In this guide, I will be looking at the tax implications of the sharing economy, specifically, Uber and AirBnB.

Uber:

First off, anyone who drives Uber is required to register for GST. If you want to earn money by being an Uber driver, you will need an ABN and to be registered for GST.

Straight from the ATO: https://www.ato.gov.au/General/Ride-sourcing-and-tax/

Income tax GST – if you have a ride-sourcing enterprise
  • Include the income you earn in your tax return
  • Only claim deductions related to transporting passengers for a fare
  • Get an Australian business number
  • Register for GST regardless of how much you earn (ride-sourcing is taxi travel for GST purposes)
  • Pay GST on the full fare
  • Only claim GST credits related to transporting passengers for a fare
  • Lodge business activity statements
  • Know how to issue a tax invoice (you need to provide one for fares over $82.50 if asked)

The result of this, is that 1/11 of every dollar earned  is the GST portion and will need to be declared and paid on your business activity statement (BAS). I would recommend registering on a cash basis, so what you only include on your BAS the amounts you have received.

What you can claim:

  • Motor vehicle costs using the logbook method. Based on your logbook percentage you can claim your business use percentage of the following:
    • Registration
    • Insurance
    • Fuel
    • Services
    • Repairs and maintenance
    • Depreciation
    • Interest

Traps and pitfalls:

GST and your vehicle used for Uber:
While running an Uber driving enterprise will allow you to claim GST back on the purchase of a vehicle (limited to your logbook business use percentage), you will need to allow for also having to charge GST when you sell your Uber vehicle. Essentially, 1/11th of the price you sell your car for is GST and is required to be remitted on a BAS to the ATO.

Unfortunately, you cannot avoid this by simply not trading in or selling your car, if you stop driving for Uber and cease your enterprise, you will still be required to remit GST on your final BAS using the market value substitution rule. Essentially treating the car as sold for its market value at the time you ceased using it for driving for Uber.

Instant write off and car depreciation:
Until 30th June 2018 if you are running an Uber driving enterprise, you can instantly write off (claim in full) the cost of a new car that has a GST exclusive cost under $20k

However, the issue to watch out for is that you will now have a vehicle with $0 written down value. The problem here is once again, when you sell the car, the entire amount you sell the car for, will form an assessable adjustment (as the value sold for will exceed the written down value) and result in an increase to your taxable income. Once again, if you cease operating your enterprise before selling the car, the market substitution rule will be applied. Essentially you are considered to have sold the car at market value at the time it is ceased being used in the enterprise.

Airbnb:

Airbnb is treated differently to Uber. Currently the ATO and current legislation considers services Airbnb to be essentially the same as renting out an investment property via a real estate agent. It includes the same rules as any rental property. First off, any income earned via Airbnb is going to be taxable income, it is however included as rental income on your tax return.

As you are earning rental income, you have the same deductions available to claim against this income as any rental property such as:
Council Rates
Water Rates
Insurance
Interest on loans
Depreciation
Body Corporate fees
Airbnb’s fees
Etc Etc

What you will need to consider though is whether these deductions are available in full or need to be apportioned. Essentially you will only be able to claim the deductions in full if you had the whole property available for rent for the entire year. If you only rented part of the property or only for part of the year then you will need to apportion the expenses.

Further reading from the ATO: https://www.ato.gov.au/General/Property/Your-home/Renting-out-part-or-all-of-your-home/

Traps and pitfalls:

Capital gains tax:
Airbnb has a potentially major trap, capital gains tax (CGT), any rental property that you earn income on, is subject to CGT. This includes your principal place of residence (PPOR). If you rent out even just one of the rooms in your PPOR, you will lose part of the PPOR CGT exemption.

This means, when you sell your PPOR you are required to calculate the capital gain and apportion it based on the floor space rented out and time it was rented out for. It may only be a small portion, but a small portion can add up when gains on properties can run into the hundred’s of thousand’s of dollars. There is also the compliance cost of maintaining all the records relating to your property and the calculation itself.

If you have any questions or would like to discuss your tax situation, please feel free call on 0433 357 477 alternatively, email: srobinson@robinsonaccounting.com.au