The sharing economy and tax

June 2015

If you're considering renting out your spare room or offering taxi-style services via your private vehicle, the ATO wants you to understand your tax obligations. 

The ATO has highlighted that activities such as letting a room, doing odd jobs or driving passengers in a car for higher are likely to result in taxpayers earning assessable income, regardless of whether they are carrying on a business or only participating in a limited capacity.

The ATO is also focused on whether there may be GST implications for people who participate in sharing economy activities, as they may have an enterprise if not carrying on a business.

Room rental, main residence and capital gains

Sharing services such as AirBnB and Uber are the more evident activities being targeted. Taxpayers who rent out spare rooms in their main residence may lose their entitlement to the full main residence exemption at the sale of their property in the future, for example.

If the taxpayer is renting out rooms in their property, even only occasionally, it could also trigger the 'home first used to produce income rule, which requires the owner to obtain a valuation of their property on order to reset the cost base under CGT provisions.

Uber-style ride sourcing may trigger GST

If you're thinking about providing taxi travel for paying passengers akin to the Uber phenomenon, then the ATO has issued a guide which confirms that, for GST purposes, the word 'taxi' has broad meaning of a car made available for public hire that is used to transport passengers for fares.

Ride sourcing occurs when there is an ongoing arrangement where a driver makes a car available for public hire, a passenger can use digital tools such as a website or smart phone app you request a ride and the driver uses the car to transport the passenger, with the view of taking payment and making a profit.

The key issue here is whether the taxpayer is providing taxi travel. If so, then there would be a requirement to register for GST because the $75,000 threshold does not apply in this case.

The ATO states that affected taxpayers will be given until 1 August 2015 to obtain an ABN, register for GST and start complying with their GST obligations.

Talk to an accountant

If you are currently or intending to offer rooms or rides to people in return for payment, it's worth discussing your tax obligations with your accountant. Contact us on 02 9957 4033 for more information. You can also download more information from the ATO Website.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.