Drive for Uber or list on Airbnb? Here’s 3 things you need to know this tax season.
Uber, Airbnb and Airtasker are becoming increasingly mainstream as flexible ways to earn extra income for almost anyone with a good car, spare room or extra time on their hands.
But now that it is tax time, there are a few essential things rideshare drivers, space-sharers and other ‘sharing economy’ workers need to know.
The ATO is cracking down on the sharing economy and those who jump in without good tax planning could soon have a tax debt in the thousands, even tens of thousands of dollars.
Here are some general principles to follow when it comes to tax time:
Whether you use Airbnb or Uber to earn a bit of extra cash on the side or as your primary source of income, it all must be declared on your tax return. Tax experts advise tracking your income and being honest on your tax return.
“The ATO can now match Australians’ tax returns with personal data collected from banks, employers and other institutions, to work out whether there’s undeclared or missing income and whether expense claims have been incorrectly reported,” says Simone Gielis, Senior Tax Agent and General Manager at Etax.com.au.
“Those who under-report their income may end up owing back taxes and be hit with fines, penalties and interest charges.”
It can be tempting to count any extra money you’ve made through Airbnb or Uber as an excuse for a shopping spree. But just as your income is boosted by your Uber driving or rental, so is the tax you’re required to pay.
“If you don’t set aside some of your earnings, it can be a nasty surprise at tax time. During your first year you should put aside at least 30, even 40 per cent of what you earn from the ‘sharing economy’ to be safe,” says Gielis.
If you need to buy something to run your Airbnb or Uber, you may be able to claim a portion (or all) back at tax time. The key here is that you need to keep a record of your expenses in order to claim them.
“If you are renting out a room or apartment, you can claim expenses and depreciation for the percentage of your house that was rented, for the duration someone was paying. This includes things like internet and phone costs, utility and council rates and depreciation of furniture,” says Gielis.
Ridesharing drivers can claim work-related expenses including insurance and registration costs, car maintenance and repairs and even car cleaning costs.
It’s important to have an understanding of how the sharing economy impacts your individual tax obligations otherwise you could be in over your head. These days, 74% of Australians use a registered tax agent to help prepare their tax return, so if you’re not sure, it’s best to ask a professional tax agent.
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