Concepts
Sharing economy
The sharing economy covers activities where people earn income through online platforms by offering services or assets, such as ride-sourcing and short-term accommodation, and these activities can have tax and GST consequences.
The sharing economy, sometimes called the gig or platform economy, describes activities where individuals use a digital platform to offer services or rent out assets. Common examples include ride-sourcing, food delivery, short-term accommodation, freelance task platforms and renting out cars, parking spaces or equipment. These activities are often casual in appearance, but income earned is generally assessable for tax and may trigger GST obligations.
For income tax, money earned through a platform is generally assessable income, whether it is paid into a bank account, held by the platform or paid in another form. You can claim deductions for expenses related to earning that income, such as a portion of vehicle costs or platform fees, but you need records to show what is business-related and what is private. Platforms may also report information to the ATO, so earnings can be matched against your return.
For GST, the rules can be more surprising. People who drive for a ride-sourcing service must register for GST regardless of their turnover, and must charge GST on the fares. This applies from the first dollar, which is unlike most businesses that only need to register when GST turnover reaches the threshold. Drivers can generally claim credits on the business portion of their costs, such as fuel and car expenses.
Other sharing economy activities follow the usual rules. If you are carrying on an enterprise and your GST turnover is $75,000 or more, you must register. If you are below the threshold, you can choose to register voluntarily. Whether GST applies to your supplies depends on their nature. Renting out a residence for long-term living is generally input-taxed, whereas short-term accommodation can be treated differently, so the particular circumstances matter. Check the ATO guidance for your activity.
Records are essential. Keep platform statements, invoices, bank records, logbooks or other evidence of business use, and receipts for expenses. Records generally need to be kept for five years. Many people earn through several platforms, so it helps to use one system to total up all income, because the registration threshold looks at the total of your enterprise income across all sources, not platform by platform.
A common misunderstanding is believing that income from a side activity is not taxable because it is small or occasional, or that the platform deals with all the tax. The platform may take a fee and report your income but does not usually account for your income tax or GST. The ATO publishes specific guidance for sharing economy participants. This is general information only, so confirm your situation with the ATO or a registered tax professional.
Worked example
A ride-sourcing driver collects $52,800 in fares over the year, including GST, even though this is below the $75,000 threshold. Because she is a ride-sourcing driver she must be registered. GST on fares is $52,800 divided by 11, which is $4,800. If she paid $9,900 including GST on business-related car costs, she may claim credits of $900, assuming full business use and valid records.
Practical tips
- Remember ride-sourcing drivers must register for GST from the start, regardless of turnover.
- Keep platform statements and logbooks or other evidence to separate business and private use.
- Add up income from all platforms when checking the registration threshold.