A growing number of Australians are ditching their 9-to-5 jobs in favour of independent task-based contracts. Here's what you need to know about being a gig worker. With the rise of the sharing economy, more Australians are using their homes, vehicles and skills to earn an income through sites like Airbnb, Uber, Car Next Door and Airtasker. But while these companies offer great earning opportunities and flexible working conditions, it's important to understand the financial implications involved. Remember, your freelance employment is a business, not a hobby – and you need to treat it that way. Here are some things to be aware of.
Like any other income you earn, the money you make from the sharing economy is subject to tax. So you'll need to declare all your earnings, including rental income from Airbnb. Remember, the Australian Tax Office (ATO) can match
tax returns against data from third parties, including the platforms you use to secure gig work. So, if you attempt to hide any income, you're likely to be found out – and may even have to pay a penalty.
If you earn over $75,000 through your business as a freelancer, you're required to register for GST. However, a different rule applies to Uber drivers, who the ATO considers to be taxi drivers for GST purposes.1 So if you're driving for Uber, you have to be GST-registered – no matter what your income.
It's also important to note that renting out your home (for example via Airbnb) may lead to capital gains tax consequences when you sell your home in the future. Speak with us for further details.
You may be eligible for tax deductions related to the costs you incur to provide sharing economy services. For instance, an Uber driver might be able to claim for expenses like parking, insurance and car registration, whereas a tradie working through Airtasker may be able to claim deductions for their tools, equipment and work clothing.
You may also be able to claim expenses such as bills and cleaning for your home office or any rooms you rent out through Airbnb, as well as any fees and commissions you pay to whichever service platform you use.
Be sure to check the ATO website to confirm which of your work-related expenses are deductible, and keep appropriate records in case you need to prove a claim.
Growing your super
Many gig workers aren't entitled to receive compulsory Super Guarantee payments from an employer, which could put your retirement savings at risk of falling behind. In fact, the Association of Superannuation Funds of Australia (ASFA) estimates that around 20% of Australia's self-employed workers have no super at all, compared with 8% of employees. 2
That's why it's so important to make regular voluntary contributions to your super so you can continue building your nest egg. Of course, this isn't always easy when your earnings can change dramatically from one month to the next. However, we can develop a super strategy tailored to your unique circumstances.
Budgeting and saving
By nature, freelancing is unpredictable; there are likely to be periods when the work is pouring in and other times that are relatively quiet. Without the security of a regular pay cheque, it's essential that you stick to a strict household budget so you don't suffer a financial setback during the dry spells.
By drawing up a list of your average monthly incomings and outgoings, you can avoid overspending. A regular savings plan will also ensure you have a financial safety net if you need to take time off for illness or holidays, since you won't be entitled to any paid leave. And don't forget to put money aside to pay your tax bill at the end of the financial year.
Impact on government benefits
It is important to also understand that earning money from the sharing economy may impact on your eligibility for means tested government benefits. Speak with David Freer for further details.
Get the right advice
Everyone's financial situation is different. So, if you're considering a new employment direction, it's best to get professional advice from us. We can guide you through your super options and tax requirements to make sure you're financially prepared for the change.
1 Australian Tax Office, Ride-sourcing and tax, 2018.
2 ASFA, Superannuation balances of the self-employed, 2018.