What You Should Know About Airbnb and Tax
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“All forms of rental income must be declared to SARS … We are … determined to make it hard and costly for non-compliant taxpayers not willing to meet their obligations. We are working hard to improve system capabilities, in order to detect those taxpayers who do not comply by using data to identify risk” (extracts from SARS media statement 11 March 2021).
The Basics
Airbnb is an online app which allows homeowners to rent out their property to travellers on an ad hoc basis with very little admin from their side. Users of the app simply search and select properties that have been listed in the area they are visiting, then pay on the Airbnb platform. The owner is responsible simply for letting them in and making sure the property is as described in terms of quality and cleanliness. In return for this service Airbnb takes a percentage of the total rental charged as commission.
It’s a simple and clean system that to date has been extremely difficult for SARS to track. The recent announcement by the revenue service that it was aware owners were not declaring this income and thus underpaying owed taxes and that they are determined to tax this income does, however, suggest that things are about to change.
“We are determined to make it hard and costly for non-compliant taxpayers not willing to meet their obligations. We are working hard to improve system capabilities, in order to detect those taxpayers who do not comply by using data to identify risk,” SARS announced.
This in itself poses a problem for SARS as while it’s easy to see just who is renting their property out on Airbnb by looking at adverts and cross-referencing them with ownership records, it is more difficult to see just how much time was spent by guests in the property. Nonetheless, the announcement does seem to indicate a determination by SARS to put a stop to tax avoidance in this area and this could spell trouble for those who have been letting out their properties, most likely in the way of audits. But just what is owed by owners, and how would they correct this situation?
Income tax returns and registering for VAT
There is no doubt income derived from letting a property out on Airbnb must be declared on your income tax return. As SARS made clear, “This is the same principle that applies to any person who has rental income from letting out their property as a homeowner, placing them under the same obligation to declare such rental income to SARS”.
According to registered CA(SA) and Group Financial Controller for SYSPRO Louise Buchanan, “A property owner who hosts fee-paying guests like in the case of Airbnb, has to declare the rental income on their income tax return as it is considered gross income.” She warns that in addition to this, any property owner earning more than R1 million within a 12 month period would also need to register as a VAT vendor and charge VAT 15% on rental income.
What about deductions?
As always, any income that comes with costs can be reduced by a portion or percentage of certain of those costs allowable for tax purposes.
According to Buchanan only expenses which arise in relation to the production of rental income can be claimed as a deduction.
“These include levies, rates and taxes, electricity and water, home-owner’s insurance, advertising, bond interest and agent’s fees,” she says, cautioning that, “If only a portion of a property is rented out, then only pro-rata expenses related to that portion are deductible”.
What about Airbnb themselves?
Airbnb has a notice on its site which states that “In areas that Airbnb has made agreements with governments to collect and remit local taxes on behalf of hosts, Airbnb calculates these taxes and collects them from guests at the time of booking. Airbnb then remits collected taxes to the applicable tax authority on the hosts’ behalf.”
This can sometimes be confusing for the home-owner who may believe that tax has been paid on their behalf already. Unfortunately, South Africa is not one of the areas in which Airbnb has made an agreement with government to collect and remit taxes on its behalf. Owners with properties in other areas are, however, able to take advantage of this fact, and a full list of these areas can be found here.
What to do if you didn’t declare Airbnb income and owe back taxes
Homeowners who have not been paying taxes on their Airbnb income are still liable for those taxes and SARS has made it abundantly clear that they aim to find and crackdown on non-compliant owners.
“Taxpayers are reminded that failure to comply with their tax obligations may result in administrative penalties being imposed in addition to interest, or even criminal action being taken against them,” the revenue service said.
Buchanan explains that in practice what this means is that administrative penalties are likely to be imposed along with interest, but has also warned that it would not be unheard of for criminal action to also be taken against a defaulter. She therefore urges all Airbnb owners who may be in default to consider declaring their Airbnb income through the SARS voluntary disclosure programme, which offers more favourable penalty amounts and a significantly reduced chance of criminal procedures being instated.
If you are an Airbnb owner who has not declared this income, it would be wise to speak to your accountant to evaluate just how much you might owe in back taxes and to try clear up the situation before you are the subject of a tax audit.
Your Tax Deadlines for June 2021
- 7 June – Monthly Pay-As-You-Earn (PAYE) submissions and payments
- 25 June – Value-Added Tax (VAT) manual submissions and payments
- 29 June – Excise Duty payments
- 30 June – Value-Added Tax (VAT) electronic submissions and payments
- 30 June – Corporate Income Tax (CIT) Provisional Tax Payments where applicable
- 30 June – End of the 1st Financial Quarter
8 Tips for Marketing Your Business on Instagram
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“You are what you share” (Charles Leadbeater, We Think: The Power of Mass Creativity)
Instagram is a popular photo and video-sharing social media platform with over one-billion active users around the globe. Users are able to share photo or video posts as well as temporary “Stories” that exist on their profile for just 24 hours. What many don’t know is that users are also able to shop directly from e-commerce brands through the app, and this is just one of the benefits for small businesses.
For the entrepreneur Instagram offers a cheap, reliable and easy way to build a following and engage with customers and has become a marvellous way to reach customers even for the newest of endeavours. To help you take advantage, here are some top tips for getting your business noticed on this platform.
- Use a business account
Signing up for Instagram is an easy process akin to signing up for any other social media site, but the business owner needs to take an additional step if they intend to use their Instagram account to market their business, by switching the personal account to a business one.You will want to do this as Instagram business accounts offer owners access to unique features which are not available on a personal account, including Instagram Insights, Instagram ads, Instagram Shopping, a call-to-action button on your profile, contact information and even a variety of messaging inboxes. These functions will allow the business owner to better engage with customers and bring their products front-and-centre to their client base.
To change to a business account, go to your profile and tap the hamburger icon at the top right –
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- Tap Settings, then Account.
- Tap Switch to professional account.
- Tap Business and follow the prompts.
- Know why you are on Instagram
Defining the reason for your existence on Instagram will immediately help you to create the kind of page that you want. Are you there to get the company noticed, to direct people to your website or shop, or sell directly to your customers from the app?In order to effectively achieve those goals you will also need to define your target market. Who are you trying to reach? Instagram’s users are primarily between the ages of 18 and 35, but this does not mean they are the only ones there. Indeed, Instagram claims that more than 500-million people use the site daily, so knowing which demographic within that huge database you are targeting will help you stand out.
- Shape your page
Now that you have defined who it is that you are looking to target and just what you hope to achieve, you can set about shaping your actual page profile to be attractive to that demographic and for that purpose. There are a variety of aspects of your page that you will be able to change to including your username, your actual name, and your website. More subtle perhaps is making the decision as to which business “Category” you fall under as this will provide followers information without using up bio space and will help you get recommendations for people who are searching in your field.The most important part, however, is the actual bio itself. Your business’ bio should directly reflect the brand promise as well as its personality. Are you informative? Funny? Motivational? Are you a local business or aiming for international sales? What makes you unique and what do you want people to do once they have seen your profile?
- Create engaging content
This is without a doubt the most critical part of a decent Instagram account, and is also the most elusive. On Instagram your brand will be judged by the effort you are putting into your images, so this isn’t a place to put up sayings with a single colour background. While you don’t need professional photography, your photos and videos do need to be at least well-lit, well-composed, and in focus. What you are looking for is not simply beautiful photos, however, but photos and images that tell the story of your brand and make your audience feel like they know you better.Take your followers behind the scenes of your brand with shots inside your offices, or of your manufacturing process. Teach your followers something that aligns with your brand or show them how to overcome a business challenge which you just accomplished. Share your mistakes. Listen to your followers and Regram (share), their content about your brand. Ask questions, and respond via video to questions they are asking. It all comes down to getting your customers to buy into your business, believe in it and then start backing it.
- Create an aesthetic
Now that you know what kind of content you want to put up it’s also important to think about the aesthetic you want for your content. You chose the colours for your logo carefully because different colours give off different impressions of the brand. Now you need to take that idea and extend it to each and every photo and video you upload on the site. Will you be highly corporate with defined lighting, or a softly lit and warm account? What colours will the curtains be, and how is the décor arranged when you do your live interviews? These things will all help make your content instantly recognisable and more shareable in the future.An easy way to achieve this kind of consistency is to use Lightroom presets. Here are a few unique filters that can get you started. Take a look at other user’s accounts to try to find the looks you like or that you think may fit with your brand and start from there.
- The Writing is also important
While Instagram is definitely a visual medium, your captions on each post are also vitally important. Your captions are a great place for expanding your brand, nudging clients to your website and making a sale. While captions can be long, and some brands take advantage to tell stories, it’s the first two lines that will be always visible and which will capture audience’s attention. Getting the right information in those first two lines is therefore critical. Importantly, the caption is also a great place to introduce your unique hashtag.Creating your own hashtag is a good way to drive instant engagement with your business, and over time it will become an easily-spread marketing tool that others will use to share their own posts with your business. Because the hashtag is unique to you, this allows you to also search for all mentions of your business online quickly and easily, and every time someone uses your hashtag they will be exposing your business to their followers.
- Use Instagram tools to find the right metrics
Business profiles on Instagram aren’t all that different from Facebook business profiles. Through Insights, you can view statistics like impressions, engagement data, and more. You can also get a breakdown of the demographics of your followers, including information on their age, gender, location, and most active hours. This information will help you make informed decisions about when you should be posting and what kinds of content your followers like the most.For starters though, according to SimplyMeasured, the worst days to post on Instagram are Wednesdays and Sundays, while Mondays and Thursdays are considered the most likely to be successful.
These tools can give you great insights into just how successful your time on Instagram is. The two most important things to look out for are “Follower growth rate” and “Engagement”. While the number of followers gives you very little idea of how good your posts have been of late, the rate at which that number of followers is growing does. Additionally, looking at how many likes and comments you are getting on your posts will show you just how interested those followers are in what you are posting.
- Engage
If you want more engagement, you are going to need to engage yourself. No Instagram account will be successful simply by uploading images every day. Search out other brands or products that are similar to yours and comment on their posts. This will not only put your brand front-and-centre for people looking for companies like yours on your competition’s page, but it will also teach algorithms that you are an expert in this field and that other users should be directed at your page for that kind of service. Working with other brands and influencers will also allow your brand to be shared beyond your normal circle and engaging with them is a great way to get noticed.