Do you earn income through car sharing platforms? If you do, it is important to include the income – no matter how little – 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.
The growing popularity of third party services (eg Car Next Door, Carhood or DriveMyCar Rentals) has prompted the ATO's interest.
Note! The ATO has sophisticated systems and data to help identify where sharing platforms are being used to generate income.
Deductions that car sharers can claim
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 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.
Do you use your car for private travel?
If you use your car for your own private travel, you will need to exclude all the related costs.
If you own a car jointly, you will need to declare income and claim expenses in proportion to your share of ownership. You must declare the income and claim the deductions in proportion to your ownership interest.
Note! You cannot claim for expenses related to a car that you salary sacrificed.
- Keep good records to help ensure you declare the right amount of income and have evidence for claims made.
- 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.
Renting or hiring your car and GST reporting
If you are registered for GST, you must account for it on the extra income you have earned. If you are not registered for GST but your turnover from all of your enterprises is $75,000 or more per year, you need to register for and report GST.
If you report GST, you should also be able to claim credits on the GST included in the price for things you purchase for renting or hiring your car.
New rate for car expenses
The rate for work-related car expenses has increased for the income year starting 1 July 2018. It is now 68 cents per kilometre.
This applies if you have chosen to use the cents per kilometre method for calculating work-related car expenses and will remain in place until the Commissioner decides it should be varied.
If you are paying your employees a car allowance in excess of 68 cents per kilometre, you need to withhold tax on the amount you pay over 68 cents.
Tip! Remember, registered tax agents and BAS agents can help you with your tax.
With a deep understanding of the links between our clients’ personal and professional lives, Kelly+Partners offers a coordinated solution across a range of financial services: accounting, tax, superannuation, wealth management, finance, estate planning assistance and family office services.