The ATO has reminded tax professionals to consider clients who may be involved in the share economy. Some individuals may not be aware they have tax obligations when earning income through the sharing economy. The types of goods or services taxpayers provide, and how much they provide, will determine what they need to do for tax. Taxpayers may be involved in renting out part or all of a house, providing ride-sourcing services or providing other goods or services.
Source: ATO, "Sharing economy reminder for your clients", 9 August 2016, https://www.ato.gov.au/Tax-professionals/Newsroom/Income-tax/Sharing-economy-reminder-for-your-clients/.
The ATO has previously released information on view of the tax obligations of people who provide services in the sharing economy. The ATO's view is that the tax laws apply to activities conducted in the sharing economy in the same way as they apply to activities conducted in a more conventional manner.
Some key points:
- Income tax obligations for providers: People who earn assessable income from providing sharing economy services need to keep records of income from that activity and any allowable deductions, which may need to be apportioned for private use.
- GST implications for providers: Where a person is already registered for GST for another purpose, the activities in their sharing economy enterprise must be included with their other activities. People providing "taxi travel" must be registered for GST regardless of their turnover amount. People conducting other activities need to register for GST if the annual turnover from their sharing economy enterprise is $75,000 or more.
- Taxi travel services through ride-sourcing: The ATO has previously released guidance for people providing taxi travel services through ride-sourcing (also known as ride-sharing or ride-hailing). This is available on the ATO website at: https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/General-guides/Providing-taxi-travel-services-through-ride-sourcing-and-your-tax-obligations/. The ATO has confirmed that people who provide ride-sourcing services are providing "taxi travel" under the GST law. The existing tax law applies, and so drivers are required to register for GST regardless of their turnover. Other key points:
- GST must be calculated on the full fare, not the net amount received after deducting fees and commissions. For example, if a passenger pays $55 and the facilitator pays $44 (after deducting an $11 commission), the GST payable is $5 (not $4).
- GST credits can be claimed on business purchases, but must be apportioned between business and private use. For example, if a new car is bought for $33,000 (including $3,000 GST), and the usage is 10% ride-sourcing and 90% private, the GST credit will be $300.
- For fares over $82.50 (including GST), drivers must provide their passengers with a tax invoice if they request one.
- The ATO previously allowed drivers until 1 August 2015 to obtain an ABN and register for GST. The ATO does not intend to apply compliance resources regarding drivers' GST obligations before 1 August 2015, except if there is evidence of fraud or other significant matters.
- Renting out part of all of a home: The ATO has also previously released information for people renting out part or all of their home (available on the ATO website at: https://www.ato.gov.au/general/property/your-home/renting-out-part-or-all-of-your-home/). The rent money received is generally regarded as assessable income. Taxpayers must declare their rental income in their income tax returns; however, they can claim deductions for the associated expenses, such as part or all of the interest on a home loan. These people may not be entitled to the full CGT main residence exemption. The ATO also notes that GST does not apply to residential rents, meaning GST credits cannot be claimed for associated costs.