Hank Jongen is General Manager at the Department of Human Services.
In the space of a few years, the phenomenal rise of the ‘sharing economy’ has had a significant impact in Australia. But beware the social security and tax implications for people receiving a pension.
With the rise in popularity of services such as Uber, Airbnb and Stayz, it’s easy to see why older Australians are signing up to become providers and help give their retirement funds a little boost.
To understand this business model, we must look at what the sharing economy is. It refers to the activity of sharing human, physical and intellectual resources, or in simpler terms, it allows people to share resources, such as their personal assets, services or skills, for a fee via an app or a website.
If your clients are thinking of registering to become a provider with companies such as these, it’s important they speak to the Department of Human Services first, so we can assess how any income they earn might affect their pension.
Similarly, finance professionals, such as financial planners and accountants, can assist people in understanding what they need to report for both taxation and social security purposes.
Looking at someone earning income through ride sharing services, such as Uber, different income and assets test free areas apply, based on whether a person is partnered or single, or if they’re a homeowner.
And for tax purposes, people are considered contractors and not employees. This means all Uber drivers need to register for an Australian Business Number (ABN) and Goods and Services Tax (GST) with the Australian Taxation Office (ATO), as they are providing ‘taxi travel’ under GST law.
Drivers must also lodge business activity statements and report any income from Uber in their tax returns to the ATO. Assessable income is counted in the Centrelink income test, however, we do not take into account the GST, as this is paid to the ATO.
Income from self-employment is treated differently to income earned from wages or a salary, so it’s best for your client to contact the Department of Human Services first, so we can evaluate the classification of their employment and then determine how they should report their income.
For example: A single pensioner’s total income can be up to $168 per fortnight, and couples can earn a combined total of up to $300 per fortnight, before it starts to reduce their Age Pension rate. Anything over these amounts would reduce your client’s pension by 50 cents for every dollar.
Some of your clients might also be jumping on the home sharing bandwagon through companies like Airbnb, and choosing to rent out a spare room or the backyard granny flat to earn some extra money. If that’s the case, your clients should be aware on how this is assessed, as it may affect their payment.
Under the Age Pension asset test, we need to take into consideration any real estate your clients rent out (even when not receiving rent), leave vacant, allow someone to live in at no charge, or that they live in when they’re not at their family home.
The family home is not counted in the assets test. However, if they choose to rent out any part of their family home through Airbnb, that portion of the home may be an assessable asset.
Again, they should speak to the Department of Human Services first before they make any decisions to rent out a room or their home, so we can determine how they should be reporting their income, and if their payment will be affected.
For example: Renting out a room in the family home every now and then will be considered as income from boarders and lodgers. We will generally take a portion of the income received from boarders and lodgers. People can choose to use the board or lodging rules or supply us with a profit and loss statement outlining the actual expenses, including commissions or charges paid to a home share website.
The best way to notify us of any income earned as an Airbnb host or an Uber driver, is by contacting the Older Australians phone line on 132 300 or visiting a service centre.