Taxes and the gig economy: Are you declaring all you owe?

The gig economy can help people be their own boss, but are you declaring your earnings properly?

The employment world is changing. A growing proportion of people want to be their own boss and enjoy a better work-life balance.

More than 2 million Australians reported a collective rental income of $42 billion in 2016.

A Hays Australia study found 75 per cent of employees would take a salary cut to work from home. Furthermore, nearly one-third of Australians do freelance work, either full-time or in addition to their normal job, according to Upwork research.

The gig economy, which is characterised by short-term contracts and freelance opportunities, has grown in response to these needs. But the Australian Taxation Office (ATO) has issued a warning to gig workers that they must declare taxes correctly. The agency is targeting two key areas:

1. Short-term rentals

More than 2 million Australians reported a collective rental income of $42 billion in 2016, ATO figures show. However, online services such as Airbnb have exploded in popularity in recent years, and not everyone is declaring the money they earn through accommodation-sharing platforms.

The ATO is launching a comprehensive data-matching program to identify taxpayers who may not be meeting their obligations. Information from 190,000 Australians using online short-term rental platforms will be matched against financial institution details and the ATO's own files to spot errors.

Anyone renting property out via Airbnb and similar sites should:

  • Declare all income, even one-off rentals.
  • Only claim deductions for times when the property is rented or genuinely available.
  • Remember that certain deductions can only be made over a period of several years, including certain repairs and renovation costs.
WMC Accounting and rental property income. Short-term rental property sites are becoming more popular in Australia.

2. Car-sharing activities

Car Next Door, GoGet, DriveMyCar and similar services allow peer-to-peer vehicle rentals in the local community. They can offer a cost-effective and convenient method of travel for users, as well as providing an additional income stream for vehicle owners.

Nevertheless, ATO Assistant Commissioner Kath Anderson stated that car-sharing income has the same tax implications as renting out any other type of asset.

"The good news is that if you rent out your vehicle, you are probably entitled to claim some deductions. This includes expenses like platform membership fees, availability fees, cleaning fees and car running expenses," she explained.

There are three golden rules for claiming deductions on car rentals:

  1. Where vehicles are used for personal and business use, only claim for the latter.
  2. Maintain clear and accurate records for your claims.
  3. Only claim for expenses you have directly paid for and that are related to your rental income.
WMC Accounting and income from vehicle assets. Renting out your vehicle can be a lucrative income stream, but you'll need to declare your earnings.

Do you need help with your taxes?

Working in the gig economy provides freedom and flexibility, but you'll also need to be diligent with your tax-paying responsibilities. We have covered two areas of the gig economy, but there are many more to consider when working freelance.

At WMC Accounting, we can ensure you're never paying too much or too little tax. Contact us today to book an appointment.

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