The future of work is already changing. The growing trend of the gig economy will continue as many Australians are swapping the traditional 9 to 5 job for a more flexible style of employment.
The gig economy refers to a way of working that is based on people getting paid for completing individual projects or tasks, instead of working for an employer. Its popularity stems from the changing needs of the workforce. People are demanding greater flexibility and autonomy from their work. Similarly, many businesses enjoy the flexibility this approach offers when engaging people to work in their businesses. This type of working arrangement is attractive to people who want a greater work-life balance.
Advantages and Disadvantages of Working in the Gig Economy
Gig workers find opportunities from many online platforms like Uber, Deliveroo, Airtasker, and Upwork.
People who need work compelted will post their requests onto these platforms and gig workers can search for jobs they are keen to take on.
- There is greater flexibility. You do not have the constraints of working in a 9 to 5 job. You can choose what you want to do and when you want to do it. Your gigs can fit in with your lifestyle and family commitments.
- You can take on gigs to supplement your full-time income.
- You can pursue your passions.
- It is easy to participate in the gig economy.
- You don’t need to deal with office politics.
- You do you not have the same benefits as those employed the traditional way. There is no paid annual leave or sick leave.
- You may be working for very little money. There is no guaranteed minimum wage to protect gig workers.
- The inconsistent income and availability of work can create stress or anxiety. It is harder to get a loan because lenders need to see a regular income source.
- You may miss out on being able to interact with your colleagues and co-workers. This can stifle social and personal growth.
- You do not have the support of an employer or co-workers. You miss out on learning from your superiors.
- Your schedule may be inconsistent.
- You need to have a high degree of discipline to manage your own time and be motivated to keep going.
- You need to manage your own financial affairs, pay your own super and meet your tax obligations.
Managing Your Tax Obligations
Income from gig work is assessable for tax. If you are making money from this type of work, you need to declare all of your income to the ATO. This can be confusing for many new gig workers who do not understand their tax obligations, especially if they have income from different sources along with their regular employment. Incorrectly lodging your tax return can result in a fine from the ATO. The tax office can match your tax return against data from online platforms, so attempts to hide your income will incur penalties. To avoid costly mistakes, it is important you keep records of your income and expenses, and declare all earnings in your tax return.
Do you need to register for GST?
If you earn over $75,000 a year, you will need to register for GST. For gig workers who provide ride-sharing services, the ATO requires you to have an ABN and register for GST regardless of your annual income.
Can You Claim Tax Deductions?
You are entitled to claim tax deductions for expenses incurred relating to your work. Good record keeping is a must. In case you are audited by the ATO, you’ll need to provide evidence to support your claim.
The expenses you can claim will depend on the type of work you do. Some common expenses you can claim for may include:
- Car expenses
- Phone and internet
- Equipment and supplies
- Commissions charged by online platforms
For items that are used privately and for work, you’ll need to apportion those expenses. You can only claim the work-related portion as a tax deduction.
Managing Your Money
The inconsistencies of gigs mean you’re likely to experience some ups and downs in your income level. Without the stability of a regular income, it is essential for gig workers to be prudent with their money. Developing a budget will help you manage your cash flow and avoid overspending in the quiet months. Creating a savings plan also prepares for a rainy day. As a gig worker, you do not have access to paid holidays and sick leave. Having money saved up will see you through the periods when you are not working.
Contributing to Your Super
Gig workers are not entitled to receive superannuation payments from their employer. It is crucial for gig workers to contribute to their super fund or they will risk not having enough savings to cover their retirement. This sometimes can be challenging because their income can fluctuate considerably.
If you are participating in the gig economy, you will need to be aware of the financial implications. Managing your finances and tax obligations as a gig worker can be challenging. It is important to speak to your financial and tax advisor to receive professional guidance for your specific situation. Contact Moiler today to discuss your needs and let the team help you develop a financial plan and superannuation strategy to secure your future.
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