Airbnb – the world’s largest accommodation business but owns no properties.
Uber – the world’s largest transport business but owns no vehicles.
Time to earn some quick cash? Have a spare room or an underutilised beach house? Want to get paid for driving to work?
These are some of the advertising slogans that we are bombarded with on a daily basis. The ways of doing business has changed and we all want to have a piece of the action. Companies such as Airbnb and Uber have disrupted worldwide markets with their simplistic business models that we can all participate in. As exciting and easy as it may be to register as a provider of these services, there are many things to consider, one of which being the tax implications that can arise.
With 1.5 million listings in 191 countries around the world and 65 million guests, Airbnb is fast becoming the most popular accommodation site in the world.
If you are wanting to get involved with Airbnb as a provider of accommodation, you are creating an income, and with income, comes tax.
When you rent out all or part of your home on Airbnb or other similar apps, you will need to keep a record of all income earned and declare it in your tax return.
You can claim a deduction for expenses associated with the rental such as cleaning/laundry, repairs and guest amenities, to name a few. You can also claim a deduction for a portion of your usual living costs, for example, rates, insurance, interest and electricity. These costs are usually apportioned based on the size of the room and the number of days being rented.
One major point to consider is that by renting out part of your home, you could lose part of your Capital Gains Tax main residence exemption which means that when you come to sell your house you may need to pay tax on a portion of any gain you make based on the room size and number of days you rented out your home.
Before setting off to earn your first Uber fare, there are a few things that you must consider.
‘Ride-sourcing’ services in the eyes of the ATO are viewed the same as providing taxi services. Even though your Uber activities may only be infrequent and not expected to earn $75,000 from it, you are still required to register for an ABN and GST. This requirement to register for GST means that you will be required to lodge Business Activity Statements on a regular basis to remit the appropriate GST amounts to the ATO. It’s not all bad however as you are able to claim GST credits on expenses that relate to earning your ride-sourcing income.
It is important to know how to complete a tax invoice, as if the fare is over $82.50, you are required to provide one if asked.
When it comes to your Income Tax Return, you are required to report all income earned and any eligible deductions that relate directly to the provision of these ride-sourcing services. There may be some provision to claim a portion of other expenses, such as depreciation and interest. It is very important to bear in mind, that should your ride-sourcing activities result in a loss, there are strict Non-Commercial Loss rules that you need to pass to be able to claim that loss against your other sources of income.
As you can see from the above, there are many aspects to consider when starting out in any business. If you are considering participating in the sharing economy, make sure you discuss your plans with your accountant to ensure you don’t get a nasty surprise when the ATO comes knocking!