By Alisa Sainoski

The sharing economy is economic activity through a digital platform (such as a website or an app) where people share assets or services for a fee.  New sharing economy arrangements are coming onto the market regularly and at a rapid pace.

A share economy includes the renting out of all or part of a home for a short period of time through platforms such as Airbnb, HomeAway or Flipkey.  Sharing assets such as personal assets like boats, cars or caravans, personal belongings like tools or sports equipment, storage or business spaces like car parking spaces or offices through platforms like Camplify, Car Next Door, Spacer, Toolmates or Quipmo are included as part of the share economy.

Also included are the provision of services such as delivering goods like food or parcels being UberEats, Menulog and Deliveroo.  If you are using the sharing economy for performing tasks and activities for other people like odd jobs, cleaning or running errands or providing professional services like web and trade services through OneFlare, Mad Paws or Hark Hark, all these will be included.  It also includes the ride-sourcing of transporting passengers for a fare which can be found in more detail my article:  The World of Ride-Sourcing.

Any income received through the sharing economy is considered assessable income and needs to be declared in your income tax return.  If projected Goods and Services Tax (‘GST’) turnover is less than $75,000 a year, GST registration is not required for most share economy activities.

There are some activities which are not considered to be part of the sharing economy these would include Gumtree, eBay or Carsales.  However, you will still need to consider how income tax, GST and other obligations may apply to you if you undertake business activities for a profit from these other activities.

When delivering food and drinks through a platform, how you are engaged to the digital platform will depend on the nature of your relation with the platform and other parties to the arrangement.  However, whatever form the engagement takes, what you earn is assessable income and needs to be reported in your tax return.  It does not matter whether you are an employee, independent contractor, carrying on a business, or none of these.  When you provide the services listed above in return for a fee, the income earned is considered assessable and needs to be reported in your tax return, even if it is a one-off payment.

In the event you are ever renting out all or part of your residential house, unit, apartment or holiday home through a digital platform like Airbnb, adequate records of all income earned (and any associated expenses) need to be maintained and declared in your income tax return.

Where you are carrying on an enterprise renting out commercial residential premises, such as a boarding house, there will be different income tax and GST obligations.  However, just because you provide services in addition to providing a room (which in most cases would be the provision of breakfast or cleaning services) does not necessarily mean you are providing ‘board’ or anything other than renting out your space.  It is rare for someone to be carrying on a business because they are renting out a property.

It does not matter who registers on the platform, income is declared by the owners of the property, according to their ownership or lease interest in the property.  For example, if you have a 12-month lease on an apartment and occasionally rent out a room through a digital platform, you will need to declare any income you earn from this.

The owner of an investment property is usually required to pay Capital Gains Tax (‘CGT’) when the property is sold, this is no different when the property is used as part of the sharing economy.  CGT may even apply if the property is your main residence and part of it has been rented out via Airbnb for example.  It is important that if you are using a digital platform for the purpose of renting out a property, adequate documentation from the platforms should be maintained which show income and expenses.

Some of the deductions which may be available where a property is made available under the sharing economy include:  the use of a home office, equipment, utilities and supplies may be deducted as a percentage of your home expenses.  As a rental property owner, you can deduct your insurance costs.  These costs may include mortgage and fire insurance fees for the year which they are paid.  Most sharing economy websites and apps have a fee, with Airbnb the guest service fee is also deductible.

There are two methods which can be selected from when calculating the income for the provision of accommodation in your home.  We strongly advise a detailed record be kept of all income and expenses.  The first method is the standard cost method and is available for individual hosts, who rent rooms for less than 100 room nights per year and who are not registered for GST.  The proposed standard costs are $50 per room per night if the host owns the home, or $45 per room per night if the host rents the home.  These amounts have been set based on the average cost of owning or renting a home plus the cost of short term accommodation items such as breakfast, linen and cleaning.  However, by using the standard cost method taxpayers will not be able to deduct for any actual expenditure and will be unable to claim any losses from providing the accommodation.  This method makes the rental income non-taxable provided the income earned is less than the standard cost.  However, if the extent of the income earned exceeds the standard costs the amount will become taxable.

If deductions are higher than $50 per night, the deductions can be based on actual expenditure which brings us to the next method being the actual cost method.  Unlike the standard cost method the income and expenditure are both 100% taxable and deductable.  Of course, the private percentage of the property is required to be accounted for.  The apportionment calculation should take into account the floor area of the property and the number of nights or rooms were rented out.

Check out the advantages and disadvantages of Airbnb and the taxing of an Airbnb.

The Australian Taxation Office (‘ATO’) have recently declared the sharing economy an area of focus which has resulted in a recent announcement by Airbnb where by it will make available all information in relation to it’s members available to the ATO.

If you are ever thinking of joining the sharing economy and need more help with your tax affairs to do so, please do not hesitate to contact us.

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