It’s estimated that 20-30% of the Australian workforce actually participates in some form of gig economy.
The Australian gig economy is flourishing, with services such as Uber, Airtasker, and HiPages accommodating their people with everything and anything they would like to pay for in an income-smart way.
One thing, however, is that freedom brings about the need for financial independence: tax independence. Most of the time for gig workers, there are many recognised deductions they leave out because they don’t know about them that could save them quite a lot of money.
This is a guide for you to find out how to maximize tax deductions and ensure you keep most of what you make.
Understanding the tax basics for gig workers
When you become a gig worker, you operate as a sole trader, meaning you must report all your income and expenses to the Australian Taxation Office (ATO).
Here are some key points to understand:
- ABN Registration: All gig workers need an Australian Business Number (ABN).
- Progressive Tax System: The more you earn, the higher your marginal tax rate.
- Tax Rates: Gig workers pay taxes under the same system as traditional employees.
- Tax on Income: Unlike salaried employees, no taxes are withheld from your gig earnings. You must set aside funds for your tax obligations.
Effective tax planning begins with understanding the deductions you can claim to reduce your taxable income.
Essential tax deductions for gig workers
| Category | Examples of Deductible Expenses | Notes |
|---|---|---|
| Vehicle Expenses | Fuel, maintenance, insurance, registration, depreciation | Logbooks are required for accurate tracking. |
| Home Office | Electricity, internet, office supplies, furniture | Can use ATO’s fixed rate method or detailed calculation. |
| Equipment & Tools | Computers, software, tools | Items under $300 claimed outright; over $300 depreciated. |
| Marketing | Website hosting, online ads, business cards | Only for promoting gig-related services. |
| Travel | Airfare, accommodation, meals | Keep receipts and justify work-related travel. |
| Insurance | Public liability, income protection | Consult a tax advisor for specifics. |
| Education & Training | Industry courses, workshops, memberships | Must be directly related to current gig activities. |
| Superannuation | Personal contributions to super | Helps reduce taxable income. |
1. Vehicle expenses
If your gig work involves travel, such as ride-sharing or delivery services, you can claim vehicle-related costs. However, only the portion used for business purposes can be deducted.
Eligible deductions include:
- Fuel costs: Track your fuel purchases linked to your work trips.
- Maintenance and repairs: Keep records of expenses for repairs and regular servicing.
- Insurance and registration: You can claim a portion of these costs if the vehicle is used for work.
Depreciation: If your car loses value over time, you can claim depreciation.
Tip: Use a logbook to separate business and personal travel.
2. Home office expenses
If you do part of your gig work at home, such as managing client bookings or working online, you may be eligible for home office deductions.
Deductible expenses include:
- Electricity and utilities (proportional to your workspace use).
- Internet bills (only the portion used for work).
- Office supplies such as stationery and printer ink.
- Furniture or equipment, such as desks or chairs.
The ATO offers a simplified rate method to calculate these expenses: a fixed rate per hour for each hour worked at home. Alternatively, you can calculate the exact percentage of costs related to your workspace.
3. Equipment and tools
Every bit of equipment and tools you buy out of your pocket for your gig-related job can also be claimed as deductions.
Examples include:
- Computers, phones, or tablets.
- Software or apps you use for work (e.g., editing software, invoicing tools).
- Specific tools for the services offered (e.g., cleaning supplies or gardening tools).
Important Note:
- Items costing less than $300 will be considered immediate deduction items.
- Items over $300 are capitalised and depreciated over their useful life.
4. Marketing and Advertising
Another way of claiming the deductions for your gig work is under the promotion of your gig work.
Some of these eligible expenses are:
- Website hosting and domain costs.
- Online advertisements via Facebook, among other mediums.
- Printing business cards, flyers, or brochures.
These costs are incurred to help you attract clients, and thus meet a purpose that the ATO allows for deductions.
5. Travel Costs
If your gig requires travelling for work-related reasons (other than your usual commuting), these expenses are deductible.
What you can claim:
- Airfare, train, or bus tickets for work-related travel.
- Accommodation costs during work trips.
- Meals while travelling overnight for business purposes.
It’s crucial to keep receipts and documentation to prove the travel was necessary for your gig.
6. Insurance costs
Gig workers often invest in insurance to protect their income or work tools.
There are various types of insurance that can be claimed:
- Business insurance.
- Public liability insurance (normally for tradespeople).
- Income protection insurance (if not provided by super).
- Seek confirmation with your tax professional on whether you are allowed to claim an insurance deduction or not.
7. Education and training
Expenses incurred by people that are enrolled in programs or training sessions directed towards their gig work may become deductible.
Such example expenses include:
- Course fees.
- Industry-related periodical subscriptions or membership dues.
- Seminar and workshop fees.
- The requirement is that training must be somehow related to their current income-producing activities.
8. Superannuation contributions
Although not a direct deduction of expenses, gig workers can make tax-deductible contributions to their respective superannuation funds. It thus reduces taxable income in addition to saving for retirement.
GST Registration
As an individual earning more than $75,000 in gig income, you will have to register for Goods and Services Tax. This will include:
- Charging GST on your sales
- Submitting Business Activity Statements (BAS)
- Remit GST to the ATO
Maximise your tax savings today with kPG taxation!
Getting your head around all the tax deductions for gig work? Well, then KPG Taxation is here to help you out. Our tax accountants make it easy to claim what you are legally entitled to so that you save more and get the biggest refund possible. We have you covered from work-related expenses through to home office costs.
