Gig economy workers urged to comply with ATO rules

Accounting body CPA Australia is reminding the growing gig economy workers to include their earnings in their tax returns. In a statement, the body’s Senior Manager of Tax Policy Elinor Kasapidis said, “Lots of people turned to the gig economy to make ends meet during COVID-19. The ATO 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.”

While gig economy workers often work as independent contractors, CPA Australia noted that the term broadly includes people who earn income from bartering or sharing as well.

“If you drive people around, do odd jobs or freelance 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,” Kasapidis said. “The good news is that your expenses from earning this income may be deductible.”

Gig workers can claim deductions for most costs such as travel, vehicle, marketing, financing and home-office expenses, as long as they are incurred in earning their income.

“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,” Kasapidis said.

According CPA Australia, the consequences of not declaring cash income from the gig economy may include interest on your tax bill and 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,” Kasapidis warned. “You don’t need to declare income from activities that are little more than hobbies or not intended to make a profit, but you can’t claim a deduction for them 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.”

CPA reminded gig workers to be particularly wary on reporting income that has been affected by the COVID-19 pandemic.

“During lockdowns, some gig economy activities like ridesharing declined, while others such as food delivery skyrocketed,” Kasapidis explained. “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.”

Contractors who received JobKeeper payments or other business grants are reminded to record these as business income in their tax return. These are assessable and taxpayers may need to pay tax on them.