The Australian Taxation Office (ATO) has continued its series of crackdowns on niche areas of Australia’s tax landscape, releasing a warning for customers using car sharing services such as CarNextDoor and DriveMyCar.
While tax implications around car and travel-related expenses are fairly well known for both everyday taxpayers and business owners, assistant commissioner Kath Anderson has raised concerns about those participating in the sharing economy failing to get their affairs in order.
Startups like CarNextDoor and DriveMyCar allow people to rent out their cars to others while they aren’t using them. The services have picked up in popularity in recent times as a way for Australians to earn a bit of extra cash on the side. However, it’s that extra cash the ATO is keeping its eyes on.
“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,” Anderson said in a statement.
But when it comes to what taxpayers are and aren’t able to claim, it becomes more complex. For those renting out their cars through these sorts of services, the ATO says any expenses claimed “must relate directly to the renting, hiring or sharing of your car”, and all receipts and records should be kept.
These expenses can be things like platform memberships and fees, or general car running expenses, but only if those running expenses are your responsibility under the car sharing agreement, rather than the renters.
“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” Anderson said.
Furthermore, cars designed to carry a load of less than one tonne can use the cents-per-kilometre or logbook method to calculate fuel expenses, but if a motorbike or vehicle designed to carry more than one tonne is rented, the cents-per-kilometre method cannot be used.
Car renters who also use their car for private travel will need to separate those claims from their other deductions, and users are not able to claim expenses related to a car that is 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 okay,” Anderson said.
Anderson also took the time to reinforce to taxpayers that operating in a digital world does not excuse the need to pay appropriate tax, saying the ATO has significant data matching capabilities for any “digital footprints” left behind.
“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,” she said.
A “net benefit” for users
Speaking to SmartCompany, communications manager at CarNextDoor Kate Trumbull says the focus from the ATO is nothing but good news for CarNextDoor users, saying for the large majority it will result in a “net benefit” as they now have clarification of exactly what expenses they can claim.
“I’m not really sure why they’re calling it a crackdown as they’ll be handing money back to 99% of people who car share with us,” she says.
“On average our users earn between $300 to $400 per month car sharing, and most of them will be as much as $500 ahead at tax time with this.”
The company had previously sought clarification around expenses for car sharing users, and was midway through an application for a private ruling when the ATO released its advice.
“You pay $1,000 a year to insure your car which is usually not tax deductible, but when you rent it out, the membership fee includes insurance, so your insurance becomes tax deductible,” Trumbull says.
This is far from the first time the ATO has announced its focus on a niche area of the Australian economy, releasing a similar statement earlier this year around laundry expenses and clothing claims.
Additionally, the ATO has also announced it is keeping a laser focus on cryptocurrency investors, who have seen massive gains and then massive losses in the past 12 months, with their assets eligible for capital gains tax.
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