• Am I running a small business providing services?

    The factors that will determine if you are running a small business through the sharing economy include:

    • Have you decided to start a business, what was your intention?
    • Have you started the activity with the intention of making a profit?
    • Does your activity have a commercial character?
    • Is there repetition or regularity to your activity?
    • Is your activity similar to other businesses and how they operate?
    • Does the size scale or permanency of your activity indicate you have a business?
    • Is your activity planned, organised and carried out in a business-like manner?

    While no one factor can be used to work out if you are carrying on a business, taken together they can show if your activity exists as a business for tax purposes.

    Example: determining if you are running a business

    Banjo is a university student and has a van. He has decided that he wants to earn some extra money using a sharing economy site and sets up a profile where he is selling his services as a delivery person or a person who can help with small moves.

    The sharing economy site operates so that clients list the requirements of the job and then the registered providers can bid for the work.

    Banjo actively bids for any work in his area that requires any type of delivery service or help moving goods like furniture and other household belongings. The people hiring Banjo do not pay him directly. Clients pay through the sharing economy website or app and the money is deposited into Banjo’s personal bank account once the person advertising the job confirms that the job was completed in a satisfactory manner.

    Banjo is consistently performing four to eight jobs a week and generally earns $1,000 to $2,000 a week providing delivery or moving services. The amount Banjo is paid per job depends on what is required for each job and there is no consistent amount paid.

    Banjo needs to decide if he is running a business. Banjo looks at our website and answers the following series of questions:

    1. Have you decided to start a business, what was your intention?
      Banjo did not intend to start a business. He has not registered a business name or for GST, and does not have an ABN.
    2. Have you started the activity with the intention of making a profit?
      Yes. Banjo was providing the services with the intention of making a profit.
    3. Does your activity have a commercial character?
      Yes. Banjo would be considered to be operating in a commercial manner because:            
      • Banjo does not know the people that he is providing the service for (they are arm’s length strangers)
      • the interaction is managed through a third party, the sharing economy website. The people hiring Banjo do so to receive a service (delivery or furniture removal)
      • Banjo is bidding for the work (quoting amounts for the service) and using the service reviews on the website to get more business.
    4. Is there repetition or regularity to your activity?
      Yes. Banjo is doing jobs at least once a week.
    5. Is your activity similar to other businesses and how they operate?
      Yes. Banjo is providing a delivery and furniture removal service in a manner similar to other commercial delivery services and furniture removal services.
    6. Does the size scale or permanency of your activity indicate you have a business?
      Yes. Banjo is providing services to people on a weekly basis. Banjo bids for the work and arranges to go and do the work in the timely manner during the week or on the weekends. If Banjo did jobs on an infrequent basis, for example one or two small paying jobs once a month, he would not have the scale or permanency of activity that would indicate a business.
    7. Is your activity planned, organised and carried out in a businesslike manner?
      Yes. Banjo’s work is planned as he is bidding for the work that he wants to perform. He does all the work in a professional manner that ensures he is paid and encourages good reviews that help him get more work. Banjo does not have a separate business bank account and he does not provide invoices. In isolation, this fact could indicate that he is not operating in a businesslike manner.

    While Banjo did not intend to start a business, in answering the questions Banjo realises that he is providing delivery and furniture removal services in such a manner that he considered to be running an enterprise.

    Because Banjo is running an enterprise, once Banjo’s annual turnover is, or is expected to be, $75,000 or more a year he will need to register for GST.

    End of example

    What deductions can I claim? 

    You can claim deductions that are related to you earning the income. To be able to claim a deduction:

    • you must have spent the money and not been reimbursed
    • the costs must relate to doing your job and must not be a private expense (such as travel from home to the job)
    • you must consider how much of the total expense can be claimed if the expense is for both personal and business use, and
    • you must keep appropriate records to prove your claim.

    Any fees or commission charged by the sharing economy facilitator can be claimed as a deduction.

    Other deductions you can claim will depend on what goods or services you are providing.

    Table of deductions for common sharing economy job types

    To help you understand the items that may be deductible, some common job types are listed below, with links to our rulings about deductions. These deductions apply if you are earning income as an individual or a small business.

    Service types and links to work-related expenses information

    Service type

    Work-related expenses information for

    Removal services

    Truck drivers

    Cleaning services

    Cleaners

    Home maintenance services

    Building and construction employees

    Electricians

    Earthmoving plant operators

    Engineers

    Plumber employees

    Personal training

    Fitness and sporting industry employees

    Business professionals

    Business professionals

    Journalists

    Lawyers

    Educational services (teaching, tutoring)

    Education professionals

    Teachers

    Information technology services

    Information technology professionals

    IT professionals

    Mechanical services

    Mechanical, automotive and electrical tradespersons

    Health and beauty services

    Hairdressers

    Catering services

    Hospitality industry employees

    See also:

    How to avoid a tax debt

    If you are earning more than $4,000 a year, you could consider entering the pay as you go instalment (PAYGI) system voluntarily so you don’t get a large tax bill at the end of the year. The PAYGI system allows you to pay amounts every three months (quarterly) to help cover any income tax you may need to pay on your sharing economy income.

    If you pay too much during the year, you will get the money back when you do your tax return.

    If you don’t pay enough during the year, you pay the difference when you do your tax return (but it will be less than if you didn’t pay anything at all).

    See also:

      Last modified: 07 Apr 2017QC 45171