Get ahead of the expanded sharing economy reporting regime

The sharing economy has seen significant growth in recent years, with services such as Uber and Airbnb disrupting traditional industries and providing people with a way to earn extra money.

However, the Australian Government is concerned that transactions occurring in the digital and sharing economy are not being properly reported, due to the Government’s lack of visibility over these transactions. The Government is particularly worried that some sellers using these platforms may not be fully reporting their income or paying the correct amount of tax.

Compulsory reporting obligations for sharing economy in Australia

To address this concern, the Australian Government legislated a compulsory Sharing Economy Reporting Regime (SERR), requiring sharing economy businesses to 'share' the details of all transactions made via their online platforms. This would bring digital marketplaces and other electronic distribution platforms (EDPs) in line with the Taxable Payments Annual Report regime that already applies across other higher-risk industries. 

SERR has been in effect since 1 July 2023, but initially only applied to ride-sourcing or short-term accommodation services. 

Effective from 1 July 2024, SERR has been expanded to require all EDP operators facilitating the provision of rights or services to report their transactions, including those renting goods or services. Transactions involving the sale of goods via an EDP are not covered by this expanded SERR. 

The Government claims the initiative will provide much-needed visibility on who is receiving money to provide services to Australian customers and enhance their understanding of the digital economy. However, many first-time reporters may struggle to complete their reports by the 31 January 2025 deadline, as the reports must be delivered in a specific XML format and may require a new registration with the Australian Taxation Office (ATO).

Summary of the SERR

The SERR requires EDPs providing rights and services, such as Uber and Airbnb, to report all transactions (subject to limited exception) to the ATO. The SERR focuses on sharing economy services and seeks to ensure that tax obligations, such as those for income tax and GST, are fulfilled. Participants need to understand and follow the new reporting requirements to avoid penalties and remain compliant.

• EDP operators are required to report transactions twice a year by January 31 and July 31.
• There is a specific format, as an XML file, for the report and this will likely require a new build of a template report.
• The report must be lodged twice yearly with the ATO and may require EDP operators to separately register for the SERR. 
• Significant penalties (currently, up to AUD $825,000 for a non-lodgement) could apply for non-compliance. 

Tax implications for participants in the sharing economy

Those involved in the sharing economy need to be aware of the tax implications resulting from the new reporting system. If you supply services through an online platform such as Airtasker, Menulog or Twitch, those platforms are now required to report all transactions made through their platform to the ATO. This greater visibility will place the ATO is a much better position to be able to enforce tax obligations of sharing economy participants.

Any income you have earned from sharing economy services will have an impact on your tax obligations and deductions. It is crucial for people participating in sharing economy activities to have a clear understanding of the tax implications, to ensure compliance with GST and income tax regulations.

Penalties for non-compliance with reporting obligations

Non-compliance with the new reporting regime could result in penalties imposed by the ATO. These penalties could include fines or legal sanctions for EDP operators who fail to report required information on sharing economy activities. It is crucial for all relevant parties to adhere to the reporting requirements to avoid facing potential financial and legal consequences.

Failing to lodge your SERR report on time can result in severe penalties, particularly for significant global entities (SGEs). The penalty schedule is daunting, but RSM can help you avoid these costly mistakes. Our proactive approach ensures that you meet all compliance deadlines, safeguarding your business's reputation and finances

Penalties for SGEs are dramatically higher

SGEs also face additional lodgement obligations. An SGE is broadly an entity that has annual global income of AUD $1bn or more, or is part of a consolidated group of entities that has annual global income in excess of AUD $1bn. 

A late lodgement of 113 days can now result in a penalty of up to $825,000 - 500 times the standard penalty amount imposed on non-SGEs.

A schedule outlining the potential failure to lodge on time penalties applicable since 1 July 2023 is outlined below: 

If your company is considered an SGE, or you require assistance in establishing its SGE status, it is important that you contact a tax adviser to ensure that your compliance obligations are met.

How to report transactions under the new regime

To report transactions under the new regime, participants in the sharing economy are required to develop a report, in XML format, covering a standard and required set of data fields. Our experience is that not all fields are always captured by EDPs so it may require some EDPs to specifically capture information that it not within their business systems. The reporting needs to be done on a bi-annual basis, with deadlines set for 31 January and 31 July. The EDP operator will be responsible for submitting the necessary information to the ATO via either a taxpayer’s online portal or, for non-resident EDPs, through a specific login portal (which may require a new registration with the ATO).

For first-time reporters feeling overwhelmed by the process, or for anyone who finds it a hassle, it can be beneficial to work with a professional to prepare the template XML file and file on your behalf. RSM has the advantage of familiarity, as we know how to extract the data from your database and format it to meet the ATO's requirements. We can get it done much faster than most people doing it on their own.

When does the reporting period begin for EDP operators? 

Absent an exemption, platform operators are required to report transactions that occur on or after 1 July 2023 for:

• Taxi travel
• Ride-sourcing
• Short-term accommodation

Starting on or after 1 July 2024, share economy transactions that must be reported include:

• Taxi travel
• Ride-sourcing
• Short- and long-term accommodation
• Hiring assets, including personal assets such as car storage or shared business space
• Services including food delivery, professional services or performing tasks
• Digital assets, such as eBooks, apps or games, software, videos or podcasts
• Tips, donations and other gratuities given through the EDP 

The information required to be reported will be specified by the ATO but, at a minimum, will include the seller’s identification information and the aggregate of the transactions relating to the seller over the reporting period.

Reports must be lodged on a bi-annual basis by 31 January and 31 July and will need to be reported via an approved form set by the ATO.

Who will be required to report?

Operators of an electronic service (e.g., Website, internet portal, app) that allows buyers and sellers to transact for services 

Which transactions are required to be reported?

• Transactions for all services unless an exemption applies
• Transactions for the sharing or loaning of assets unless an exemption applies

The following transactions are exempt from the new reporting requirements:

• Where only the title/ownership of goods are exchanged
• Financial supplies
• Relating to the transfer of ownership of real property
• Where the service, loaned assets or property does not take place in Australia
• Subject to another tax reporting requirement
• Arising from online classifieds, listing, or advertising service
• Where the seller is also the operator of the platform

FOR MORE INFORMATION

To learn more about ATO reporting compliance, reach out to your local RSM adviser today.