The Sharing Economy (Airbnb and Uber)

The ATO has provided some guidelines for what you should do if you are operating one of these sharing economy businesses and the tax implications they may have.  Their guidelines can be found here and contain a number of useful examples.

Airbnb Rentals

If you are using Airbnb to rent out a room, or even your whole house from time to time, you may be carrying on a business and have a need to register for an ABN.  You would always need to declare this income for tax purposes and there may be additional substantiation requirements, such as keeping a log book (number of days a year) to apportion expenses into private usage and income usage.

The bad news is that whilst Airbnb may sound like a fabulous way to earn extra cash, you must be mindful that if you are renting out your primary residence, when you sell it, if it has been used for an Airbnb/rental scheme you may not be able to apply the full capital gains tax Main Residence exemption.  It might be that only a partial exemption will be allowed.  This exemption can be complex and professional advice should always be sought.

The good news is you do not have to register for GST (even if your turnover is above $75,000pa) as residential rental income is not subject to GST, though you will not be able to claim GST on your costs.

You should also be aware that through sophisticated data matching techniques, driven by technology, the ATO are more likely than ever to be able to track the income you have received through Airbnb.  We recommend you maintain careful records and ensure all income is disclosed, and all allowable expenses are claimed, when lodging your income tax return.

Uber Drivers

Unfortunately Uber drivers have been slammed by the ATO. Regular Uber drivers must typically declare all income for tax purposes; keep a log book and details/receipts of all expenses.  On top of that, the ATO considers that Uber drivers should hold an ABN and be registered for GST, as they are treated the same as taxi drivers for GST purposes.  This means GST is payable on all income, whether or not total income is below $75,000pa.  

We recommend any regular Uber drivers open a dedicated bank account to track all expenses and income connected with their Uber activities.  In addition, a simple bookkeeping system should be implemented in order to track GST and ensure year-end tax preparation can be done smoothly.

Further details on the ATO’s views regarding ride sharing and Uber can be found here.

Other Issues to Consider

If you are conducting any of these businesses, it’s advisable to set aside some money to help with any potential tax debts. As you will be taxed on these income sources, the tax rate will be your personal marginal tax rate. As your taxable income increases, so too will the rate of tax which applies.

Both house sharing and ride sharing income is on the ATO’s radar and they may follow up their recent announcements with compliance action in the near future.

If you have any doubt about tax applies to your personal circumstances, please get in touch with your contact at Baumgartners.