The Australian Tax Office (ATO) is warning Australians earning second incomes through things like the share economy and social media to report all their income at tax time.
ATO Commissioner Tim Loh says almost 900,000 Australians now earn second incomes, with many seeking to improve their finances due to the rising cost of living.
Secondary incomes must be declared for the 2023-24 income year, Mr Loh said.
“We want to make sure people understand that when you do earn money from these side hustles, odd jobs or even cash jobs that you need to declare all this income,” he told The New Daily.
The warning comes as new McCrindle research shows the majority of younger Australians are considering alternative incomes to combat rising inflation, including through the gig economy and online content creation.
Is your side hustle a business?
To work out whether the ATO would consider your side hustle a business, there are a few key points to consider.
The first is whether the activity is repeated, Mr Loh said.
“If you’re regularly engaging in content creation, for example if it’s on Instagram or Facebook, and you’re earning money from that, that’s considered to be a repeated activity and you’re considered as running a business,” he said.
“Whereas, if you’re having an annual garage sale to sell odd personal items that’s not considered to be a business.”
The second factor is whether you’re seeking to make a profit with the activity – crucially, this is different from actually making a profit.
Additionally, consider whether you operate in a “business-like” way, like having a plan and system for making a profit on a regular schedule.
If your side hustle fits the bill for both those things, it’s most likely a business – and you may need an Australian Business Number (ABN) or to register for General Sales Tax (GST).
And while registering additional taxable income may seem like a hassle, Mr Loh said there could be an upside, with businesses likely to be eligible for a wider range of expense claims.
“You’re eligible for any workplace tax deductions associated with that business as well,” he said.
“We want people to get it right, including all your income and relevant deductions.”
ATO’s access to data
There are penalties for getting it wrong, and this year the ATO will have its sights on those with side hustles who don’t report their income to the government.
From July 1 this year, a new Sharing Economy Reporting Regime will begin, allowing the ATO to access data from a wide range of “electronic distribution platforms” – such as Uber – that will be cross-referenced by the ATO to reveal income.
“It doesn’t matter whether you are carrying on a business or simply earning additional income through a digital platform, such as a website or even an app, you must keep accurate records of your income and include it in your tax return,” Mr Loh said.
“Every dollar dodged is a dollar that can’t be used for vital services like health and education.
“The ATO needs to ensure there is a level playing field for everyone, with no unfair advantages.”