More and more home owners and car owners are dabbling in the Sharing Economy to make some extra dollars for the household, and why not? That spare bed is only collecting dust! All your friends seem to be making a small fortune and you’re missing out on all this easy money. All you have to do is put a few photos online and watch the income flow in. And best of all, unlike your other income streams, you don’t have to pay tax on the money you make because the Government doesn’t even know you’re doing it, right?
Just as it happened for Online Stores a decade ago, the ATO may take a little while to catch on to the new ways we are earning our incomes, but catch on they DO! Like any income earning stream, the ATO has put checking mechanisms in place to make sure that no income stone goes unturned. Using AirBNB as one example of the sharing economy, the ATO has the ability to gain access to who they make their payment to. If that happens to be you, then this can trigger a mini-audit which involves having a quick look at the income you have declared in your tax return and comparing it to the information they already have. If they find that you have not declared all your income you will be required to pay the tax with penalties and interest. There are other potential issues such as Capital Gains Tax when you go to sell the house, so it’s always best to discuss this with your accountant or business advisor before embarking on any new venture.
Whether it be Uber, Stayz or any other sharing service, treat it like a business from Day 1. Keep it separate from your other income sources and personal expenditure. Open a second bank account so you can easily keep a record of the income you are receiving from it, but also so you have a record of what you are spending in running the business eg. laundry, petrol, so that you can claim them as deductions in your next tax return.
For more information relating to your specific circumstances please contact the Skinner Hamilton team.