The Sharing Economy in Australia and the Associated Tax Obstacles

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Table of contents

  1. The Sharing Economy in Australia
  2. Income Tax Law for Gig/Shared Economy
  3. Conclusions and Recommendations

The 'sharing economy' is a term that describes individuals utilizing web applications to lease their property, assets, time and skills. Sharing economy stages enable users to monetise the estimation of surplus limit in the utilization of advantages or work, for instance, vehicles or transportation administrations. Users can either lease possessed resources or give administrations to a charge, or pay to utilize resources or secure administrations on an 'as-requirements' basis. For instance, the proprietor of a vehicle that holds a permit to drive the vehicle can give ride-sourcing administrations to purchasers through stages, for example, Uber.

Hence the sharing economy depends on 'access over ownership’. The effect and utilization of the sharing economy has developed drastically as of late in Australia and different nations, with increasing availability and affordability of internet access, particularly by means of smart phones. Additional instances of sharing economy administrations incorporate leasing a room or an entire dwelling on a transient premise, leasing parking spots, giving individual administrations (unspecialized temp jobs, errands, conveyances, exchanges). Well known platforms for these activities include Uber, Airbnb, Airtasker. The sharing economy also goes by different names, for example, collaborative consumption, the gig economy, peer-to-peer market, mesh economy or peer production.

Sharing economy exercises are regularly planned by method for applications running on individual members' cell phones, which associate with a 'platform' facilitated by an administrator. The stage goes about as a middle person between the individual members who may use the platform to agree and contract for the delivery of some services. The expected activity of sharing economy platform is that they don't utilize any of the members or possess or control any of the advantages shared over the stage. Or maybe, the platform tries to encourage the formation of courses of action between companions. The platform typically provides a payment mechanism and charges a fee or commission on a transaction-by-transaction basis.

The Sharing Economy in Australia

The sharing economy has additionally ventured into a scope of new areas, for example, the arrangement of individual administrations. The sharing economy is hard to characterize and measure, anyway freely accessible information proposes that: Australia's sharing economy was worth around $15 billion in February 2017, and about 10.8 Australians, or 60 per cent of the workforce, were thought to have earnt extra money from sharing economy from sharing economy services between July to December 2017.

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Presently, there is frequently an absence of data and transparency in connection to assess matters in the sharing economy. This makes it hard for the ATO to comprehend if merchants are underreporting their pay, either purposely or because of absence of mindfulness. In interviews, the Taskforce heard that absence of mindfulness is frequently referred to as the reason for the issue. An explanation behind this absence of mindfulness is that sharing economy venders may not be working in conventional business connections, yet rather as self-employed entities or independently employed principals that fall outside the current announcing routines. This implies expense may not be retained from the pay they produce on the stage, and stages may have no commitment to report data on instalments made to user to the ATO. The casual idea of sharing economy exercises additionally makes it more uncertain that merchants will see how such exercises may influence their assessment position. Sharing economy merchants may mistakenly think about that the income they gain from sharing economy exercises isn't assessable as it is interest pay, or that they are doing sharing economy exercises for the time being or all around at times and accordingly don't need to cover government expense. On the off chance that sharing economy dealers don't comprehend their commitments it is progressively hard for them to consent. Because of the above mentioned, the ATO has restricted data about the pay of sharing economy dealers. This transparency gap where many sellers are not familiar with their tax obligations is not a desirable outcome. In a self-appraisal charge framework, while training and direction on assessment commitments is significant, the nonappearance of a far reaching detailing system for specialists presents dangers of rebelliousness.

The ATO has already begun to work with businesses on a reporting regime, obtaining information from some ride-sourcing providers and accommodation providers under its formal information gathering powers contained in section 353-10 of Schedule 1 to the Taxation Administration Act 1953. Under this provision the ATO requests vehicle registration details and details of payments received by drivers from ride-sourcing platforms,5 and information from rental platforms to identify entities who rent their property on a short term basis but may not be meeting their registration, reporting, lodgement and/or payment obligations.

Income Tax Law for Gig/Shared Economy

The Australian income tax law does not contain any unique regimes that are intended to apply explicitly to shared economy members. Individual sharing economy participants should subsequently apply the general income law to their individual conditions. This includes rules as to allowable deductions and the tax treatment of assets used to produce income (including via the sharing economy) such as the CGT and capital allowances rules. Shared economy participants can deduct outgoings to the extent they are incurred in gaining or producing assessable income such as depreciation, operating costs etc. Where deductions exceed income from sharing economy activities, the resulting loss may be quarantined under existing non-commercial losses legislation. Where assets are used to generate income through the sharing economy, a proportion of the gain on disposal of the asset may be taxable, and in some circumstances losses may be deductible. This is because exemptions related to (for example) private or domestic use or main residence exemptions may not apply.

The ATO see is extensively that much of the time sharing economy members' exercises will offer ascent to assessable income. That is, members in the sharing economy regardless of whether working at a moderately little scale would for the most part have a necessity to regard their receipts as assessable income and be qualified for deduct the costs identified with gaining this pay. In any case, the ATO urges all citizens to self-evaluate their expense obligation as per their own conditions and recognizes that a few people are really accepting sums through a pastime, for example, create, and that these sums are not assessable. Given the unique guidelines for GST enrolment applying to the particular business, the ATO has embraced focused on consistence exercises in the sharing economy space, incorporating concerning GST enlistments by drivers taking part in ride-sourcing exercises.

Conclusions and Recommendations

It is considered that the shared economy presents specific administration risks, difficulties and opportunities. This is because that the innovation empowers sharing economy exercises has altogether brought down the boundaries to passage into interest in business exercises and numerous people take an interest in the sharing economy without considering or understanding the tax consequences and where participants consider tax consequences, there is significant scope for misunderstanding or misapplication of concepts. 

At present, the ATO has forces to urge the arrangement of information on members' exercises. In any case, this power applies to data that has just been gathered by stages, which regularly just incorporates data which the business requires, for instance, bank subtleties, however may exclude other individual identifiers required for successful information coordinating or pre-filling.

This recommendation may be costly as it requires development of the appropriate means of facilitate. It would likewise be important to decide the conditions in which information sharing would be required. It is presented that it would not be suitable to force information sharing commitments on a single stage, for example, Airbnb in isolation, as this could possibly build shirking movement. Or maybe, standards for application would should be built up. Considerations may incorporate sorts of businesses, user volumes, money related limits and kinds of stages. Any such application would should be gone before by an expansion of this investigation to seek after a comprehension of annual expense consistence with regards to the clients of other shared economy platforms.

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