The concept behind the sharing economy is that people who own stuff that isn’t being used to its maximum capacity (a car, a room, a parking space, even internet bandwidth) are linked by an intermediary organisation to those who want to make use of that stuff and are prepared to pay to do so.
Prime examples of the phenomenon are Airbnb, which is a marketplace for spare accommodation, and Uber, a ride-sharing service that lets you hitch a lift with drivers whose vehicles are available and in your vicinity.
The benefit of services like these is that spare capacity is matched with latent demand to ensure goods and services are utilised efficiently. For those who market their services through a platform like Uber or Airbnb, they provide a useful way of earning some extra cash.
The government has picked up on the trend. Former treasurer Joe Hockey observed, quite correctly, that Uber is now the world’s largest provider of taxi services but owns no taxis, while Airbnb is the world’s largest provider of accommodation but owns no hotels.
For the ATO, the sharing economy presents plenty of issues. Many in the sharing economy have not been complying with all their tax obligations. Now, rather belatedly, the ATO has finally issued some guidance on how the tax laws apply to those operating in the sharing economy.
At the heart of the new rules, the ATO’s message is that running a business in the sharing economy is fundamentally the same as running any other sort of business.
So, what in practical terms does that mean if you’re earning income from sharing economy providers?
First of all, the ATO points out that if you are making money from letting out a room or any other activities for payment, the chances are that that money is assessable income, even if you’re not, strictly speaking, running a business.
So you need to keep records of all your income, as well as details of any allowable deductions you incur, such as licensing fees, commissions or other payments to the facilitating organisation (such as Airbnb). That income – and the associated deductions – then needs to be disclosed on your tax return.
Secondly, you may have a GST obligation. If you rent out a property on a regular basis, for instance, the ATO regards you as running an enterprise. That means that if your turnover from your activities (whether in the sharing economy alone or from other activities combined with your sharing economy turnover) exceeds $75,000, you must register and account for GST. For Uber drivers, the rules are even stricter.
The ATO now regards them as providing ‘taxi travel’, which means that they must be registered for GST regardless of turnover and must account for GST from the first dollar of that turnover.
The ATO’s stand on the sharing economy hasn’t won them many friends, but one thing is clear: shared economy participants are on notice and the ATO is watching.
Mark Chapman is the director of tax communications at H&R Block, and a former senior director of the ATO.