More and more we are living in a ‘sharing economy’ with many opting to top up their traditional income stream through platforms such as airBnB, Uber or other side-line businesses. What many taxpayers forget however, is that these businesses generate income that needs to be reported on your annual income tax return and applicable tax paid.
You will find below some of the taxation issues that need to be considered before renting your house on airBnB or starting a side line business such as Uber. It is important to plan ahead of time and put cash aside to cover any tax on the income.
AirBnB Tax Issues to consider:
Rental Income – any income earned through airBnB must be included in your tax return, regardless of whether its only a spare room in your house for one week of the year. The ATO have announced this will be an area of audit focus in the future, so make sure you are declaring the income.
Capital Gains Tax (CGT) on sale of your home – renting out all or part of your home on airBnB can trigger CGT implications upon sale. Typically, the family home is exempt from CGT due to the main residence exemption however this exemption is removed once the property becomes income producing (including when rented on airBnB). This is a long-term cost that many forget to consider.
Uber Tax issues to consider:
Income Tax – when you driver for Uber you are classified as a contractor, which means unlike an employee, you are not having tax taken out of your income. Any money you make from Uber is classified as income and is included in your tax return, so you need to ensure you are putting money aside for the tax bill that will follow at year end.
GST – all Uber drivers are required to be registered for GST, regardless of how much income they generate. This means that you need to pay the GST portion of your Uber fares to the ATO on a quarterly basis via a BAS statement.
The key to staying out of trouble with the ATO is to ensure you keep good records of your income and expenses related to your side-line income producing activities. Staying up to date with your tax lodgements and putting sufficient cash aside for future tax liabilities will ensure you avoid any stress or questions asked later down the track.
If you need assistance in completing your tax return please contact the team at MJJ Accounting and Business Solutions.