Tax time may have quietened down, but not everybody is breathing a sigh of relief in its wake – especially those participating in the new sharing economy.
You may have seen Air BnB in the news over the past few weeks, embroiled in a tonne of issues with some taxation gymnastics. Recently thousands of Air BnB hosts were informed that their information could be shared with the Australian Tax Office as part of a larger crack down on unreported sharing economy income.
The move has led many to speculate that could mean a sharp rise in Air BnB user’s costs as providers (hosts) scramble to account for the taxable portion of their earnings. The Air BnB company itself might be set to take a bit of a hit as some users are raising privacy and information concerns over the whole incident. There is something unsettling about receiving an email that to say your information will be handed over, even if it is to a government body.
Air BnB isn’t the only ‘new era’ sharing economy business that’s struggled to keep up legally with the massive business expansion. Freelancers, Uber drivers and Food Delivery App workers have all had their fair share of issues spotlighted over the past year or so as the legislation surrounding the ‘Gig Economy’ has been retrofitted for the businesses of today.
With more and more people becoming part of the sharing economy, it can get tricky trying to understand what you need to declare (and even claim as a user) – and costly if you don’t get it right! Aside from the financial penalties that could be enforced, in severe enough cases, failing to follow through on your tax obligations is an offence that can leave you serving actual jail time (it’s rare, but it can happen).
Here’s what you need to know
If you’re earning any kind of income in the sharing economy, whether it be through Air BnB or anywhere else – you need to keep records of it (the ATO has access anyway through bank reporting) and report it. If you aren’t sure if what you’re doing falls under sharing economy income, talk to your accountant, they can help you figure out very quickly whether you have any cause for concern – and what to do about it!
You can still claim deductions for business expenses related to sharing economy income (cleaners for your Air BnB property, internet usage for your online business needs) but as with every other deduction – you’ll need proof of the deduction and that it was related to you earning that income. Keep any records of your transactions and also of things that demonstrate a connection between your expense and your business – you may be asked to provide them as well. It’s a lot to consider and if you’re finding yourself immediately worried about navigating your tax obligations – you’re not alone.
So how do you get out of a mess – or stop yourself getting into one?
Ask for help. Your accountant isn’t going to judge you or try to trip you up. Whilst ignorance of your tax obligations isn’t ever an excuse, in most cases, taxation issues can be rectified if you catch them before things get out of hand. So the sooner you can get questions answered and issues sorted the better.
Lots of Australians are in the same boat when it comes to understanding their tax obligations. Tax rulings change and can be difficult to understand. By getting help from an experienced accounting professional, you can set your mind at ease knowing they have got your back, can explain the rules around the sharing economy and can help ensure you don’t fall foul of the ATO.
If you’re earning an income from the sharing economy and you’d like to chat with someone about how to navigate your tax obligations, we’d be delighted to help. You can call us on 02 6023 1700 or drop us a note via the form below.
Got a question? Get in touch
If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.
Unlock the potential of your small business by prioritising employee engagement to create a thriving workplace culture.
#EmployeeEngagement #SmallBusinessSuccess #ProductivityBoost #EmployeeHappiness