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Gig economy explained

Playing to Win in the Gig Economy

This is the first article in our series on the gig economy, where we explore the changes in the employment market, and the related tax and financial issues that workers and employers face.

What is the gig economy?

The gig economy is characterised by freelance and project-based work. Its players inhabit a constantly changing workscape and juggle a pastiche of jobs.

In some circumstances, gig economy workers have very little connection with their “employers”. This is typical for the “share economy” workers of Uber, Airtasker and similar companies, where the platform owner facilitates jobs through a technological medium like a website or an app, and the workers pay a percentage of their earnings for access.

Gig economy explained

But many gig workers make their living through a combination of employee and freelancer jobs. Sometimes known as “slashies” (for the slashes in their multifaceted career descriptions), these people often work across multiple industries and offer a diversity of skills and experience. A slashie might be, for example, a university tutor/web designer/bartender.

If you are a solopreneur, a casual employee, a contractor or a slashie, the chances are that you are part of the gig economy.

Got a gig?

While recent changes in the labour market have brought flexibility for both employers and workers, they have also brought risk and uncertainty. For many, too, there is an increase in the amount of administration they must do for contracts, recordkeeping and their income stream, as well as greater complexity in planning a financial future.

Each employment type, task and industry has unique characteristics and implications for tax and financial planning. But regardless of the category, similar tax, superannuation and income contingency planning considerations apply. We can help you manage these.

The impact of the gig economy on the employment market and the economy as a whole is yet to be realised, as are the social effects, yet it is touted as the future of work. Many more of us are likely to find ourselves as players. So why not have an advantage? Understanding your obligations and entitlements and having a plan for stability in this dynamic market is critical for success.

Employment status

Are you an employee, a contractor, self-employed – or is your work a combination?

If you are part of the gig economy, then it is essential to establish your status for each job. Fair Work Australia provides a clear summary based on the level of control you have in carrying out the work and responsibility for statutory obligations such as taxes and benefits.

As an employee, you will have pay-as-you-go (PAYG) tax deducted from your wages, and superannuation and other benefits will be paid by your employer. Your contract will specify if you are a casual, fixed-term, or permanent employee. Employees also have the benefit of workers compensation if they are injured on the job.

For any work you undertake as a contractor, you have responsibility for managing your own obligations, including your tax, superannuation and insurance.


Determining your tax status will be more complex if you have multiple gigs.

If you are a PAYG employee but also use an Australian Business Number (ABN) to invoice for other work, you will need to lodge an annual personal tax return and may also have to lodge a regular Business Activity Statement (BAS) and pay tax instalments. You will need to set aside funds out of the income from your invoiced work to make your BAS payments. These tax instalments are usually required quarterly, and it’s a good idea to set aside around 35% of each income payment you receive.

To further complicate things, if you derive income from your individual skills or personal efforts – for example, if you are an entertainer, engineer or IT consultant – you’ll need to work out if you are classified as a personal services business (PSB) and/or you earn personal services income (PSI). This is significant, as there are substantial differences between the corporate and personal tax rates and the deductions claimable for the different income types. Accurately identifying your PSI/PSB status can be tricky, depending on your profession, how you are contracted and the scope of your work, especially where you have multiple contracts.

GST registration

If you earn more than the $75,000 threshold through your ABN, you need to register for Australian GST. And if you earn income as an Uber driver, you are now required to register for GST no matter how much (or little) you earn from that work. If this applies to you, talk to us about whether you can use your existing GST registration.

For everyone else who works in the platform economy – watch this space! The Federal Government is setting its sights on better ways of capturing GST on consumption, as we’ve seen with the introduction of the “Netflix tax” on digital products and services and the proposed low-value imported goods tax.


You’ll also need to manage your own superannuation for your gig-economy income, whether you divert money into an existing fund or set up a self managed super fund (SMSF). An SMSF may be worth considering if you’re looking for greater portability and diversity in investments.


PAYG employees are covered for workers compensation by their employer. If you are a contractor or run a small business you will have to take out you own insurance to cover loss of income, illness, disability and death, and possibly other insurance types if you also employ people (workers compensation), sell products or provide certain services (professional indemnity).


Negotiating entitlements for cross-industry work and a variety of tasks can be bamboozling. We can help make sure that you’re claiming appropriately for your types of work and business.

Some common issues faced by gig economy workers include distiguishing between revenue and capital expenses, and apportioning claims where assets are for both personal and professional use. Don’t forget that if you’re undertaking project work, you might be entitled to claim for coworking space hire, software that allows for collaboration across a team, travel expenses and equipment depreciation.

As always, good recordkeeping is essential – hold onto all of your receipts!

Charging clients and low season contingency plans

If you’re a sole trader or casual employee, the level of control you have over the rates you charge will vary according to your profession and from gig to gig. Nonetheless, it is essential to build into your fee structure the amounts you need to cover your tax, superannuation, insurance, purchasing new equipment, training, any certification fees, repairs.

Balancing current work while chasing future work and keeping up with tax and other obligations can be extremely challenging. You should also plan how you’ll deal with periods when you’ll have less work and income, and think about how to fund some holiday time. Talk to us if you’d like help developing a contingency plan.

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CGT rollovers

CGT Rollovers on Restructures

Every business runs using a particular legal structure – as a sole trader, a partnership, through a company or trust arrangement or even using a combination of these structures. Each structure offers different advantages and disadvantages. These advantages range from ease of regulatory compliance to matters of personal liability to asset protection considerations and, of course, tax advantages and requirements. The “mere” choice to operate a business using a particular structure for its beneficial tax outcomes does not generally amount to tax avoidance.

CGT rollovers

In this increasingly complex and fast-changing commercial and trading world, you may find it necessary to change your business’s form from one structure to another as business (or personal) needs shift. There are a range of tax concessions that allow for a change in business structure without triggering tax liabilities that may otherwise arise on the transfer of business assets from one structure to another – particularly in relation to capital gains tax (CGT).

For example, from its inception, the CGT regime has provided for “CGT rollover” relief when a business’s assets are transferred from a sole trader or partnership structure to a wholly owned company structure (with all the tax and other benefits that could arise from running a business as a company).

Likewise, rollover relief is available when interposing a company or a trust between a business’s owners and the existing entity through which the business is run, if this considered to be a viable thing to do for the business.

A CGT rollover allows you to "roll over" a capital gain connected to a CGT event,
such as the transfer of assets from a sole trader business to a company business
in a restructure.This means you can put off paying tax on the gain until another
CGT event happens to the assets – for example, when the company sells them.

The small business restructure rollover (which applies to transfer of assets occurring from 1 July 2016) was introduced to provide greater flexibility for businesses with a small aggregated turnover of (at the time of writing this article this amount was $2 Million). This rollover is somewhat revolutionary, because for the first time it allows business assets to be transferred to a discretionary trust, subject to the underlying principle of any business CGT rollover, which is that the ultimate ownership of the assets does not change. In effect, the rollover rules themselves are designed to maintain the economic ownership of the transferred business assets in various ways, including through the use of “safe harbour” rules.

This small business restructure rollover provides tremendous scope for business owners to restructure their business in a variety of ways without triggering CGT (or other) tax liabilities.

However, as with the other business rollovers available, a restructure must meet a range of conditions for the new rollover to apply. The key conditions are as follows:

  • the transfer of the assets must be part of a “genuine restructure” of an ongoing business;
  • the entities involved in the restructure must, in effect, be “small business entities” in terms of the $2 million annual turnover test (this threshold is proposed to change to $10 million);
  • the transfer of the assets must not materially change the “ultimate economic ownership” of the assets transferred;
  • the asset transferred must be an active asset (ie one used or held ready for use in carrying on a business);
  • the transferor and transferee parties must be Australian residents for tax purposes (at the time of the transfer); and
  • the transferor and each transferee must choose to apply the rollover.

Each of these requirements have their own particular intricacies that must be considered carefully in light of the particular business’s and taxpayer’s circumstances. For example, the requirement that the restructure be “genuine” means that it cannot be undertaken as or be part of an “inappropriately tax-driven scheme” – for instance, one that allows the transferred assets to later be sold with minimal tax consequences. This requirement is so significant that the ATO has issued a lengthy guide, Law Companion Guide LCG 2016/3, to illustrate what would and would not be regarded as a “genuine restructure”.

In spite of the need to meet these varied and precise conditions, this rollover will prove invaluable for business taxpayers who find it necessary to change the legal structure of their business to fit in with their changing business and the shifting domestic and global business environment.

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Are you considering changing the structure of your business, or wondering about other CGT-related matters? Contact us to talk about your situation.

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forgiving debt

The creditor’s position: Forgiving a debt

In a commercial context, where a creditor has made a loan that the debtor uses in the course of a business or to produce their assessable income, there will be clear capital gains tax (CGT) consequences when the creditor agrees to forgive the debt. This is because the creditor’s legal or equitable right to repayment of a debt is a CGT asset in the creditor’s hands.

forgiving debt

However, this does not necessarily mean that the creditor will make an outright capital loss on the forgiveness of a debt equal to the amount of the debt owed. There will be other factors to consider, including whether the debt is entirely forgiven and the circumstances under which it is forgiven. The debtor’s capacity to repay the debt (that is, the extent to which the debt is “truly bad”) will have a significant bearing on the amount of any capital loss arising to the creditor – and could even mean that the creditor makes no capital loss. The “truly bad” status of a debt can be complicated to determine, depending on the particular circumstances of the creditor, the debtor, the debt and the forgiveness arrangement.

Whether the parties are dealing with each other at “arm’s length” under the forgiveness arrangement (and not just in terms of whether they are related parties) will likewise have a significant bearing on the amount of any capital loss arising to the creditor. This consideration is typically important where the parties are a shareholder and a wholly owned company.

Where a debt exists as part of a private (non-commercial) arrangement – such as a loan between family members – and is forgiven, there are a range of other CGT-related matters to consider. In particular, the tax consequences will depend on whether the loan was made at a commercial rate of interest or is interest free. As a basic rule, however, where a loan was not used to produce assessable income, the lender’s forgiveness of the debt does not give rise to a capital loss.

The debtor’s capacity to repay the debt will have a significant bearing on the amount of any capital loss arising to the creditor – and could even mean that the creditor makes no capital loss.

The debtor’s position: having a debt forgiven

In a commercial arrangement where a debt is forgiven – that is, one where interest was payable on the loan – the forgiven debtor’s position involves a range of entirely different CGT considerations.

This is because, unlike the creditor, the debtor does not own a CGT asset as part of the debt arrangement. The debtor’s repayment obligations are merely that: obligations or liabilities, but not assets.

Nevertheless, a debtor obtains a type of commercial or other advantage when their repayment obligations are forgiven, waived, released or extinguished. To take this into account, the tax law includes special rules that aim to indirectly recoup the debtor’s tax advantages associated with forgiveness of the debt, to the extent that the debt was a commercial arrangement.

Generally, these rules provide for the net amount forgiven to be deducted from certain current and future tax deductions the debtor claims. Specifically, the net forgiven amount of the debt reduces the following tax deduction amounts, in this order:

  1. the debtor’s prior year revenue losses;
  2. the debtor’s prior year net capital losses;
  3. undeducted balances of other expenditure that the debtor carries forward for deduction (including depreciable assets); and
  4. the CGT cost base of other assets that the debtor holds.

In short, a taxpayer does not get off tax-implication free when a creditor forgives a debt they owed under a commercial arrangement.

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The CGT and other tax consequences related to debt forgiveness can be difficult to navigate, for both the creditor and the debtor, and will depend on the specific circumstances surrounding the matter. Contact us if you would like more information about how forgiving a debt, or having a debt forgiven, may affect your tax situation.

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business travel expense sydney

Happy Trails: Business related Travel Expenses

The main areas for travel expenses that can be claimed as tax deductions are:

  • transport;
  • meals; and
  • accommodation.

Specifically, these can include:

  • public transport costs, including taxi and air travel fares;
  • bridge and road tolls, parking fees and short-term car hire costs;
  • meals and accommodation expenses while staying overnight for work;
  • incidental expenses for purchases that are linked to your work and the purpose of the work trip; and
  • petrol, oil and repair costs for a car that is owned or leased by someone else.

However, there are a number of factors to keep in mind when claiming travel-related deductions in your personal income tax return as an individual or as part of small business.

business travel expense sydney
What is “work-related”?

Defining what is work-related is an essential consideration for all travel claims. There must be a direct link between your work and the expense. Put simply, you need to ask: is the travel linked to producing the income on which you pay tax?

Transgressions by politicians aside, recent cases have highlighted the importance of correctly establishing the relationship between your work and the claimed expenses. It’s also important to ensure that your employer will support your claim, should the ATO ask them. In the case of Re Vakiloroaya and FCT [2017] AATA 95, the ATO denied the taxpayer’s claim for $60,000 of work expenses, including travel, and the Administrative Appeals Tribunal agreed, in part because the taxpayer’s travel to visit clients was not required by his employer as a core part of his work.

Thresholds for deductions

To help taxpayers successfully claim reasonable deductions, each year the ATO publishes a Taxation Determination that sets out the amounts considered reasonable to claim for various travel destinations in that income year (for example, see TD 2016/13 for the 2016–2017 income year). This provides a useful baseline for trip budgeting and claiming deductions.

Expenditure versus allowances

Another important question to ask is whether you are paying for work-related travel out of your own pocket – or has your employer paid you a travel allowance?

If you are footing the bill for work-related travel yourself, then the expenses can be claimed as deductions on your tax return. However, if your employer reimburses you for the costs, you cannot also claim them.

A slightly more complex situation comes about if your employer has paid you an allowance. You will most likely have to declare the allowance as income in your tax return, especially if the amount is over the threshold set out as reasonable in the relavent year’s tax determination. Your employer is required to withhold tax on this payment as on your salary. If you are a small business owner who pays an allowance to your employees, your accountant can provide further advice on the finer points of your tax and declaration obligations.

Substantiating your claims

If you are claiming travel expenses, you need to maintain evidence to back your claim. Keeping receipts and information such as a log of car expenses, dates, driving distances and fuel purchases is vital. To show that claimed expenses are work-related, keep a travel diary recording the details of business meetings, including dates, durations, places, times and activities. In addition, sending follow-up email to clients detailing pertinent actions arising out of your meetings offers useful support for your claims.

Distinguishing between business and pleasure

Extending a business trip to include a holiday is a very popular approach, for good reason – it’s an excellent way to get the most out of a trip. However, you need to ensure that you only claim deductions for the work components of your trip. Again, keeping a travel diary will help in keeping your claims organised and reasonable.

Claiming expenses of travelling companions

The interesting case of Re WTPG and FCT [2016] AATA 971 highlighted issues with claiming travel companions’ expenses. If you are considering doing this, it’s worth discussing with your tax adviser when planning your travel. In this particular case, a taxpayer with disabilities was denied a deduction for his wife’s travel costs when she accompanied him to conferences overseas. The taxpayer’s wife had accompanied him on the trip as a carer, as his employer did not provide one. The ATO ruled that his wife’s travel expenses were not related to income-producing activities and so could not be claimed as deductions, and the Administrative Appeals Tribunal agreed with that ruling.

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