Earning extra money through an online platform can be convenient, but it can also create tax obligations that are easy to overlook.

Whether you're driving for a ride-sourcing service, renting out accommodation, delivering food, hiring out an asset or providing services online, income earned through these activities may need to be included in your tax return.

There is another reason to check your records carefully: many digital platforms now report transaction information directly to the Australian Taxation Office (ATO).

What counts as sharing economy income?

The sharing economy covers a broad range of activities where people provide services or make assets available through digital platforms.

This can include:

• providing ride-sourcing services through platforms such as Uber or DiDi;
• renting a room, house or other short-term accommodation;
• delivering food or providing task-based services;
• hiring out vehicles, caravans, parking spaces, storage areas or other assets;
• providing freelance or professional services through an online platform; and
• certain content creation and online subscription services.

The tax treatment will depend on what you're doing and your circumstances. However, receiving income outside your normal salary doesn't automatically put it outside the tax system.

Don't assume everything will be pre-filled

Information reported by a platform may be available to the ATO, but that doesn't remove your responsibility to make sure your tax return is complete and accurate.

Platform information and pre-filled tax return data should be checked against your own records.

This is particularly important if you earn income through more than one platform, receive payments outside a platform or have expenses that may be relevant to earning that income.

Your Modoras accountant can help you identify what information is relevant to your return and how your particular activities should be treated.

Keep records of income and expenses

Good records can make tax time considerably easier.

Many platforms provide transaction or annual income summaries, but it is still worth maintaining your own records of income received and expenses incurred.

Depending on the activity, relevant records could include:

• platform statements and transaction reports;
• platform commissions and service fees;
• receipts and invoices;
• vehicle or travel expenses;
• cleaning, repairs and maintenance;
• equipment purchases;
• insurance costs; and
• records showing how an asset was used privately and to earn income.

Not every expense will be deductible. Where an expense relates partly to private use, only the eligible income-producing portion may be claimable.

What deductions could you claim?

Expenses directly connected with earning assessable sharing economy income may be deductible, subject to the normal tax rules.

The type of deductions available depends heavily on the activity.

Someone renting short-term accommodation may have very different deductible expenses from someone providing ride-sourcing services or freelance work.

Keeping evidence of expenses and separating private costs from income-producing costs can help support legitimate deductions if the ATO reviews your return.

Remember that tax may not have been withheld

Unlike salary and wages, income tax may not have been deducted before sharing economy income reaches your account.

That can result in a larger tax liability when you lodge your return.

For people earning sharing economy income regularly, it may be worth planning for that liability during the year rather than waiting until tax time.

Depending on your circumstances, this could include setting aside part of your income or making payments through the PAYG instalment system.

GST can apply in some circumstances

Income tax isn't necessarily the only consideration.

GST obligations depend on the type of activity and your circumstances. In some cases, registration may be required once the relevant GST turnover threshold is reached.

Ride-sourcing is treated differently. Drivers providing ride-sourcing services generally need to register for GST regardless of how much they earn from those services.

If you're unsure whether your activities amount to a business or whether GST registration is required, it is worth checking before assuming the usual turnover threshold applies.

Side income can become something bigger

An occasional source of extra income can develop into a regular business activity.

If that happens, tax isn't the only area worth reviewing. Record keeping, cash flow, GST, business structure and longer-term financial planning may all become more relevant.

If your activity is growing beyond occasional income, speaking with a Modoras business adviser can help you consider the broader financial position of the activity.

Know what's being reported before you lodge

The expansion of third-party reporting means the ATO has access to more information about income earned through digital platforms than many taxpayers may realise.

That doesn't mean every person earning money through an app is running a business, nor does it mean every dollar received will be taxed in the same way.

It does mean accurate reporting and good records matter.

Reviewing your platform income, expenses and other obligations before lodging can help reduce the chance of discrepancies and unexpected tax issues later.