bizEDGE NZ - It’s all fun and games in the sharing economy, until the taxes aren’t done

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It’s all fun and games in the sharing economy, until the taxes aren’t done

Article by Reckon Accountant Group general manager Grant Linton

It seems like everyone is either letting out a room – or a house – on Airbnb, or even driving an Uber in their spare time for some extra cash.

Yet two years ago, hardly anyone knew anything, or very little, about the likes of Airbnb.

These days we all want a piece of this pie that serves up the sweet taste of extra pocket money and helps many of us avoid the bitter taste of overpriced hotel bills. 

The likes of Airbnb and Uber are the best-known brands that form part of the burgeoning sharing economy.

This “shared” business model, which cuts out the middle man, connects the buyer and seller directly through an online technology platform.

There’s always that initial wariness of a new business model and taking that leap of faith to see if it works.

But think back 15 years ago when online shopping first came about.

People were hesitant and thought it wouldn’t take off because consumers wanted to see and touch what they were buying.

There were also challenges around security, delivery fees and returns.

Now you can buy everything from beds and burgers to your weekly grocery shopping online.

Forget the fear of giving out your credit card details and worrying about the delivery costs – just get me my goods now!

The thing about the Sharing Economy is that anyone, and everyone, can get into it.

It’s relatively easy and low-cost to start up.

And it’s not just for smarty pants tech-savvy entrepreneurs.

If you have a spare bed, a decent car, or any other assets or resources that aren’t being fully utilised, you too can start your own mini business and earn a bit on the side.

And who knows, if it takes off like so many of the businesses in the local sharing economy are doing, it may even become your main source of income.

With the online sourcing of products and services continuing to grow, the opportunity for shared business will continue to grow.

But before you jump on the internet and start touting your wares and sharing your toys, there are some key things you need to consider.

You’re running a business after all.

Simple things such as income must be declared, and tax paid, on your new – and for some, secondary – source of income.

These days the IRD is cracking down on undeclared income and it is very easy for them, and anybody else for that matter, to see what services a company is offering online. 

Managing your tax efficiently by putting a tax efficient structure in place is key.

For example, you should protect personal assets such as your home from getting caught in the GST regime, which may incur 15% GST cost on sale.

Also, be aware of other hidden costs and risk.

Watch out for insurance because using personal assets and property for generating an income is likely to have implications for your premiums and cover.

If the thought of sorting out taxes and worrying about what sort of insurance you need makes you want to stick forks in your eyes, then give your accountant a call.

As well as giving you the lowdown on how to organise your finances and ensure you are paying the right amount of tax, they will have some wider-reaching business advice and insight that will help you grow and consolidate your new venture.

Having the right software and technology in place to help you manage the hard stuff is essential.

For example, cloud accounting software, which records all your invoices, receipts and payments, is a low-cost and straightforward way of staying in control of your finances and important records.

Also set up a separate bank account for your new company and link it to your accounting software to save you time and money by simply not having to manually enter your transactional data.

This software can be used anywhere, and from any device, meaning you regularly check in on the business and keep your finger on the pulse as the money starts flowing. 

Now then, the mobile nature of this technology may sound like a small thing, but believe me, it will come in very handy when you’re staying at a fancy Pacific Island Airbnb taking a break while your new business ticks along in the background.

Article by Reckon Accountant Group general manager Grant Linton

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