Key things to consider before jumping on the sharing economy bandwagon

Everyone seems to be bringing in extra pocket money from either letting out a room – or a house – on Airbnb, or driving an Uber in their spare time. Yet two years ago, hardly anyone knew anything, or very little, about the value these brands could bring to everyday Australians. Today, we all want a piece of this pie that serves up the sweet taste of extra cash and helps many of us avoid the bitter taste of overpriced hotel bills, or the taxi metre ticking over in traffic.

Known as the sharing economy, this “collaborative” business model cuts out the middleman and connects the buyer and seller directly through a digital platform. If you have a spare bed, a decent car, or any other assets or resources that aren’t being fully utilised, you too can start your own mini business and earn a bit on the side. Who knows, if it takes off like so many of the businesses are doing, it may even become your main source of income.

As the online sourcing of products and services continues to grow, so too will the opportunity for the budding entrepreneurs looking to jump on the sharing economy bandwagon. However, before you start plugging your wares and sharing your toys, there are some key things you need to consider.

You’re not sharing your hair-dryer with your friends or letting mates crash for the night, you’re actually running a business. That means simple things such as income must be declared, and tax paid, on your new (and for most, secondary) source of income. The ATO is increasingly cracking down on undeclared income and it is very easy for them, and anybody else for that matter, to see what services your business is offering online.

Here are ways you can keep the tax boogeyman at bay and run a successful start-up:

  1. Manage your tax by putting a tax efficient structure in place. For example, you should protect personal assets, such as your home, from getting caught in the GST web, which may incur 15 per cent GST cost on sale.
  2. Watch out for hidden costs and fees. Using personal assets and property for generating an income is likely to have implications for your insurance cover and premiums.
  3. Drop your accountant a line. If you can’t bear the thought of sorting out taxes and worrying about what sort of insurance you need, then give your accountant a call. As well as giving you the lowdown on how to organise your finances and ensure you are paying the right amount of tax, they will have some wider-reaching business advice.
  4. Implement the right tools. Having the right technology in place will help you manage all administrative work effectively. For example, cloud accounting software, which records all your invoices, receipts and payments, is a low cost, low fuss way of staying in control of your finances and important records.
  5. Set up a separate bank account. Linking your new bank account to your accounting software can save you time and money by not having to enter your transactional data manually. This software can be used anywhere, from any device, meaning you can regularly check in on the business and keep your finger on the pulse as the money starts flowing.

Ultimately, joining the sharing economy is a worthwhile and potentially lucrative endeavour, but don’t let the fine print trip you up. A simple investment into the right software and advice will ensure a smooth and enjoyable experience as you enter an exciting new world of business possibilities!

Alex Alexandrou, General Manager, Reckon

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