Have you heard of the sharing economy? In a nutshell is a socio-economic ecosystem that is built around the concept of the sharing of goods and services by different people and organisations. The poster children of the sharing economy currently are Uber and Airbnb.
However if you’re an Uber driver transporting passengers in your car, or renting out your apartment through Airbnb are you aware of your income tax and GST obligations?
Using Uber:
If you’re an Uber driver the Australian Tax Office (‘ATO’) believes that you should be registered for GST, regardless of how much you are earning through the App for providing your services to passengers. Registering for GST though will require you to charge GST to your passengers, something that is not catered for within the App itself.
However according to the ATO Uber drivers are providing taxi travel services to passengers and under the current GST legislation a taxpayer providing taxi travel services is required to register for GST. The term taxi travel is defined in the relevant legislation, however there’s uncertainty as to whether a private vehicle, as is used by Uber drivers, falls within this defined term.
You only have to turn on the TV, or open a newspaper at the moment to see the uncertainty and disputes centring around the legality of Uber, so it’s definitely an area to keep an eye on.
Using Airbnb:
But what does the law say when it comes to making an income by renting out your property through Airbnb. This is again one of those grey areas.
If you are using the site on a regular basis you need to consider whether you are carrying on an enterprise and earning a regular income. If this is the case you will need to look at if you are under the $75,000 per annum GST registration threshold. If your income from the site exceeds this threshold then you are required to register for GST and charge this to your ‘customers’.
The ATO takes the position that all of your rental income should be declared on your income tax return.
It is possible though that you could claim a deduction for expenses involved in renting out your property, including a proportion of the interest on your mortgage.
It’s also worth considering that in selling your property you may be required to pay capital gains tax on part of the gain from the sale due to the fact that you have derived income from your property.
So what should you do?
The ATO has provided taxpayers until 1 August 2015 to review their tax positions and declare income. Following the expiration of this deadline it is expected that the ATO may increase audit activity of these sharing economy apps.