The Australian Taxation Office (ATO) is reminding Australians that it is paying close attention to undeclared income from secondary work, including from the sharing or 'gig' economy this tax time.
Assistant Comissioner Tim Loh has noticed some confusion about when these side hustles cross the line and become taxable. "Generally, when you provide your labour, skills or goods for a fee, you need to report this income in your tax return. This applies regardless of whether you're using a digital platform or more traditional means, such as word of mouth."
"We know lots of people have picked up a side hustle during the pandemic. This has included a wide range of activities such as freelancing, setting up a local market stall or receiving income from subscribers through platforms like Patreon, Twitch or OnlyFans."
It doesn't matter whether you are an employee, independent contractor, carrying on a business, or none of these. When you do receive payment for your services, the income has to be reported - even if it's a one-off. The Pay As You Go Instalment system helps you set aside tax payments throughout the year to avoid bill shock.
"We receive income information from a range of providers including financial institutions, online marketplaces, ride-sourcing applications and short-term rental websites. The data we receive is growing, which means the places to hide are shrinking, "Mr Loh said.
The good news about declaring side hustle income is that you can also claim deductions for expenses if you have kept your receipts and it directly relates to earning this side hustle income, this includes the cost of managing you tax affairs through us.
It is important to know that you can only claim a deduction for the work-related part of your expenses. If you're a food delivery rider, you can claim some of your bike costs, but you can't claim for your personal riding time and costs.
"Don't rely on what other people claim as a guide to what you can claim. Every job is different, and what is required to earn an income for one occupation may not qualify in another."
"Chefs can claim the knives and hairdressers can claim the scissors they use for their job, but a train driver or a salesman would have the same claims get knocked back" Mr Loh said.
If your side hustle becomes a side business, it is a good to seek specialised advice from us to consider your additional tax obligations including the need for an ABN, registering for GST, implementing a record keeping system to track income and expenses. You will also require a plan for paying tax on your business income when you lodge your activity statements and annual tax returns.