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 Airbnb, 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 regular 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 can 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. It was also revealed that Deliveroo and Foodora were contracting new riders at lower than average wages in parts of Australia.
That’s not all, though. Heavy competition and customer whims could also 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. 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.
In Victoria, the State Government is looking to introduce a levy on ride sharing services, taxis and hire cars 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. 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.
Of course, it’s best to seek the advice of a professional tax adviser regarding income and taxes.
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 out 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. Also, if your family relies on you and your income, you might consider assessing whether you have the correct insurances in place.
Life insurance policies may be worth looking into. For policies Choosi can arrange directly, a lump sum payment of up to $2 million (depending on your age and policy) can be paid to you in the event of a terminal illness diagnosis, or to your family or beneficiaries after your death, if the worst was to happen. This could help your family manage financially and maintain their quality of life if you were no longer around to support them. Further, life policies often come with optional benefits that you can select if they suit your and your family’s needs.
Don’t leave your financial security to chance. Find out how life insurance can protect you.
2 Nov 2017