Freelance workers, food delivery drivers, and people who rent out an extra room on the weekends – these are some of the independent workers that make up the gig economy of Australia, and these jobs are just a small sample of the diverse range of work types that gig workers can be engaged in. This new economic model allows workers to earn money from contract work or short-term gigs, in contrast to traditional full-time employment. Workers who participate in the gig economy praise the freedom of their work and being their own boss. But they face many challenges – with one of the largest being gig economy tax obligations. Join us as we explore today’s gig economy and taxes.
Taggart & Partners are a small business accountant with a thorough and up-to-date understanding of the ever-changing tax code. We are available for consultation related to gig workers and any obligations for gig worker taxes. Contact us today by calling 07 3391 1188 or reach out via our online form.
Considerations for the Gig Economy and Taxes
Gig Workers Must Declare Income
This may seem obvious to people who do gig work as their sole or primary form of income, but some think the money earned from a ‘side hustle’ doesn’t need to be reported. An important truth about the gig economy and taxes is income is income, no matter where it comes from, and you are legally obligated to report any earnings from gig work or even from a hobby. Not doing so means you run the risk of interest penalties on taxes owed or even criminal charges.
Setting Aside Money for Tax Time
At a regularly paid job, taxes are deducted straight from your pay. This means many individuals will not have to worry about paying a tax bill come reporting season. Gig workers don’t have this luxury and must consistently set aside money for taxes due in the future. How much to set aside will vary from person to person, so professional advice is recommended to make sure you are saving enough of your income.
Don’t Try to Hide Your Income from the ATO
Just don’t do it. It’s not worth it and you’re likely to not get away with it. Governments spend a lot of money, so they are highly incentivised to find ways to make sure they are receiving all taxes owed. The ATO has advanced technical resources available that allow them to detect irregularities in spending and the movement of money. The push towards paying for most purchases with the use of our phones has made this easier for them. The ATO will find out if you are not properly reporting your income and they will come after you.
Deductions
Some of the most advantageous aspects of the gig economy are the many deductions available on taxes for gig workers. Many expenses directly related to the gig work performed can be claimed as tax deductions, including vehicle expenses, equipment, home office costs, and marketing expenses. Workers need to be proactive by keeping receipts and documentation to claim the deductions available.
Retirement Savings
We already mentioned the importance of setting aside money to pay taxes once they come due. There is another important reason to save money – retirement. Gig workers are responsible for their own superannuation. Unlike taxes, paying into your super is not an obligation, but with advances in medicine come increased life expectancy, leading to people living longer in retirement than ever before. While that time might seem far off, it is important to be set for one’s golden years, and the funny thing about retirement is you reach that age before you know it. Best to be prepared.
Contact Taggart & Partners Today
Taxes for gig workers and for businesses can be complicated, and properly navigating the tax code is often a challenge – professional assistance makes the difference. Taggart & Partners is a business tax planner and tax financial adviser, and we want to speak with you about ways you can save money and be better prepared for tax season. Get started by calling 07 3391 1188 or reach out to us via the online form.