With help from the Internet, the latest business model is quietly turning millions of ‘average Joes’ into successful entrepreneurs and business moguls.
* Uber is connecting riders with drivers through apps.
* Airbnb is connecting hosts with travelers looking for a place to sleep through their website.
* Zopa is connecting lenders with borrowers through its peer-to-peer lending service.
Many individuals are unlocking the value of their under-utilised 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; by car-pooling; by being a personal tour guide; by running errands for people who are time-poor; 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, rather, it encompasses 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 are wildly successful, and some flop.
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 policies.
A confusing area for some is how the sharing economy is taxed. Although this business model can be thought of as an unconventional system, it is nonetheless viewed by the Australian Tax Office (ATO) the same way as a traditional business.
Tax law applies to the sharing economy the same way it would apply to a regular business. If you are earning an income from renting out a bedroom or running errands for example, 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 or income stream 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 or ‘ride-sharing’ service of some kind, you will 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 their website. Just search “sharing economy and tax” into your preferred search engine, or contact us for individual guidance through this exciting landscape.