Tax and the shared economy
Posted 03 Aug 16 by Timothy Bow
Marketplaces today clearly identify consumers’ increasing participation in the shared economy. The collaborative consumption initiatives have provided a broad range of services to consumers from dog minding services, food delivery, and ride-sourcing, to short-term accommodation rental. This shared platform has facilitated a new income stream for many taxpayers and for others the main source of income.
If you are an avid user of this platform to maximise your earning capacity, what are your potential tax triggers? Can you include certain costs as deductible expenses to reduce your taxable income?
The tax authorities have lagged in prescribing general guidelines in relation to transactions in the new economy and in effect have taken a reactive stance to this growing trend. Nonetheless, taxpayers should be mindful of their potential tax exposure from these ventures.
An Airbnb host, will need to consider the market value rental charged for accommodating guests and include such amounts in their assessable income. Direct expenses in maintaining the rented areas such as cleaning, repairs and maintenance, listing fee and host service fee have a direct nexus with the rental income derived, therefore deductible in full. However, if the expenses incurred are in relation to a shared area, a reasonable apportionment of the expenses is required to carve out any private use.
Airtasker connects the best Airtasker Worker seeking engagement to consumers needing assistance with the task on hand. These services can range from domestic home and garden tasks, to event and photography engagements. All receipts from the various task should be included in your assessable income. If you are required to travel from one task to the next task, you may claim the travel expenses between the two workplaces as a deduction. As always, record keeping is important to substantiate any deductions claimed. A log book is a good tool to assist in recording your travel between tasks.
Although the ATO cannot express their view about the legality of ride-sourcing arrangements or whether ride-sourcing vehicles are taxis, tax obligations still apply to income generated by drivers providing ride-sourcing services. Deductible expenses may include the motor vehicle running costs, depreciation, repairs and maintenance and related consumables. Note however, the expenses in relation to your private use of the vehicle should be carved out.
Depending on the level of activity, some hobby or recreational pursuits have evolved into a profit-making undertaking. A good example is dog walking/dog minding. The Madpaws app and website connects dog minders with dog owners for a fee. If an individual consistently provides dog walking/dog minding services for a fee, it is likely such activities will be considered a profit making venture.
We have very broadly touched on the direct tax implications of the shared economy. We note there may also be pertinent indirect tax implications for these operations which will be addressed in our next blog.
If you wish to discuss the tax implications of participation in these marketplaces, please contact any of our tax specialists.
Contact an expert for more information