A warning to the Sharing Economy: the ATO has you in their sights

What the ATO is doing

The Australian Taxation Office has warned users of the ‘sharing economy’ (e.g. Airbnb or Uber) that it is performing data matching with third parties to track millions of dollars in undeclared income.

The sharing economy is becoming a major player in Australia’s economy. Websites such as eBay, Airbnb, Uber, Airtasker and various other platforms allow thousands of Australians to earn extra income from their spare rooms, parking spaces or by driving around town. A recent estimate values the industry at around $504 million per annum in NSW alone.

The biggest myth about sharing economy income is that you don’t have to declare sporadic or one-off transactions. However, there is no threshold for declaring these types of income: you will have to declare everything from the first dollar earned provided you are doing more than just carrying on a hobby.

What you need to do

If you are involved in the sharing economy, you need to consider if you are “carrying on an enterprise”.

If you are selling goods or performing a service in your spare-time, e.g. as a hobby or recreation, then you are not carrying on an enterprise and you may not have tax or reporting obligations.

However, if you provide goods or services to people for a fee and it is more than an occasional pastime or a hobby, the tax office will consider your activity an enterprise. As a result, you need to keep records of all income and expenses and declare these in your income tax return. Also, if you are running a business, you will need an Australian Business Number (ABN).

The following factors help determine if you are carrying on an enterprise:

• Have you decided to start a business, i.e. what was your intention?
• Have you started the activity with the intention of making a profit?
• Does your activity have a commercial character, such as do you advertise your activity?
• Is there repetition or regularity to your activity?
• Is your activity similar to other businesses and how they operate?
• Does the size, scale or permanency of your activity indicate you have a business?
• Is your activity planned, organised and carried out in a business-like manner?

Whilst one single factor cannot be used to work out if you are carrying on a business or enterprise, taken together they will indicate whether your activity amounts to a business for tax purposes.

If you are carrying on an enterprise, you will also need to consider if your income from the sharing economy will be $75,000 or more per year. If it is, you will need to register for GST and lodge activity statements.

Note, however, if you are providing ride-sharing services (e.g. Uber) you will need an ABN and will need to be registered for GST regardless of your income. You will need to pay GST on the full amount of every fare.

If you are renting out part of your home through Airbnb, you may also be reducing the amount of the capital gains tax exemption that can be claimed on the ultimate sale of your property.

We’re here to help

If you are considering, or have already commenced earning income through the sharing economy, please discuss your activities with us to ensure that you meet all your obligations.

We’re excited about the sharing economy too but we’re more interested in seeing you protected so you can contribute and benefit from it fully!