Gig Workers: 5 Things You Should Know About Your Tax Obligations

The gig economy has seen a significant rise in Australia, with many Aussies signing up either as their main source of income or as a side gig. Whether you breeze through Upwork gigs at coworking spaces in the Melbourne CBD or drive Sydney’s streets for apps like Uber and Deliveroo, gig work can give you flexibility and a decent weekly income. However, it can also complicate your tax return quite a bit. 

To give you a good shot at meeting your obligations and avoiding dramas with the ATO, we’ve broken down five crucial things gig workers in Australia need to know about their tax responsibilities:

1. Registering for an ABN

As a gig worker, you are considered a sole trader, which means you need to register for an Australian Business Number (ABN). Your ABN is essential for invoicing clients and claiming business expenses. Without it, you may find it challenging to operate legally and efficiently in the gig economy. Thankfully, the registration process is super straightforward. Simply complete the online application form on the Australian Business Register website.

2. Understanding Your Income and Tax Rates

Income earned from gig work is taxable, so no matter how small your earnings are, you’ll most likely need to declare them in your annual tax return. The Australian Taxation Office (ATO) treats gig workers as “self-employed,” meaning your income is subject to the same progressive tax rates as traditional employees. 

3. Claiming Deductions

One of the benefits of being a gig worker is the ability to claim deductions for expenses you incur while earning your income. Common deductible expenses include:

  • Vehicle expenses: If you use your car for work, you can claim a portion of your fuel, maintenance, and insurance costs.
  • Home office expenses: If you work from home, you can claim a percentage of your utility bills, internet, and office supplies.
  • Tools and equipment: Any tools or equipment necessary for your work can be claimed as a deduction.
  • Marketing and advertising: Costs associated with promoting your services, such as website hosting and business cards, are deductible.

Note that you can only claim the work-related portion of these expenses. For example, if you use your car for both personal and work purposes, you can only claim the percentage of expenses related to work. This can start getting pretty complicated, so if you’re not confident figuring out the percentages, you may want to hand the hard work over to an accountant who knows the ins and outs of gig work. 

4. Setting Aside Money for Taxes

Gig workers don’t have taxes automatically taken from their earnings. This means you’ll need to be diligent about setting aside money throughout the year to cover your tax bill. Your best bet is to set aside around 25-30% of your income for taxes. This will help ensure you have enough to cover your tax obligations when it’s time to lodge your tax return.

If your income reaches a certain threshold, the ATO may ask you to set up Pay As You Go (PAYG) instalments. You’ll be notified if this happens, and you can set the payments up via your myGov account

5. Staying Compliant with ATO Regulations

The ATO has increased its focus on the gig economy, using data matching techniques to ensure gig workers are reporting their income accurately. Failing to comply with your tax obligations can result in penalties, interest on unpaid taxes, and even legal action. So be diligent about reporting all your income.

By staying informed and proactive, you can enjoy the benefits of gig work while ensuring you meet your tax obligations.

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