Accounting News & Blog

Updated: Sep 10

We’re living in a sharing economy. Even with the advent of Covid-19, people are using sharing services such as AirBnB, Uber, Car Next Door, Camplify, WeeShare, Swimply, Toolmates and GetMyBoat to make some extra money from assets that might otherwise be sitting idle and not being used. Putting aside the challenges around managing health hygiene, the negative impact on our economy resulting from the pandemic we will likely see these sorts of platforms will continue to grow in popularity with people along with other ways to conserve resources and generate cash such, as garage sales and cottage industries.

As we work our way through to the “new normal” those who own items (or assets) and who are willing to share the enjoyment, convenience and lifestyle advantages they bring may well find themselves able to generate a supplementary income. However, it’s important not to let the enthusiasm get in the way of good judgement. There are several risks to consider including; insurance i.e the potential for damage, theft, injury claims, fraud, managing difficult people and the possibility of inadvertently creating a tax problem.


According to Nathan Thiele, Associate here at Rowe Partners Accountants and Business Advisors, it's important to understand the risks, particularly as it pertains to future tax liability. "As accountants, the risks we’re most concerned about are financial. We like to balance the pros and cons with an eyes wide open approach. We encourage clients who are considering entering the sharing economy to do their homework and approach it in a business-like fashion," he said. "Ensuring your decisions are based on current ATO legislation is critical. The advantage of seeking our advice early is that we're across that detail and can steer interested clients in the right direction and head off potential problems in the future."


*Note laws change. This article was written [8.9.20] with consideration to ATO legislation at the time. It is ALWAYS necessary to seek qualified advice from your accountant before making finance and investment decisions.


The Australian Tax Office (ATO) says that “…the sharing economy is the economic activity through a digital platform such as a website or an app where people share assets or services for a fee.” They say that “…if you provide services or assets through a platform for a fee, you need to consider how income tax applies to your earnings.” Yes, this money is considered earnings. It is deemed assessable. Even if you consider it just a side hustle, the funds earned through these activities are added to any other revenue source as combined income. You’re able to claim expenses against them but in the case of renting a room in your home on AirBNB for example, you’re potentially also exposing yourself to Capital Gains Tax on the property. Capital Gains Tax has the potential to come back to bite the over-enthusiastic AirBNBer. It’s important to weigh up the costs vs benefits beforehand.


Considerating Tax Implications


Start by looking at the percentage of the space or item to be rented – personal use vs time or amount rented. If an entire property is rented through AirBNB then all running costs will be deductible. If you’re renting the use of a backyard swimming pool, we’d consider the size in proportion to the whole property and then calculate income and running costs proportionate to personal use. The same method applies to other rented items that are separate from the home. Every person’s situation is different, which is why we strongly advise making an appointment with your Rowe Partners accountant before embarking on any new venture in the sharing economy.


The amount of tax you will pay depends on what you earn and the allowable deductions. If you’re an AirBNB host renting out a bedroom in your home, then you’re not likely to be earning much from it alone, but if you’re also working earning an income of $80k plus, the extra cash could push you into a higher tax bracket and increase the tax you must pay.


When you’re renting out part of the home e.g. one or two bedrooms or a granny flat, we determine what percentage of the home is rented and then associated costs such as insurance, rates, power, phone and internet, depreciation on furniture and appliances need to be allocated. Capital Gains Tax which might be due on a future sale will work the same way – on a percentage basis.


Watch out for pitfalls. It is common for AirBNBers to rely on the ATO’s “six-year rule” that allows homeowners to be absent from their home for up to six years without losing Capital Gains Tax exemptions. In order to benefit from the six-year rule, your home must cease to be your principal place of residence, not just for a few weeks or months, or Capital Gains Tax will be calculated based on the property value at the time and you’ll be required to all keep records of future expenditure from the date you rented the property. Again, there’s more to it. Call to arrange a consultation with your Rowe Partners accountant before deciding. We can ensure you’re better informed.

Ensuring it’s not more trouble than it’s worth.


Once you’ve talked to us and decided to proceed, the key point to remember is to keep good records and always aim to be transparent about earnings. The ATO uses a range of sophisticated data matching tools and strategies to keep people honest. They can identify people who earn income from the sharing economy. Banks, employers, and health insurers are all legally obliged to report to the ATO. The ATO also cross-references with information held by other Government agencies using the data to check tax returns and calculate the correct amount payable.


Our aim here is not to put you off, just to ensure you’re going about it in the right way. Give your Rowe Partners accountant a call for more information on 1800 04 7693.


Are you sure you want to start a business?


People start businesses for all kinds of reasons ranging anywhere from a purely commercial decision through to a personal desire to make the world a better place. It can be driven by a bucket list or a major crisis event, such as suddenly finding oneself unemployed because of a global pandemic! No matter what, people who start businesses will all have something in common, and that is that they’ve identified a gap in the marketplace, some consumer problem to be solved, which they feel they’re capable of filling.


Taking the first steps.


The first step or main task is to identify that awesome potential in an idea. Then you’ll need to invest the necessary energy and resources to give it life. Our job as accountants, bookkeepers and business advisors, is to help you reach your goals by helping you manage risk, finances, make investment decisions, plan and implement your growth strategy, all while meeting your financial and reporting obligations along the way.


To succeed, you’ll need to understand your market and your customer’s needs. You’ll need the ability to respond to changing market conditions and build your business on strong foundations. The success of a business in the long term is influenced by so many factors and they’re not always within your control. Far too many factors to cover within the context of one blog but suffice to say your approach and preparedness are critical.


How good is your idea? Is the timing right?


Researching your business idea or concept will give you the best chance at success. Ask yourself and seek answers for the following questions;

  • Am I solving an actual consumer problem?

  • What’s my USP (Unique Selling Proposition?)

  • How many players are in the market already? Am I better? Faster? Cheaper? Smarter?

  • Who is my target market?

  • Are people prepared to pay for me to solve this problem? If so how much? It's important to know how much people will truly value what you sell or do.

  • How often will people need my product or service?

  • Analyse your idea using one of these tools; SWOT, PESTLE, STEEP, Porters 5 Forces, Critical Success Factor Analysis or Scenario planning. Do this regularly as part of your strategic business planning.

  • Write a draft strategic business plan and refine it with your accountant and/or business coach.

  • Find a good marketing consultant to help you develop a marketing plan.

  • Engage experienced professionals to help you. Did you know that Rowe Partners offer strategic business advice, business performance assessments, and business planning?

Do you really have a head for business?


When you start a business, it’s important to consider your motivations and carefully consider if you’re truly ready, willing, and able to take up the challenge. Are you one of those super diligent workers that has always worked in a business as if it’s your own? If so, chances are you’ll do great at running your own business. But if you’ve always worked for other people, it’s likely you haven’t had to deal with the mundane aspects of business such as human resources, WH&S, bookwork, payroll, PAYG withholding tax, leave entitlements, superannuation, GST, FBT. These things can be overwhelming. You need the right systems and support network in place. The great news is that there are affordable outsourced resources like our Rowe Partners Business Support Services available to handle this for you so you can focus on the aspects of the business that need your unique expertise. Our team can support you with all aspects of business bookkeeping, or just some of it depending on your skills and needs. Once we understand your business goals and needs, we’ll set you up with a no-fuss combo of cloud-based software systems. As you’re focussed on getting the business up and running, you can be confident knowing we’ve got an eye on your cash flow and have got your back with the ATO. There are some excellent software solutions and apps for accounting, bookkeeping, planning and document management that will make your task easier. Ask your Rowe Partners accountant.


Prepare to battle your demons!


Make sure you’ve got a strategy to achieve your goals and to battle those demons before you start. You'll have many moments of doubt along the way. We suggest that you write down your own success goals and develop a plan to achieve them. Anticipate some of the hurdles you might face and think through your response. We don’t all measure success the same way so your goals will be very personal. You may not need to run a global empire to be happy. Some people run successful businesses with a couple of products and just a few staff or even no staff at all. There’s no right and wrong but you need to decide early.


Managing Stress


You’re going to get stressed. Make sure you’re in the right frame of mind to deal with it and for the long haul. For example, if you’ve recently been made redundant or are under financial pressure when you start, it could undermine your confidence and willingness to take even calculated risks so…surround yourself with good, experienced, and positive people. Avoid people who don’t believe in you or your vision. You don’t need to take everyone on the journey with you. Sometimes, the most well-meaning, protective people can drag you down so make sure to maintain healthy boundaries.


Having a great team around you will help. Include in yours a trusted Rowe Partners accountant and/or financial advisor, a lawyer, business coach, IT guru, technical or subject matter advisor and marketer on your team. And again, implementing good bookkeeping and administrative processes early will save many headaches later and help you avoid drowning in paperwork.


Read the Rowe Partners blogs and our Rowe Partners Facebook page. We provide a lot of good business-focussed content.

Dotting your I’s and crossing your T’s.


Get clear about business structure


Setting up the right business structure to suit your needs is particularly important. So too is protecting your business. You need to be able to imagine your business into the future and prepare for possibilities. The ripple effects of an error in the early stages can be costly.


What business structure is most suitable? Talk to your accountant first! You’ll need an appropriate, legal, and compliant business structure to suit your needs. If you’re planning to operate across borders or globally, you’ll need to ensure your business is compliant in all markets. Advice on structural setup will vary depending on your requirements, who owns the business, how you’re raising capital, your level of exposure and sometimes what roles people might have in it. Your Rowe Partners Accountant will be able to go through the pros and cons with you but essentially, you’ll have four main options;

  1. Sole trader

  2. Company

  3. Partnership

  4. Trust

Protect your assets in case of “What If?”


What if your business takes off? That’d be awesome right? Well yes. Absolutely. However, it may also open you up to risk and unscrupulous behaviour from competitors. There's an old saying "there are no friends in business". At Rowe Partners we don't subscribe to that at all. Developing good business relationships and networks is often critical to success but we do recommend that you take precautions. Your new-found enthusiasm for your business could blind you potential issues. Take an eyes-open approach and if you’ve done your research well in the first instance by completing a competitor analysis, you’ll know who the other players are in the market, the size of their business, their products, market positioning, services etc. but you will still need to protect your investment. You’ll be developing assets which represent a value to the business. At some point when you need a clear understanding of how much the business is worth say for selling the business or accessing finance, it will be important.


Whilst the cost of defending a breach of copyright, for example, might be prohibitive, there’s no point giving an untrustworthy person the keys to your house. Make sure to;

  • Register your business name with the Australian government and other key markets if operating internationally. https://register.business.gov.au and be sure to conduct a search of both your business names and domain names first.

  • Obtain an Australian Business Name (ABN) or Australian Company Name (ACN) registration https://register.business.gov.au/registration/type?type=Company

  • Register for taxes such as GST, PAYG and FBT

  • Trademark any brands and protect other Intellectual Property such as designs, patents and unique methods or processes.

  • Decide what sort of business you want to operate - Bricks and Mortar? Online? Bricks and Clicks? A franchisee? Provide specialist services as an independent contractor? Knowing this will influence the many choices you will need to make.

  • Always protect your reputation. With the ability of social media to spread damaging negative opinions and reviews fast, it pays to focus on customer service. Know your responsibilities and your rights. Grow your fan base!

  • Take a professional approach to legal matters pertaining to your type of business. Get a good basic understanding of contract law, privacy, anti-spam, WH&S, consumer law, tenancy, defamation etc. and if anything tricky comes up, see your lawyer.

  • Know what help is out there. As Australia begins its economic recovery post-COVID, there is likely to be lots of support by way of Government programs and grants. Keep an eye out. If you're eligible, why not apply for funds or assistance?

  • Secure all financial, supply and logistics contracts, licencing or franchise agreements, leases, cyber, business names, domain names and social media accounts.

  • Be cyber safe. Keep a record of passwords in a reputable password manager, keep thorough records of client information in a quality database (preferably a CRM) obtain SSL certification on domain names, use 2-factor authentication for all accounts and install high-quality cybersecurity software on your systems. *Ideally you should have an IT expert conduct a security risk assessment.

Money, money, money


The start-up phase of a business is financially risky. It requires a significant investment of resources and you need the capacity to make important, real-time business and financial decisions. Develop good open communication with your bank and/or investors and set up a system to facilitate this. Secure your financial resources and budget for cash flow. Ask your Rowe Partners accountant about this.


Good luck and remember we are here when you need us. Call 1800 04 7693.


The Prime Minister recently announced a number of changes to JobKeeper that may affect you if you are currently receiving the payment. The great news is that the program has been extended for a further 6 months out from 28 September 2020 to 28 March 2021 but some of the eligibility criteria have changed. This means that some may no longer be eligible to receive the payment and may need to move across to Jobseeker, or make some significant business decisions in light of the changes.

According to the Treasury website, treasury.gov.au, "...from the 28th September 2020, eligibility for the JobKeeper Payment will be based on actual turnover in the relevant periods, the payments will be stepped down and paid at two rates." Business & NFP Eligibility (from 28.9.20)

  • To be eligible for JobKeeper, businesses (with an aggregated turnover of $1 billion or less) will need to demonstrate that their actual turnover for both the June 2020 quarter and the September 2020 quarter has declined by more than 30% compared with their actual turnover for the June 2019 quarter and the September 2019 quarter.

  • For Australian Charities and NFP Commission-registered charities (excluding schools and universities), the test is 15%.

  • Businesses and NFP will need to assess their eligibility for JobKeeper again in January 2021.

Payments (from 28.9.20)

  • The payment rate of $1,500 per fortnight for most eligible employees and businesses will be reduced to $1,200 per fortnight.

  • Employees and business participants working fewer than 20 hours per week will receive a reduced payment of $750.

  • Rates will change again in January.

It's worth noting that;

  • Those not meeting the new JobKeeper eligibility criteria remain eligible for JobKeeper until 28 September 2020.

  • JobKeeper remains open to new applicants provided they meet the new eligibility criteria.

  • Alternative tests will be available to businesses for which comparing turnover with the prior year does not provide an accurate measure of their decline in turnover for each period.

  • Other JobKeeper eligibility criteria have not changed.

If you're a business already receiving JobKeeper and need clarification about your ongoing eligibility, feel free to get in touch with your Rowe Partners accountant to discuss. If you're a new business or NFP applicant for JobKeeper we can also work together to ascertain your eligibility. We're standing by ready to help. Call 1800 04 7693 to make an appointment.

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Rowe Partners Pty Ltd (ACN 105 365 688) as an agent for Rowe Partners Partnership (ABN 65 250 711 759). Directors: R P McDonald FCPA, C R McKnight FCPA, P J Connolly MIPA, F B Cammarano AIPA, M R Nutt CPA. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees.

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