Tax

If you provide a good or service though a Collaborative Economy platform you may have tax obligations.
Examples could include:

  • Renting out or letting a room or other property for accommodation
  • Renting out or letting a car parking space
  • Doing odd jobs, errands, deliveries or more skilled services on an ad hoc basis
  • Using a car to transport members of the public for a fare

The tax laws which apply to activity conducted in a conventional manner apply in the same way to activity conducted in the Collaborative Economy.

Read on for a summary of the income tax and GST implications. For more detail, head to the Australian Tax Office (ATO).

Income tax implications for providers: a summary

In some instances, letting out a room, letting out a parking space, or doing other activities for payment will mean that you are earning assessable income regardless of whether you are carrying on a business.

If you are earning assessable income from providing Collaborative Economy services, you need to keep records of:

  • income from that activity and
  • any allowable deductions, which may need to be apportioned for private use.

These records will help you to include these amounts in a tax return and pay any tax owing from your activities on time.

If you are receiving a payment for some type of Collaborative Economy activity, you can check with the ATO whether you need to declare the income, what expenses you can claim and if there are any other special rules. You can also apply for a private ruling.

What are the GST implications for providers?

If you are engaged in Collaborative Economy activities where you let a room, let a car parking space or do other activities for payment, you may have a GST obligation where you have an 'enterprise'.

For example, if you rent out a property or provide a service on a regular basis to make money, this is considered to be an enterprise (even if it is not a business).

You need to register for GST if your annual turnover from your Collaborative Economy enterprise is $75,000 or more. If you have another enterprise with under $75,000 in turnover, but the combined turnover from that activity is over $75,000 you will also need to register for GST.

Where you do have an enterprise and you are required to be registered for GST, you will need to:

  • charge GST when you make a taxable supply
  • claim any input tax credits you are entitled to
  • lodge an activity statement and remit any net GST from your activities

Note that there are special input taxed rules about accommodation.

If you are already registered for GST for another purpose, your activities in a Collaborative Economy enterprise must be included with your other activities.

If you are receiving payment for some type of Collaborative Economy activity, you can check with the ATO whether you need to be registered for GST, whether you can claim input tax credits and if there are any other special rules. You can also apply for a private ruling.

Important update: On 17 February 2017 the Federal Court of Australia handed down its decision that ride-sourcing is taxi travel for GST purposes. This means that if you are providing a ridesharing service to customers you are required to be registered for GST regardless of your turnover. The Court’s judgment (Uber B.V. v Commissioner of Taxation [2017] FCA 110) is available on the Federal Court of Australia’s website. Visit the ATO website for detailed information on what this means for you.

Tax information for new platforms – how the ATO can help you

You’ve had a great idea for a new Collaborative Economy platform. You’ve built it, tested it, maybe received some initial seed funding. But have you considered the tax obligations for both yourself and providers that use your platform?

Wouldn’t it be great if you could help your providers simplify their tax obligations?

If you talk to the ATO early they can help you by preparing specific advice for your business which you can then pass to your providers. At tax time, you may even be able to feed earnings information directly to the ATO on behalf of your providers, making the process of completing their tax return much simpler.

What do I need to do?
  • Keep records of all income earned through Collaborative Economy platform
  • Keep records of any expenses you have incurred in the course of providing a good or services through a Collaborative Economy platform
  • Check whether you need to get an ABN and register for GST
  • If you have any doubt about your tax obligations, contact the ATO

Tax scenarios:

Mandy: Accommodation sharing

Mandy owns the house she lives in and likes to go on holiday over summer every year. While she is away, she is thinking about leasing her home to other holiday-makers through an online platform. Mandy estimates she will earn about $5,000. What tax implications might this have?

  • By renting out her house while she is away, Mandy is earning assessable income. Mandy must declare the income received from renting out her house as rental income in her tax return.
  • Mandy can claim deductions for expenses for the time period the house was rented out.  Mandy is entitled to claim deductions for expenses related to earning the income like mortgage interest, insurance, rates and advertising costs for the online platform. Mandy needs to ensure that she only claims expenses for the period the house was rented out which means she will need to apportion some of the expenses.
  • Mandy may not be entitled to the full main residence exemption from capital gains tax which means she may have to pay capital gains tax (CGT) on part of any capital gains made when she sell the house.
  • Goods and services tax (GST) doesn’t apply to residential rents so Mandy is not liable for GST on the rent Mandy charges and she can’t claim GST credits for associated expenses.

Find out more from the ATO:
The Sharing Economy
Renting out part or all of your home

Avoid legislating against problems that don’t yet exist, but instead take a balanced view of consumer benefit vs risk as disruptive technologies emerge
Sarah: Accommodation sharing

Sarah has invested in several apartments in different locations and apartment buildings and earns income by leasing them. She has decided to start using an online platform to advertise the properties to holiday-makers. What might some of her tax obligations and benefits be? 

  • Any income Sarah receives from renting out the apartments is assessable income. Sarah must declare the income received from renting out the apartments as rental income in her tax return
  • Sarah can claim deductions for expenses related to renting out the apartments including mortgage interest, rates, body corporates fees and platform administrator fees.    
  • If Sarah uses any of the apartments for personal use for herself or her family and friends she can only claim deductions for expenses or a proportion of expenses related to when she rents out the apartments. 
  • Goods and services tax (GST) doesn’t apply to residential rents so Sarah is not liable for GST on the rent charged and she can’t claim GST credits for associated expenses.

Find out more:
Rental properties 2015-16
The sharing economy

Sam: Accommodation sharing

Sam is a university student with a part-time job, earning $35,000 per year. He rents a two-bedroom apartment. He has received permission from his landlord to lease out his second bedroom to holiday-makers using an online accommodation platform. Over the past financial year, this has earned him an extra $8,000. It’s time to fill in his annual tax return. What does Sam need to do? 

  • Any income that Sam earns renting out a room in his apartment is assessable income. Sam must declare any income earned as rental income in his tax return.
  • Sam will be entitled to some deductions for expenses earning the rental income for when the room is rented out. Sam will need to apportion any expenses that he wants to claim on a floor-area basis based on the area solely occupied by the holiday maker, and then add to that a reasonable amount based on the holiday maker’s access to common areas (like a living room or kitchen).  
  • Goods and services tax (GST) doesn’t apply to residential rents so Sam is not liable for GST on the rent charged and he can’t claim GST credits for associated expenses.

Find out more:
The sharing economy
Renting out part or all of your home

Geoff: Ridesharing

Geoff has a full-time job, earning $70,000 a year. He has just bought a new car. To help pay it off he becomes a ridesharing driver outside of his regular office hours. What does he need to consider when it comes to tax?

If Geoff is carrying on an enterprise providing taxi travel services as a ride-sourcing driver he needs to:     

  • get an Australian Business Number (ABN) and register for the goods and services tax (GST)
  • account for and pay GST on the full amount of every fare
  • complete quarterly business activity statements (BAS)
  • if requested by a passenger, provide a tax invoice for fares over $82.50 (including GST)

Geoff can claim GST credits for things he purchased and used in his ride-sourcing services.   

The GST registration turnover threshold of $75,000 a year does not apply to ride-sourcing services and Geoff is required to be registered for GST regardless of his turnover

Geoff is also running a small business as a ride-sourcing driver as a sole trader. Geoff must declare the income that he earns (excluding GST) and can claim deductions for expenses related to providing the services (excluding GST).

Geoff must apportion all expenses and GST credits he wants to claim between personal and ride-sourcing use. He can only claim the proportion that relates to providing ride-sourcing services.

Find out more:
Providing taxi travel services through ride sourcing and your tax obligations

Peter: Services exchange

Peter has been out of work for a few months and claims the Newstart Allowance. A friend has told him about an online platform where he can pick up some extra income by advertising as a cleaner. He knows he will have to declare this income to Centrelink, but what other tax implications might there be?

  • Peter is earning income from providing cleaning services and he must declare the income in his tax return.
  • Peter can claim deductions for expenses that relate to earning the income, for example fees charged by the online platform or for cleaning products that he may provide
  • If Peter’s total turnover is, or he expects that it will be, $75,000 or more a year carrying on an enterprise providing cleaning services and/or any other enterprise, Peter will need to get an Australian Business Number, register for the goods and services tax (GST), charge GST on the services provided, and claim GST credits for things he purchased and used in his providing cleaning services or other enterprise.

Find out more:
The sharing economy

Mary: Food sharing

Mary has just retired. She recently heard about an online platform that enables you to sell extra portions of your home-cooked meals to people in the local area. Mary draws a pension from her superannuation, but thinks this might be a good way to supplement her income. What tax implications might this have?

  • If Mary’s activities are minor and irregular, for example selling two (2) meals a month, then her cooking activities would be considered a hobby and she would not need to declare the income and could not claim any deductions 
  • If Mary’s activities were more regular and for a clear profit-making purpose, for example she sold several meals every day, she is operating on a larger scale than selling the occasional meal and Mary would need to declare the income. Mary would also be able to claim deductions for the proportion of the expenses that relates to earning the income. 
  • If Mary’s total turnover is, or she expects that it will be, $75,000 or more a year carrying on an enterprise cooking for and selling meals to people and/or any other enterprise, Mary will need to get an Australian Business Number, register for the goods and services tax (GST), charge GST in the price, and claim GST credits for things she purchased and to the extent used in her enterprise

Find out more:
The sharing economy
Are you operating a business?

Computers R Us: Space sharing

‘Computers R Us’ is a company that sells computers and owns an office block near the busy city centre. Most of their employees catch public transport to work so their carpark is usually half empty. To boost revenue, the CEO has thought about leasing these empty car spaces through an online platform. Are there any tax issues the company should consider? 

  • Computers R Us must declare the income they earn from leasing out the excess car parking spaces and they can deduct expenses relate to renting out the car parking spaces.
  • If Computers R Us is already registered for GST for its enterprise of computer sales, they must charge the goods and services tax (GST) on renting out the car parking spaces and include the GST in their Business Activity Statement (BAS) for their computer sales enterprise.    
  • If Computers R Us is not registered for GST, and its total turnover is, or it expects that it will be, $75,000 or more a year carrying on its enterprises, including renting out the car parking spaces, it will need to:               
    • get an Australian Business Number(ABN) and register for GST,        
    • charge GST in the price, including in respect of leasing out car parking spaces,     
    • when requested, provide a tax invoice for providing services or goods over $82.50 (including GST), and lodge BASs. 
  • Computers R Us can claim GST credits for things it purchased and to the extent used in its enterprises.

Find out more:
The sharing economy