The sharing economy connects buyers (users) and sellers (providers) through a facilitator who usually operates an app or a website. There are many sharing economy websites and apps.
If you provide goods or services through any of them you need to consider how income tax, the goods and services tax (GST) or any other tax applies to your earnings.
Popular sharing economy services include:
- renting out a room or a whole house or unit for a short-time basis, for example Airbnb and Stayz
- providing ‘ride-sourcing’ services for a fare (considered to be taxi travel for GST purposes) such as Uber, SheSafe, Shebah and GoCatch
- providing personal services, including creative or professional services like graphic design, creating websites, or odd jobs like deliveries and furniture assembly, for example Airtasker, Mad Paws and Deliveroo
- renting out a car parking space, for example Parkhound and Spacer.
So you are looking for some extra funds and are considering Uber services or renting a room with Air BNB, consider the GST and tax implications very carefully.
The ATO refers the transportation of passengers for a fare as Ride-sourcing. All ride-sourcing enterprises must have an ABN and be registered for GST regardless of income turnover.
If you have an enterprise of ride-sourcing, you must:
- get an Australian business number (ABN)
- register for an ABN using the following categories
- 46239 Road passenger transport
- 46231 Taxi services
- use ‘ride-sourcing’ as your business description
- register for GST from the date you started ride-sourcing (you can do this when you get your ABN).
GST must be calculated on the full fare, not the net amount you receive after deducting any fees or commissions.
For Example: If a passenger pays $55 for a fare
- the GST payable is $5
- the ride-sourcing facilitator pays you $44 after taking out their commission ($11)
- the $11 fee you pay the facilitator is a tax deduction you can claim.
GST credits on your business purchases can be claimed, but you must work out the percentage that is business use (and not private use) and only claim this amount.
You are required to keep a vehicle logbook to ascertain the business usage of your vehicle. If you use your car 10% for ride-sourcing and 90% for private purposes, and:
- you buy a new car to use for ride-sourcing activities for $33,000 (including $3,000 GST) – you can claim the business portion of GST credit of $300
- you pay $110 for fuel (including $10 GST) – you can claim the business portion of GST $1
- you pay $220 for a service (including $20 GST) – you can claim the business portion of GST $2.
There are other business purchases you may be able to claim a portion of GST credits for, but you should keep records.
If you are registered for GST because you have a ride-sourcing enterprise, you also have to account for GST on goods or services you provide through any other enterprises you carry on, such as renting out a car parking space.
When you rent out all or part of your residential house or unit through a sharing economy website or app, like Airbnb, Stayz or similar, you:
- need to keep records of all income earned and declare it in your income tax return
- need to keep records of expenses you can claim as deductions
- don’t need to pay GST on amounts of residential rent you earn.
- you may not be entitled to the full main residence exemption from capital gains tax (CGT), which means you’ll have to pay CGT on part of any capital gain made when you sell your home.
Good and services tax (GST) doesn’t apply to residential rents, so you’re not liable for GST on the rent you charge, and can’t claim GST credits for associated costs.
If you are only renting part of your home, for example a single room, you can only claim expenses related to renting out that part of the house. This means you cannot claim the total amount of the expenses – you need to apportion the expenses.
As a general guide, you should apportion expenses on a floor-area basis based on the area solely occupied by the renter (user), and add that to a reasonable amount based on their access to common areas.
You can only claim expenses for when the room was rented to a client. If you use the room in any capacity, for example for storage or as an office when you do not have guests staying, then you cannot claim deductions for expenses when the room is not occupied.
Payments from a family member for board or lodging are considered to be domestic arrangements and are not rental income. In these situations, you also can’t claim income tax deductions.
Generally, you don’t pay CGT if you sell the home you live in (under the main residence exemption).
However, if you’ve used any part of your home to produce income – for example, by renting out part or all of it – you’re generally not entitled to the full exemption.
To work out the capital gain that is not exempt, you need to take into account a number of factors, including:
- proportion of the floor area that is set aside to produce income
- period you use it for this purpose
- whether you’re eligible for the ‘absence’ rule (see Treating a dwelling as your main residence after you move out)
- whether it was first used to produce income after 20 August 1996.
If you rent out a car parking space through apps like Spacer, Carparkit or similar, the payments you receive are assessable income. This means:
- you must declare the income in your tax return
- you can claim deductions for associated expenses.
You may also need to pay CGT when you sell the parking space or property it’s attached to.
If you rent out a car parking space, it can mean that you are running an enterprise. You will need to get an ABN and register for GST if either:
- your turnover is, or is projected to be, $75,000 or more per year renting out the car parking space or spaces
- your turnover is, or is projected to be, $75,000 or more a year for all of the goods and services you provide while carrying on a number of enterprises.
If you have an existing enterprise and are registered for GST, you need to account for GST on amounts received for renting out your car parking space.
Records you need to keep include:
- statements showing income from your facilitators
- receipts of any expenses you want to claim deductions for
- logbooks of odometer readings.