Many dodging tax on side hustles

Thousands of New Zealanders earning a bit of extra cash renting out rooms on Airbnb, selling ads on their YouTube channels, or shilling products via multi-level marketing schemes may be dodging their tax obligations.

There has been significant growth in recent years in what has been described as the gig and sharing economies.

People now often cobble together a portfolio of roles, rather than holding down a full-time job, and put their spare time and resources to work earning an extra stream of income.

But Grant Linton, general manager at accounting software firm Reckon, said it was likely that there was a growing tax problem.

‘‘There is a whole raft of people doing these things, who have never run a business before and don’t even think of it.’’

At the minimum, they needed to declare their income and pay tax on it, he said.

In the case of Airbnb, some people might run into issues with GST too he said, if they were turning over more than $60,000 a year.

They might need to set up a separate business to lease the property to avoid being given a 15 per cent GST bill if they sold up.

‘‘That way, they get the benefit of minimising their tax to pay and don’t get caught in the GST regime. There’s a whole bunch of things you need to be conscious of from the outset.’’

Craig Macalister, a partner at Crowe Howarth, said it was another part of a significant black economy. He said Working for Families, which ties tax credits to income levels, gave people an incentive to take work that was not taxed at source.

‘‘IRD do catch the odd one, but I think that it is likely to be the tip of the iceberg.’’

Linton said people needed to realise there was a good chance of being caught. Inland Revenue could easily audit a site such as Airbnb to see who had been making money.

An Inland Revenue spokesman said there was no specific programme of work under way to target gigging workers, or those cashing in on the sharing economy.

Earlier this year, the department sought submissions on whether income from YouTube is taxable.

‘‘Suffice to say anyone undertaking business activity in New Zealand is required to meet their tax obligations, regardless of the scale of the enterprise,’’ he said.

‘‘New Zealanders can be confident that Inland Revenue takes every action against those who deliberately cheat the tax system,’’ he said.