Tax treatment of Industry assistance payments to taxi licence holders
In most State and Territories, taxi drivers could only operate their business if they had bought a taxi licence plate (often at a significant cost). However, with the advent of various new ride-sourcing ventures (e.g. Uber), many local governments are paying taxi licence holders industry assistance payments (usually only a fraction of the amount of the original cost of the plate) so that the taxi licence holders can compete in the sharing economy.
Unfortunately for the taxi drivers, a receipt of such an assistance payment will be taxed as ordinary income at their marginal tax rates. The ATO’s view is that such a receipt will not be capital, and therefore not taxed under the CGT regime, because the payments are not made in exchange for taxi licence holders giving up or selling their taxi licence plate or ending their taxi driving business.
Tips for taxpayers operating in the sharing economy
The sharing economy (i.e. whereby users and providers are connected to each other through a facilitator – e.g. Uber and Airbnb) have become more common.
Like any business, taxpayers who provide services for a fee through the sharing economy must keep good records to record income and expenses and consider whether they should register for GST (note, ride-sourcing enterprises must register for GST).
For example, taxpayers who rent out part of their homes will need to apportion the amount of expenses they can claim (e.g. electricity, mortgage interest, internet expenses, rates and body corporate fees) based on the floor area used for business as opposed to private use – however, a full deduction will be available for any Airbnb commissions or administration fees.Such taxpayers will also not be entitled to the full main residence exemption when they eventually sell their home.
Taxpayers who receive rental income by renting out their properties through Airbnb will not be liable for GST on the rent they charge and also cannot claim any GST credits for associated expenses because the renting out of non-new property will be an input taxed supply – however, different GST consequences may apply when a taxpayer rents out commercial residential premises as part of their enterprise.
If you are operating in the sharing economy, please contact us so that we can assist you to ensure you get the best tax outcome for your circumstances.
Can you claim for a non-compulsory uniform you wear to work?
An employee can only claim a tax deduction for expenses on non-compulsory uniforms (i.e. uniforms clearly identifiable as corporate wardrobe) if such expenses were incurred in earning assessable income and such uniforms are registered on a special register.
Before implementing a uniform program, please contact us to ensure that the compulsory and non-compulsory uniform rules administered by the ATO are satisfied. The Courts have also determined whether the cost of protective clothing is tax deductible. Please contact us if you need any assistance.