With help from the internet, the latest business model is quietly turning millions of ‘average Joes’ into entrepreneurs.
- Uber is connecting riders with drivers through apps.
- Airbnb is connecting hosts with travellers looking for a place to sleep through its website.
- Zopa is connecting lenders with borrowers through its peer-to-peer lending service.
Many individuals are unlocking the value of their underutilised resources by sharing them with others in exchange for a benefit – both monetary and otherwise – giving us the term ‘sharing economy’.
The sharing economy encompasses a broad variety of services. You can earn extra cash by renting out your spare room, car or space in your garage; car-pooling; being a personal tour guide; running errands for people who are time-poor; or you can trade your clothes or play swapsies with your house. The opportunities are endless.
The concept of the sharing economy is not simply the matching of supply and demand like traditional economic theory, but rather the renting, sharing and collaborative consumption of underused assets in which also involves an element of trust.
We live in exciting times. This new ‘economy’ is gaining momentum across the world. New sharing businesses are constantly emerging. Some work, some don’t.
As with any new venture, always seek professional advice first. If you are considering taking part in the sharing economy, you should consider the risks involved. As the model is still in its infancy there are many grey areas particularly in relation to regulatory requirements and insurance.
A confusing area for some is how this is taxed. Although the sharing economy can be thought of as an unconventional system, it is nonetheless, viewed by the Australian Tax Office (ATO) the same way as a traditional economic system.
Tax law applies to the sharing economy the same way it would apply in a conventional economy. If you are earning an income from renting out a bedroom or running errands, the ATO will expect you to keep records of any income received along with any allowable deductions to include in your tax return.
What about GST?
If your sharing services generate an annual turnover of $75,000 or more, you are required to register your business for GST. Keep in mind that this also includes income from any other enterprise that you might be involved in. (However, it does not include any rental income you receive from a residential property.)
On the other hand, if you are providing a ‘taxi service’ of some kind, you need to register for GST regardless of your level of income. This includes any service where you drive passengers in a vehicle in exchange for a fee.
The ATO has more details on its website. Just type “sharing economy and tax” into your preferred search engine, or contact us for individual guidance through this exciting new landscape.