ATO targets car sharing

The Australian Taxation Office (ATO) has made its feelings perfectly clear: If you own a vehicle and use it to raise revenue through a car-sharing service such as Car Next Door that's taxable income.

And you, the vehicle owner, are required to pay tax as a percentage of that income.

Other companies involved in the same car-sharing business model include Carhood and DriveMyCar Rentals.

"No matter how little you earn through car sharing, it is important to include it in your tax return," says Kath Anderson, Assistant Commissioner at the ATO.

"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."

By its very nature, car-sharing is heavily dependent on electronic funds transfer, which leaves a very obvious digital footprint, says Anderson.

"Whether you are a digital native or an electronic illiterate, it will be difficult to avoid scrutiny as the ATO has sophisticated systems and data to help identify where sharing platforms are being used to generate income."

At least, on the plus side, the vehicle and its running costs can be claimed as legitimate deductions. But even so, the ATO demands owners keep accurate records and receipts to support their claims.

"Car sharers can legitimately claim deductions for expenses like platform membership fees, availability fees, cleaning fees and car running expenses," says Anderson.

"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. You can only claim expenses to the extent that you paid for them."

It's in the owner's best interests to get in the habit of fastidiously keeping precise records, says Anderson, ensuring that anything not legitimately deductable is excluded.

"If you use your car for your own private travel, you will need to exclude all the related costs. And you cannot claim for expenses related to a car that you salary sacrificed. Claims for private use amount to asking the rest of us to pay for your private petrol or car wash, and I'm pretty sure most Australians would say that's not ok."

"Keeping accurate records is critical. 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."

"In terms of expenses, we recommend you use the myDeductions tool in the ATO app. The information can then be sent directly to the ATO or to your tax agent for prefilling at tax time."

Keeping track of expenses and ensuring the ATO is receiving an equitable sum becomes all the more confusing if the vehicle is jointly owned.

"We sometimes see joint owners trying to shift the income and deductions around to get the best tax outcome. However, you must declare the income and claim the deductions in proportion to your ownership interest," Anderson said.

A cents-per-kilometre method of calculating the vehicle's running costs applies to most passenger cars, light commercial vehicles and SUVs, but it doesn't apply to motorbikes or heavier vehicles, says Anderson.

"For cars designed to carry a load of less than one tonne, you can use the cents-per-kilometre method or the logbook method. But if you are sharing your motorbike or your vehicle is designed to carry more than one tonne or more than eight passengers, the rules are a bit different as you cannot use the cents-per-kilometre method."

Finally, the ATO recommends that when vehicle owners rent out a car more often than just occasionally, the owners should fully familiarise themselves with current taxation requirements. Those who are registered for GST must pay GST on payments received, but they can also claim GST credits for running expenses.

The ATO has published a web page for further advice about the sharing economy and its tax implications and another web page concerning car-expense deductions. Additional information pertaining to peer to peer car sharing is also available online.