The sharing economy: Opportunity but not security

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The sharing economy: Opportunity but not security

The sharing economy offers the ability to earn extra money. But don’t rely on it if you are injured or sick and cannot work your day job.

There’s a lot of buzz at the moment around the sharing economy. Governments are adopting policies to legitimise services like Uber and Airbnb1, and sharing economy companies are promoting themselves to customers and potential workers.

Certainly, there are opportunities for people to get involved. Some services make it possible to earn extra money outside of your main occupation. Others can be a replacement for full time salaried jobs, but with the flexibility to allow you to work when you want.

However, while the sharing economy might be a catchy name and promise enticing benefits, that doesn’t make it easy work. Whether you’re providing accommodation, offering transport or delivering food, it can be hard yakka.

So, if you’re thinking it might be an option to earn an income in place of your regular job, you might need to think again. We explore the sharing economy’s hidden costs, taxes and reliability of income.

You need to be fit to work

Renting out a room is easy, or is it? If you want to maximise your income, you’ll want to take on the responsibilities of cleaning and doing the laundry. Driving for Uber might seem like a great idea but keeping your car spotless and well-maintained takes physical work. Delivering food to people or doing any other odd jobs require you to be on your feet (or bike!) at the drop of a hat.

If you’re sick or injured it might not be possible to do all that is required. Plus, when you’re unwell, you may need time off for recuperation, doctors’ visits or rehabilitation. Unfortunately, when you’re in the sharing economy, if you aren’t working, you aren’t earning. And if you aren’t earning, how are you going to pay the bills?

Your income could be unpredictable, unstable and irregular

The sharing economy implies freedom and the ability to be your own boss. Participation is at your discretion, but you are bound by companies that make the sharing economy possible.

This is a real issue: it’s not theoretical. Many Deliveroo couriers in the UK had their delivery rates reduced by nearly 50% in the past year.2 It was also revealed that Deliveroo and foodora were contracting new riders at lower than average wages in parts of Australia.3

That’s not all, though. Heavy competition and customer whims could play into limiting your earnings: even a bad customer review could really hurt your earning potential.

You need to factor in taxes

There is a myth about the sharing economy: that you don’t have to declare the income you earn from the sharing economy.4 This is not the case.

Anyone planning to join the sharing economy needs to factor in taxes and expenses into their financial plans, and work out whether the venture is worth it. For example, in addition to income taxes, Uber drivers must pay GST on every dollar they earn.4, 5

In Victoria, the State Government is looking to introduce a levy on ride sharing services, taxis and hire cars6 as part of the government’s moves to manage an industry in transition.

There is also the issue of Capital Gains Tax on property used to earn an income, such as through services like Stayz, Airbnb, Space Out or Spacer.7 If you’ve generated income by renting out part of your home and you decide to sell it, you could lose part of your Capital Gains Tax main residence exemption.8

Repairs, maintenance, up-keep, insurance, utilities, capital costs and more

Insurance, wear-and-tear, services and repairs can be expensive affairs and can eat into your earnings. Guests may also increase your power and water consumption significantly: utility bills could shoot up to an amount you may not be prepared for.

The capital costs of participating also fall on you. For example, if you’re driving a vehicle and it is starting to age, you may be required to upgrade it to a new car to keep participating in a sharing economy service.

If you’re renting a room or a house, you may need to upgrade furniture or add new whitegoods to attract customers or get better prices. After all, customer reviews aren’t likely to be good if you have an uncomfortable bed, no dishwasher, or chipped plates.

The sharing economy is changing the way customers look at the world as well as how many workers generate an income. But like any job, if you’re sick or injured, getting the job done can be hard.

Income protection insurance policies through Choosi can provide up to 75% of your monthly pre-tax income, up to $10,000 per month, directly to you when you are sick or injured.* It’s a way to meet your financial commitments while you aren’t working. Having income protection may be a smarter, safer and more reliable back-up plan.

Don’t leave your financial security to chance. Find out how income protection insurance can protect you.

References

  1. Uber, Airbnb regulation addressed in NSW government "share economy" position paper ABC News
    http://www.abc.net.au/news/2016-01-19/uber-airbnb-kickstarter-the-subject-of-nsw-government-paper/7097690
  2. Deliveroo couriers demonstrate against new contractThe Guardian
    https://www.theguardian.com/lifeandstyle/2016/aug/11/deliveroo-couriers-demonstrate-against-new-contract
  3. Deliveroo & foodora accused of using sham contracts for bicycle deliveriesSydney Morning Herald
    http://www.smh.com.au/business/workplace-relations/deliveroo-and-foodora-accused-of-using-sham-contacts-for-bicycle-delivery-riders-20160329-gnsu7g.html
  4. Uber loses GST battle in federal courtSBS
    http://www.sbs.com.au/news/article/2017/02/17/uber-loses-gst-battle-federal-court
  5. GST consequences in providing ride-sourcing services Australian Taxation Office
    https://www.ato.gov.au/General/Ride-sourcing-and-tax/?page=4#GST_consequences_in_providing_ride_sourcing_services
  6. Levy compromise leads to agreement on legalising ride-booking services like Uber in Victoria ABC News
    http://www.abc.net.au/news/2017-06-24/uber-bill-compromise-reached-with-greens/8642170
  7. Renting through Airbnb and Stayz poses capital gains tax risk for sellers domain.com.au
    https://www.domain.com.au/news/renting-through-airbnb-and-stayz-poses-capital-gains-tax-risk-for-sellers-20170220-gugvsq/
  8. The sharing economy and capital gains tax Australian Taxation Office
    https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/General-guides/The-sharing-economy-and-tax/?page=5#I_am_renting_out_all_or_part_of_my_house_through_the_sharing_economy

Disclaimer

* A waiting and benefit period applies.

Posted: 02 Nov 2017

This is general information only and does not take into account your personal objectives, financial situation or needs. You should consider the relevant PDS available on this website prior to purchasing any product. Choosi offers insurance products from a range of brands but does not compare all products available in the market.

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