Taxation Implications and Compliance in the Australian Shared Economy

This report delves into the taxation implications of the shared economy in Australia, focusing on income tax and GST for service providers like Uber and Airbnb. It examines the responsibilities of shared economy participants, including the declaration of income, claiming deductions, and GST registration thresholds. The report also addresses specific tax considerations such as capital gains tax exemptions and the importance of maintaining accurate records. Furthermore, it explores strategies to improve tax compliance within the shared economy, including suggestions for aligning GST and income tax revenue distribution between federal and state governments. The analysis highlights the significance of understanding and adhering to Australian Taxation Office (ATO) regulations to ensure compliance and avoid potential penalties. The report underscores the need for clear guidelines and proactive measures to address the evolving tax landscape of the shared economy.

TAXATION
IMPLICATIONS
SHARED ECONOMY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
(a) probability ensuring that shared economy service providers complying with the Australian
income tax laws...........................................................................................................................1
(b) Ways to improve the compliance .........................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
A tax is the charges on the income of an individual or business or trust or charity and is
charged by the government of the country where the business is running and situated. The aim
of charging the tax is earning the profit orrevenue which can be further used by the government
for welfare of the public and nation.
Application of tax on the shared economy services providers by the government and
Australian taxation authority of Australia. This study will explain about the different section and
guideline which are required to understand for doing business effectively.
The shared economy is also called as the peer to peer economy which is made of the
consumption where goods or services not owned by the single user but instead only on
temporarily used by the members of the network and underutilized assets are shared for free or
for charging by fee(Wenzel, 2019)
(a) probability ensuring that shared economy service providers complying with the Australian
income tax laws.
Two shared economy provider from the project
.Uber and Airbnb is taken as the shared economy service providers in the report which is
on this peer to peer transaction are empowered by the digital platform and tee end user who
generally representing the demand side of the transaction are got matched by these shared
economies emwithin the online platform. The users generally paying for the services provided
by these platforms by allowing asset percentage of transaction value to be held by the platform
provider as a fee or commission.
The shared economies have gained important share of market in the accommodating that
is short term letting , passenger transport, household services , professional and technical
services and collaborative financial sectors, say for example Airbnb is considering to be the
largest services provider of accommodation in the world(Stephenson and Vracheva, 2015). It is
argued that the growth of shared economy are generally drived by the cost advantage as it gives
the base with the flexibility which is been provided to the suppliers ad users of the services.
Its growth is also required to fuelled by any jurisdictions impose importantly and low
legal needs which includes of for taxes, on the sharing economy users. the another important
issue which considers for sharing economy is eve there are precautionary measures for the
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sharing economies to stay in the domain but the taxes are applicable to their activities which
may earn lower revenues and at the same time it distort the level playing field(Sigala, 2018).
sharing economy was worth around $15.1 billion in 2017 and 10.8 millions Australian or
60% of the employees and staff were thinking to have extra money from sharing economy
services. Federal government even have no estimate of the tax lost from the potential under-
reporting of income for avoiding the tax payment(Top 10 Tax Tips for the Australian Sharing
Economy, 2017 ) .
The ATO has declared a law focusing on the tax affairs for those who work in the sharing
economy(Richardson, 2016). There are many of Australians offering services through companies
like Uber, Intertask etc. Many people do not understand that sharing economy work is taxable
and for filling up the knowledge gap there are some important heads which needs to be
understand carefully and effectively.
Operating and recording of their income and expenses
Income need to declared on the tax return
Income which is received by these organisations from working in the sharing economy is
completely responsible for paying tax and need to be declared on their tax return.
Claim deductions
These organisations are claiming for the deductions for any of the expenses which is related to
the work or the part of their work and must be declared on the tax return.
 Uber driver most of the expenditures they likely to focus is on the costs of the purchase
and using their vehicles or taxies(Kupriyanovsky and et.al., 2017). Then they are required
to keeping a log book of their journey over a 12 week period so that they able to work on
the business and personal spot and also keep a log of all the journeys including the travel
to and from pick ups. Keeping receipts also so that substantiate cots like fuels, car
cleaning, servicing, etc.
 In the case of the Airbnb if they rent out a room than they can able to claim for the
appropriate proportion of the property related expenses which includes rates, cleaning,
heating ,, cable TV subscriptions, lighting, water charges etc.
Fees or commissions could be tax deductible
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Most of the sharing economy services charge fee or commission out of the price which they
charge from the customers for offering their services to them(Fauziatiand et.al., 2016) . The fee
or commission charged by them is tax deductible.
Only claim the business related elements
The expenses which are claimed by these organisations are mixture of the business and private or
domestic use but companies need to make sure that only business use expenses can be claimed
by them not the domestic ones.
Capital gains tax exemptions for the Airbnbers
if they are renting out the part of their home through Airbnb than they might lose the part of the
capital gains tax exemptions which typically applied to their main residence. This means they
need to pay the capital gain tax bills if they sell their house.
Uber drivers register for GST and claim the GST credits
it is the duty for the uber driver to get register themselves for the GST wit the ATO and also
charge GST on all of their fares from the first dollar(Emery, 2016). They can also claim for their
work related expenses and purchases. They are need to submit a BAS from every quarter.
Airbnb register for the GST of turnover exceeds $75000
Airbnb also need to register for the GST if turnover from the shared economy business
combined with any business they run exceeds to $75000
Disclosure of the income
Australian Taxation office (ATO) is in contact with all the providers of sharing economy
services also knows that who operates through those services . If these organisations fails to
disclose their income from the sharing economy work than also ATO will know about it.
According to the Income tax assessment Act 1997, section 900-165 the period of
retention says that when they are required to retain the record of expenses under the division or
the division 28 they have to to retain the records for 5 years(Dealeand Crawford, 2018).
The payment which received by the organisation through the providers of sharing
economy which are assessable income are subjected to the income tax which means they need to
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declare the income in their tax return and could claim for the deductions for business associate
expenses. Assessment incomer generally includes :
 The income recieved from providing services for fee which involve riding sourcing,
delivering food , providing other services which are arranged through sharing economic
platform.
 recieving the short term rent or long term rent from a property or any part of the
property that they own on the lease such as theira rental property, home, or any parking
space(Braithwaite and Reinhart, 2019).
 Income generating by sharing of any other forms the property as the motor vehicle or
car or a van,.
 Income which is received from continuing and carrying on business arranged or
facilitated through sharing economy platform.
Organisations required to maintain the all records of the income and expenses irrespective of
how much they are earning.
According to the Income tax Assessment act 1936- Section 262 As it is required for all the
sharing economy service providers to maintain the record of all the transactions and other acts
engaged in by the person that are relevant for any of the purpose of this Act (Allen,Murphy and
Bates, 2017). If they not keeping the records as required by the section of than there is
administrative penalty .
GST
Under $75000
If the turnover of the companies are under the GST threshold of $75000 per year than they are
need not register for the GST. However, they may apply for the ABN.
At or over $75000
If the turnover is or estimated to be $75000 or greater per year than they required to get an ABN
and register for the GST(Ali,2017).
Already register for the GST
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if the company is registered already for the GST for any of the reason than they get income
providing products and services through sharing collectively and they also need to maintain
account for the GST on earnings through the existing ABN and GST registration this includes
if it is from the Another enterprises and other sharing economy skills(Wenzel, 2019).
Say for example if any company make registeration for the GST as they have ride sourcing
enterprise than they also need to account for the GST on goods or services they provide through
any other firm they carry on such a rent out a car or the parking space.
GST on the service fees or commissions
the services provided by the GST registered facilitator are subjected to GST when they are
providing :
 Within Australia or through an Australian business They could generally claim the GST
credit for the GST they pay on the service fee or commissions if they are registered for
the GST(Sigala, 2018).
 Wholly or partly from outside the Australia if the company have not provided the
facilitator to the ABN and declaration that their GST registered the facilitator must
assume that they are not registered fir the GST and will apply for the GST. They can't
claim for the GST credit for the GST that need to pay on service fees or commissions if
they not registered for the GST.
(b) Ways to improve the compliance
The sharing economy providers are meeting bit income tax obligations but there is
requirement for improving the compliance in order to effectively fulfil the obligations of
Australian income tax department and offices(Emery, 2016). There are different ways which can
be helpful in improving the taxation by sharing providers of economy service which might
includes the following suggestions which ca be used for fixing the Australian tax system.
Uber have been accused of the wage theft by other drivers as they claim that Uber have
deceived for taking the pay cuts under the recently changed policy. The important change which
Uber gives is that customers with more certainty by quoting that exact upfront price say $45
instead of a range between 40-50. May Uber drivers claimed that there is severe drop in the
earnings as they are getting small change almost on each trip which reflects that Uber is not
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disclosing their actual income which is against the tax laws and indicating that they are not
complying with the Australian tax laws.
Working of the GST and what they involved
general bargain: shared income tax and GST equally
The bargain is a dynamic process and also remain the dynamic but it can be set back
the parts of the institutional framework to improve it. The suggestion is that sharing income and
GST revenue equally between the government and the states, by replacing other grants of the
government. A new governmental agreement is required and both the government that is federal
and state government will have hold on the future tax for both the income tax and the
GST(Stephenson and Vracheva, 2015). This will help in providing the clear budget for states
in addition with higher revenue and this revenue will be equalised across the country.
Fixing the GST and company tax- related this is considered to be one of the most important
factors for sustainability and prosperity of budget
Fixing the GST by expanding the base and it is the main aim to raise the revenue and GST is
considerer to be an important factor in the entire system of tax. It also covering the digital
downloads and e- commerce they are also applying the GST on the health, water and education,
other financial services(Kupriyanovsky and et.al., 2017). Australia requires to set clean and
clear path on company tax in the future . This cost revenue and it need be the fulfilled by
company tax and tighten the enforcement cooperatively with the different countries of the world.
Australian taxation needs to made clear and efficient investigation in context of all the
sharing economy providers with the help of the Australian taxation office (ATO) as they help the
government to know for the providers of sharing economy and who are operating under these
services who helps to ascertain the actual report of the providers on time and wil get to know
about al the expenses and income of the companies. The proper and legal deduction can be
claimed by these providers on expenses which are associated with the business or business
related activities and government needs to provide these deductions in order to run and carry
effective and legislative law.
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By improving the guidelines Australian tax office can impose the mandatory restriction
on the economy shared providers so that they fulfil all their liabilities regarding the tax and their
duties.
CONCLUSION
The above report concluded that implying of the tax by tax authorities is essential for
entire economy and it is the responsibility of all the individual, business and shared economy
providers to pay the tax which is charged on their earning. From the above report it can be
concluded that Australian tax laws are required to comply by the service providers in order to
operate on a legal path and also some ways to make improvement in the legal compliance in
order to meet the obligations towards the Australian income tax laws.
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REFERENCES
Books and Journals
Ali, Z. A., 2017. The relationship between efforts for tax learning, awareness of tax laws,
understanding of tax laws and tax compliance behaviour among salaried taxpayers in
Mogadishu-Somalia (Doctoral dissertation, Universiti Utara Malaysia).
Allen, S., Murphy, K. and Bates, L., 2017. What drives compliance? The effect of deterrence and
shame emotions on young drivers’ compliance with road laws. Policing and society, 27(8),
pp.884-898.
Braithwaite, V. and Reinhart, M., 2019. The Taxpayers' Charter: Does the Australian Tax Office
comply and who benefits?. Centre for Tax System Integrity (CTSI), Research School of
Social Sciences, The Australian National University.
Deale, C. S. and Crawford, A., 2018. Providers’ perceptions of the online community
marketplace for lodging accommodations. Tourism and Hospitality Research, 18(4).
pp.470-477.
Emery, J., 2016. Decoding the regulatory enigma: how Australian regulators should respond to
the tax challenges presented by Bitcoin. Tax and Transfer Policy Institute Working Paper-
1/2016.
Fauziati, P and et.al., 2016. The impact of tax knowledge on tax compliance case study in kota
padang, Indonesia. Journal of Advanced Research in Business and Management
Studies. 2(1). pp.22-30.
Kupriyanovsky and et.al., 2017. Digital supply chains and blockchain-based technologies in a
shared economy. International Journal of Open Information Technologies . 5(8). pp.80-95.
Richardson, G., 2016. The determinants of tax evasion: A cross-country study. In Financial
crimes: psychological, technological, and ethical issues (pp. 33-57). Springer, Cham.
Sigala, M., 2018. Market formation in the sharing economy: Findings and implications from the
sub-economies of Airbnb. In Social dynamics in a systems perspective . (pp. 159-174).
Springer, Cham.
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Stephenson, D. and Vracheva, V., 2015. Corporate social responsibility and tax avoidance: A
literature review and directions for future research. Available at SSRN 2756640.
Wenzel, M., 2019. Misperceptions of social norms about tax compliance (2): A field experiment.
Centre for Tax System Integrity (CTSI), Research School of Social Sciences, The
Australian National University.
Online
Top 10 Tax Tips for the Australian Sharing Economy. 2017 [Online]. Available through
<https://sbssa.com.au/top-10-tax-tips-for-the-australian-sharing-economy/>.
ATO hunts hidden income from Uber, Airbnb and other gig economy workers. 2019[Online].
Available through <https://www.abc.net.au/news/2019-05-07/israel-folau-breached-code-
of-conduct-hearing-finds/11089234>.
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