies to those renting out commercial residential spaces, such as hotel rooms, serviced apartments, Bed & Breakfasts or commercial spaces like function rooms and office spaces. You can find more information at ato.gov.au.
These are just a starting point. You might also think about a range of other activities like protective equipment and warranties, invoices, logbooks or even logistics for living off the gig economy. You might also seek advice from an expert to help you understand and manage the finer details of items like setting up an ABN, paying your own tax or registering for GST.
At the end of the day, one of the most important things to remember when you work in the sharing economy is to keep yourself safe – you are your biggest asset.
Information current as at 1 February 2018. This article may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.
This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it.
BT Financial Group cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of working in the sharing economy can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser. ©BT Financial Group 2018