The sharing economy has become a big part of daily life, as the ability to call on strangers for a fee to ride-share, rent a room or purchase services has become almost instant and expected. While older clients may still be sceptical of these, increasing numbers are looking to participate themselves. Younger clients in particular may be unaware of the full implications of offering their services in this way.
These are three areas to discuss with your clients.
1. Setting up an Australian Business Number and paying tax and GST
Clients are often unaware of the tax implications involved with working in the sharing economy – and how the income they earn from the sharing economy may affect their marginal tax rate overall. It can be valuable to demonstrate to your clients how this can change depending on how much income they generate from the sharing economy.
Further to this, clients may need to register as a sole trader or a business. Clients working as drivers for third-party providers are legally required to apply for an ABN and to register for GST, while others may only need to register for GST if their income reaches $75,000 or more. While those renting out a room or home may not need to pay GST, those renting out for commercial purposes with properties like hotel rooms, serviced apartments, function rooms or office spaces will need to register for GST.
In any scenario, it will be important to discuss keeping clear income records or logbooks to have an accurate measure of income at tax time, as well as options for paying any tax or GST in regular instalments compared to at the end of the financial year. For many, using PAYG for their tax can be much more manageable than trying to find the money to pay tax bills at the end.
Further tax information for the sharing economy is available at ato.gov.au.
Some third party providers like Uber and AirBnB offer limited insurance for those offering their services, but these may not be sufficient to protect your clients. In fact, any existing insurance cover your clients personally hold may not protect them against damages that may arise in the course of renting out space, ride-sharing or offering other services for hire. Clients may need to review their policies and speak to their providers to update their policies to ensure adequate cover should they need to access it.
Another area your clients may wish to consider is how working in the sharing economy could affect their health and lifestyle. Reviewing their current health cover can be a helpful step and updating it to their circumstances. Where clients are offering services based on their skills, such as ride-share, they may also wish to check in with a doctor or other specialists to manage and budget for any potential concerns ahead of time.
Clients that choose to make work in the sharing economy their full-time occupation may also need to evaluate how a less certain income could affect their living standards, mortgage repayments or other expenses like utilities. This may also mean reviewing budgeting and saving patterns to ensure funds to cover slower work periods.
For the most part, clients working in the sharing economy are acting as independent contractors, meaning they are not entitled to leave or superannuation among other benefits. That said, the government is currently reviewing standards around this so the situation may change with new legislation.
The choice to work in the sharing economy can be a useful time to discuss contributing to superannuation as part of a longer term retirement strategy if suitable for the client and government support around this, such as the tax-effective environment offered by superannuation and for concessional contributions, or even co-contributions for low income earners or for higher earners.
The insurance available to members within superannuation may also be relevant to your clients, such as life insurance or total and permanent disability (TPD). Some may even be able to consider the purchase of business property as part of the sharing economy for an SMSF.
The sharing economy is an ever evolving place, with government legislation trying to rapidly adapt. Depending on your clients’ circumstances, there may be a range of other issues to discuss with them but these areas can be a helpful starting point to ensure your clients are ready to participate, with full understanding of their decision.
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. 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 the 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. 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. This communication has been prepared for use by advisers only. It must not be made available to any retail client and any information in it must not be communicated to any retail client or attributed to this article. ©BT Financial Group 2018