As part of its focus on sharing activities, the Australian Taxation Office (ATO) has announced it will be turning its attention to anyone earning income through car sharing platforms, in a bid to make sure they stay on the right side of the tax law.
The growing popularity of third party services such as Car Next Door, Carhood or DriveMyCar Rentals has prompted the ATO’s interest. Assistant Commissioner Kath Anderson said there is evidence that some taxpayers who are undertaking sharing activities might not understand the taxation implications.
“No matter how little you earn through car sharing, it is important to include it in your tax return. It’s no different to anyone else renting out an asset, like a house or a car park. You must declare the income and you cannot avoid tax by calling it a hobby.”
Peer-to-peer services such as car sharing are at the cutting edge of the digital economy. But operating in the digital world leaves electronic footprints.
“Whether you are a digital native or an electronic illiterate, it will be difficult to avoid scrutiny as the ATO has sophisticated systems and data to help identify where sharing platforms are being used to generate income.”
The good news is that individuals who rent their vehicle are entitled to claim some deductions. The expenses claimed must relate directly to the renting, hiring or sharing of your car, and accurate records such as receipts must be maintained to back up all claims.
“Car sharers can legitimately claim deductions for expenses like platform membership fees, availability fees, cleaning fees and car running expenses. However, a deduction can only be claimed for cleaning and running expenses if you are responsible for them under your car sharing agreement. For example, different agreements require either the car borrower or the car owner to bear the costs of refuelling the car. You can only claim expenses to the extent that you paid for them” she said.
Car owners need to be aware that deductions for running expenses may differ depending on your circumstances.
“For cars designed to carry a load of less than one tonne, you can use the cents-per-kilometre method or the logbook method. But if you are sharing your motorbike or your vehicle is designed to carry more than one tonne or more than eight passengers, the rules are a bit different as you cannot use the cents-per-kilometre method.” Ms Anderson said.
According to Ms Anderson, it’s not a free ride as taxpayers cannot claim for personal expenses or expenses they have already been reimbursed for.
“If you use your car for your own private travel, you will need to exclude all the related costs. And you cannot claim for expenses related to a car that you salary sacrificed. Claims for private use amount to asking the rest of us to pay for your private petrol or car wash, and I’m pretty sure most Australians would say that’s not ok.” Ms Anderson said
If you own a car jointly, you will need to declare income and claim expenses in proportion to your share of ownership.
“We sometimes see joint owners trying to shift the income and deductions around to get the best tax outcome. However, you must declare the income and claim the deductions in proportion to your ownership interest” she said
According to Ms Anderson, car sharers should keep good records to help ensure they declare the right amount of income and they have evidence for claims made.
“Keeping accurate records is critical. Your sharing platform should be able to provide you with accurate records of the income and the kilometres travelled for sharing purposes, which would form a good basis for your deductions,” she said.
“In terms of expenses, we recommend you use the myDeductions tool in the ATO app. The information can then be sent directly to the ATO or to your tax agent for prefilling at tax time,” she said.
If your activities are more than occasionally renting out your own car, Ms Anderson says you should familiarise yourself with other taxation requirements.
If you are registered, or required to be registered for GST, and have an enterprise of renting or hiring your car, you will be liable to pay GST on payments you receive. You will also be able to claim GST credits for any GST included in the price you pay for things to the extent that you use them in carrying on your enterprise (that is, you cannot claim GST credits for personal use and so you will need to apportion your expenses).
This will be the case if:
- you are already registered, or required to be registered, for GST for another enterprise (e.g. ride-sourcing) and also carry on an enterprise of renting or hiring your car
- you don’t have an Australian Business Number (ABN) or are not registered for GST and your GST turnover from all of your enterprises (including renting or hiring your car) together is, or is expected to be, $75,000 or more per year.