The ATO is cracking down on the cash and gig economies, and taxpayers must ensure that they are declaring all of their odd jobs and freelance work on their tax return, says one industry body.
While gig economy workers often earn their income as independent contractors, the term broadly includes people who earn income from bartering or sharing as well, and all activities that earn income should be declared come tax time, says Elinor Kasapidis, senior manager of tax policy at CPA Australia.
“If you drive people around, do odd jobs or free-lance work, rent out your car or storage space, run social media accounts or sell products, you need to declare this income in your tax return,” Ms Kasapidis said.
The ATO, like its crackdown on the declaration of, and tax paid on, crypto-assets, can be expected to employ advanced data-matching from platforms that play host to large proportions of Australia’s gig economy, like Uber, AirTasker, and Airbnb.
“Lots of people turned to the gig economy to make ends meet during COVID-19,” Ms Kasapidis said.
“The ATO is aware of these ‘side hustles’ and matches data from platforms like Uber, Airbnb and AirTasker against individuals’ tax returns,” she said. “This means the jig is up on the gig economy this tax time.”
Ms Kasapidis said the silver lining for taxpayers with broader tax obligations this income year is that they are likely to be eligible for a wider range of deductions.
She said gig workers can claim deductions for most costs incurred while earning their income, like travel, vehicle, financing, and even marketing.
“You can only claim a deduction for the work-related proportion of your use,” Ms Kasapidis said. “Picking up an Uber fare on the way home from visiting mum doesn’t entitle you to write off all your car expenses.”
The Tax Office can also be expected to crack down on the cash economy, Ms Kasapidis said. Those who fail to declare cash income from the gig economy may face penalties in the form of interest on their tax bills, and even criminal charges.
“It’s legal to receive payments in cash rather than electronically but you must report these amounts in your tax return,” Ms Kasapidis said.
She urged taxpayers to be mindful that cash earned from activities that are little more than hobbies doesn’t need to be declared, though deductions can’t be claimed either.
“Don’t worry, the hundred bucks you earned from selling your designer handbag or off-loading your ‘barely used’ bike on eBay doesn’t need to be reported,” she said.
Some gig workers may face pandemic-induced tax challenges too, she said, as some gig economy activities, like ridesharing and house sharing, have declined, while others, like food delivery, have surged.
“If your deductions are based on a representative period and your usual pattern of work changed due to COVID-19, you may need to prepare an additional record for this period,” Ms Kasapidis said.
She said that those who received JobKeeper payments, or other business grants throughout the pandemic, must record them as business income in their tax returns. They are assessable, and may emerge as taxable events.