With the pandemic keeping people inside and straining them financially, more and more Australian’s have been turning towards the gig economy for extra money.
This could look like anything from driving Uber, to walking your friends dogs or selling home-knitted beanies on Etsy. But even though you earned that extra bit of cash, you’ll need to declare it on your tax and know how to do it.
Australia’s leading accounting body, CPA Australia is here to help you do that.
Senior Manager of Tax Policy Elinor Kasapidis commented: “Lots of people turned to the gig economy to make ends meet during COVID-19.”
“The ATO (Australian Tax Office) is aware of these ‘side hustles’ and matches data from platforms like Uber, Airbnb and AirTasker against individuals’ tax returns. This means the jig is up on the gig economy this tax time.”
Ms Kasapidis makes clear that the gig economy falls under a wide umbrella of any extra work or income.
“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.”
“The good news is that your expenses from earning this income may be deductible.”
Gig workers can claim deductions for most of the costs that incurred in earning their income. Examples could include travel, marketing, financing and home-office expenses. However, you need to be careful to only claim what was necessary to your work.
“You can only claim a deduction for the work-related proportion of your use. Picking up an Uber fare on the way home from visiting mum doesn’t entitle you to write off all your car expenses.”
CPA Australia also warns that the ATO is cracking down on the cash economy. Not declaring cash income could lead to interest on your tax bill, as well as criminal and administrative penalties.
“It’s legal to receive payments in cash rather than electronically but you must report these amounts in your tax return.”
Another important tip is that there is no need to declare income activities that are just hobbies or not intended to make a profit, though you also can’t claim a reduction for them.
“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.”
Ms Kasapidis offers further guidance on COVID related tax issues.
“During lockdowns, some gig economy activities like ridesharing declined, while others such as food delivery skyrocketed.”
“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.”
Another thing to be wary of is that any JobKeeper payments or other business grants must be recorded as business income in their tax return.
If you’re lodging your own tax return, you must lodge it by November 1.