The ATO is tightening its focus on small business tax compliance, and just as the end of the financial year comes hurtling toward you, the ATO has released a new campaign to remind, or, warn those with side hustles, of the crackdown coming. Whether you’re a rideshare driver, occasional delivery worker, fitness enthusiast offering bootcamp services, or social media influencer receiving fees or gifts for endorsements, you are in their sights.
From July 2023, the ATO is introducing the Sharing Economy Reporting Regime (SERR), which means all gig platforms must report the income that is earned by the independent contractor to the ATO, and they will use that for data-matching and reconciliation.
Put plainly, if you are a rideshare worker or the like, you will be caught if you don’t declare that income in your tax return. And if you are caught hiding your side hustle income, you may face considerable penalties and potential imprisonment.
The challenges
One of the biggest issues we identify there is that gig workers mix their business and personal expenses in the same bank account, and that makes the whole process even harder. The first rule of thumb is to have separate accounts, even with a part-time or occasional gig.
The most glaring problem is the complexity. Employers take care of employee tax obligations, and as a sole trader you need to manage that for yourself. Your gross income needs to be offset with expenses, and other tax obligations need to be factored in. It’s too much, and to add to the stress, we realise a lot of gig economy workers expect a tax bill.
Then the GST complexity enters the frame; if your income is over $75k, GST registration has to happen, and you need to report your income using a business activity statement (BAS), a list of total business income along with expenses by category for the financial year. That’s a complex and time-consuming process, and it needs to happen four times a year.
We see people use the spreadsheet approach, but if you’re not adept, it can take hours every week. As a sole trader, you need to consider that time equals money.
We also see people trying to lodge everything themselves and getting advice from other gig workers on social media, trying to save a few bucks. Big mistake – we’ve seen shockers where people pay thousands of unnecessary dollars.
If you’re an influencer or turning a hobby into a credible new business, engaging in tax evasion, deliberately or not, you are risking damage to your professional reputation and/or risking future business opportunities.
Alternatively, not reporting your side hustle income means missing out on potential deductions and benefits. It can also make it difficult to access loans, mortgages, and credit cards. Financial institutions require proof of income, which becomes challenging without reporting your earnings.
The answers
If you go down the traditional route, find an accountant or professional that’s experienced in your niche. Beware, though, if you find one with larger clients, you may not be their priority, and it may not be a cost-efficient or positive customer experience.
But you don’t need to collect all your receipts in a shoebox anymore; times have changed. Today there are many options of software, technologies, and apps to make tax easier, including TaxLeopard. Gig workers can stay organised and keep good records of income and expenses by using the available digital tools or apps specifically designed for managing finances and receipts.
It’s not as difficult to stay on top of it as it used to be, using those tools that are available will make it less overwhelming. Now is the time to be aware and ensure you’re playing by the rules.
