You’ve probably heard the buzz: in the 21st, we’re transitioning to a gig economy. There are advantages and disadvantage to this new economy; on the one hand, work-life balance is much easier to achieve when you’re working as a freelancer. On the other hand, being your own boss requires a good amount of discipline, and your work probably isn’t providing health benefits. The gig economy contains within it a wide variety of different jobs, but all of them share one essential facet: you’re self-employed. That has a lot of tax implications, which we’ll go over briefly here.
The Canada Pension Plan requires contributions from Canadian citizens; for traditional employment, half of these contributions come from the employee, while half are covered by the employer. When you work in the gig economy, you’ll need to pay that whole portion yourself. The amount you’ll have to contribute is going to change a bit over the next few years, so rather than give you a static number here, we’ll provide the CPP for self-employed page.
When you go to the store to buy something, or you purchase a service, you’re almost always charged GST/HST. In a similar vein, if you’re providing goods and services, you’ll have to charge GST/HST if you earn over a certain amount. The rule of thumb is that if you’re earning more than $30000 a year in the gig economy, you need to register for a GST/HST account.
We mention that the $30000 minimum is a rule of thumb, because as with all good tax obligations, there are exceptions to the rule. One of the most common gig economy jobs is ride-sharing. The federal tax code has changed to include ride-sharing under the definition of “taxi business”, which means that you’ll need to register for a GST/HST account if you drive for a ride sharing company as a contractor, regardless of your annual earnings.
Another great gig in this economy is accomodation sharing – AirBnB and the like. This is treated by the CRA as rental income; you still need a GST account if you make over $30000. There are a variety of rental expenses that can be deducted, so you should make sure to take advantage of them if you’re sharing accomodations.
We’d like to be a bit more comprehensive about all of this – what we’ve provided thus far is basically the bare minimum knowledge you need for working in the gig economy. There are a plethora of expenses that can be deducted when you operate your own business; your best bet for help with tax preparation is to hire Compass CPA who can tell you what kind of things can be claimed on your taxes. For those who don’t have an accountant yet, it’s a good idea to keep all of your records; anything you spend and anything you during your work.