Income tax declaration for gig workers

SHAH ALAM - Taxation is crucial, even for gig workers, to declare their income and file taxes just like any other full-time employee.

Based on the Association of Chartered Certified Accountants (ACCA), a gig worker is defined as 'a person who does temporary or freelance work, especially an independent contractor engaged on an informal or on-demand basis'.

While the concept is not new to Malaysians, the catchy name and influx of informal work arrangements during and after the pandemic have put it firmly on the map.

Partner at TraTax and ACCA Expertlink panel member for Taxation, Thenesh Kanna points out three important facts that every gig worker should know.

First, you can easily get your Tax Identification Number online at https://mytax.hasil.gov.my/ within just a few minutes.

"Next, all income, whether full-time or otherwise, that is taxable must be declared.

"However, if you have any other source of income, such as rentals from any property you own, as well as gig income earned from occasional or recurring jobs, these must be declared too.

"This includes side income from food delivery gigs, emceeing at events, driving an e-hailing vehicle, operating a home-based bakery, and other forms of work that are often seen as informal," he said in a statement.

Thirdly, Thenesh said not everyone will actually need to pay taxes, adding that people have the responsibility to declare their income, depending on their earnings.

"This is because those earning less than RM3,400 per month on average will not have to pay any income tax, although they are still required to file a tax return to satisfy the compliance requirement," he added.

Commenting further, he also listed tips for gig workers who need to file taxes for the first time.

"First, ascertain your income. Know how much of your income is actually taxable. Having a spreadsheet or other software that clearly identifies how much you are making and how much income to declare will help.

"Second, be diligent in keeping records of your expenses. Record-keeping of business expenses (versus private or domestic expenses) is very important. Don’t forget to keep track of all your spending as part of your gig work.

"Third, capital allowances, where you understand and utilise them. Something that is purchased for the purpose of providing your service, be it a new oven for a home-baking business or a motorcycle for the purpose of making deliveries, may be applicable for tax depreciation or capital allowance claims (which means you end up paying less taxes, if you are required to pay any at all)," he said.

Thenesh also reminded everyone not to forget personal tax relief deductions, adding that compiling the necessary receipts for this will help reduce your tax load as well.

For a better approach, he recommends professional help from a tax agent licensed by the Finance Ministry who can assist the process accordingly.

However, there are consequences to failing to declare the taxes, he added.

"There are consequences to failing to declare your taxes, which range from hefty fines if you are audited as you will be required to pay all your backdated taxes in addition to a penalty, and poor tax records can lead to difficulties in future financial situations such as applying for bank loans," he explained.