Tax warning on share economy
THE October 31 tax lodgement deadline has arrived and Australians making money from the share economy are being urged to make sure they are on top of their tax obligations.
Money earned on Airbnb, Uber, Airtasker and similar platforms requires tax to be paid, according to Jason Robinson, director at accounting firm RBK Advisory.
"More clients are casually mentioning extra revenue streams," Mr Robinson said. "I asked one client how their weekend was and found out they were earning $400 every weekend helping strangers move house."
The government is beginning to regulate side income sources.
"Uber drivers are now required to be GST registered and hold an ABN before they can begin making money," Mr Robinson said.
Airbnb and Stayz have become popular with landlords taking advantage of holiday locations by organising fixed leases for colder off-season months and then going short term for a bigger yield over summer, said Sandrina Postorino, managing director of Landlords Choice.
"During these months they can command much higher variable rents," she said. "This all needs to be accounted for in their tax return.
"Another trap is when investors decide to Airbnb their main residence instead of their investment property, which means it is no longer completely exempt from Capital Gains Tax."
Side hustles, or hobbies turned into income streams by entrepreneurial types also have tax requirements, according to Clayton Howes, CEO of fintech lender MoneyMe.
"If you make even one dollar on your side hustle that comes with tax obligations," Mr Howes said.
Another confusing one is network marketing- think Avon and other modern incarnations- often undertaken by stay at home parents, said Katrina Haskew, managing director of Leading Advice.
"Where it can get messy is when turnover is more than $20,000, but they have consumed so much of their own products in testing, trials, or giveaways, that it is an effective loss," Ms Haskew said. "This is extremely challenging to account for, so it's paramount that stringent records are kept and presented to accountants."
ATO assistant commissioner Kath Anderson said many Australians lodge their returns at the last minute and can make mistakes overlook income when in a hurry.
Catherine and Gabriel Mihalas both enjoy side hustles in addition to their regular jobs. Catherine joined Nucerity, a network marketing group in the health and skincare field, as a way to earn money in the years following the birth of son Samuel.
"The key attraction was the hope of building a future residual income where I could stop worrying about money completely, by putting in the groundwork today," Mrs Mihalas said. "My plan is to eventually retire from nursing with this as my main income."
Mrs Mihalas did not originally focus on what her tax obligations might be, until the company suggested during her onboarding process that she discuss it with her accountant.
"I'm still at a stage where what I'm doing is considered a hobby; I haven't yet passed the threshold where it will be considered a business," Mrs Mihalas said. "But I believe that when I reach that stage, the benefits of the program will outweigh the tax obligations."
Husband Gabriel set up a side business in aerial drone photography, to combine a hobby with his background in aviation.
"It seemed like a great way to earn extra cash while doing something that I loved," Mr Mihalas said. "I was aware of the tax implications from day one … I knew which records to keep to stay on track.
"I'd like to think it will become a significant additional revenue stream for our family."