How content creators are taxed

A Tax Guide for Streamers, Bloggers and Social Media Influencers

With the explosion of influencers across social media platforms like Instagram, Facebook, YouTube and TikTok — all offer an opportunity for ‘content creators’ to profit from the audiences they generate. But now the Tax Office has given notice to the booming industry.

A new update released by the Australian Taxation Office (ATO) outlines the regulator’s expectations for how content creators will be assessed for tax purposes.

Income Tax on Money, Gifts and Goods

If you make an income as a content creator, then it’s likely it will be assessed for tax purposes unless what you are doing is a genuine hobby with no expectation of generating a profit.

The ATO’s guide also makes it clear that assessable income covers not only money but appearance fees, goods you receive, cryptocurrency, or gifts from fans. Income in the form of money is easy to track and report. Non-monetary income in the form of goods is not so easy. Let’s say a company sends you a handbag with a retail value of $800. The bag is yours to keep. The Tax Office expects you to declare the market value of the bag as income and pay tax on that income.

If you receive multiple items throughout the year, or larger inducements like a destination holiday, then this might create a cashflow problem when you need to pay real money to the Tax Office for a ‘free’ product.

The timing of when you receive income is also important for content creators. The tax rules consider that you have earned the income “as soon as it is applied or dealt with in any way on your behalf or as you direct”. And, from 1 July 2023, a new reporting regime will require electronic distribution platforms to report their transactions to the ATO.

Do I Need to Register for GST?

Generally, once you earn or expect to earn $75,000 or more per annum, you will need to register for GST. The exception to the $75,000 threshold is Uber and other ride-sourcing drivers who must have an ABN and be registered for GST regardless of how much they earn.

However, even if a content creator is required to register for GST, this doesn’t necessarily mean that all of the money and goods they receive will trigger a GST liability. The GST rules contain some special provisions which sometimes enable supplies made to foreign resident customers to be GST-free.

What Deductions Can I Claim?

The upside of being a profit-making venture is that if you spend money to generate income, you can claim a deduction for certain expenses that directly relate to that income. Items such as video production equipment, microphones, and online stores might be deductible, although in some cases the deductions will be spread over a number of income years.

However, you can’t normally claim items such as cosmetic surgery, gym memberships, ‘every day’ clothes, or the cost of your hairdresser ‘because you need to look good’. The Tax Office does not consider that these are directly related to how you earn your income and that in many cases, these are still primarily private expenses.

When is a Side Hustle a Business?

The distinction between something you do on the side and carrying on a business can be a fine line. There is no one test for what determines whether you are carrying on a business versus a hobby, but factors such as the regularity of your transactions, whether you are promoting yourself as a business, marketing activities, your intent to develop a business and make a profit, the size and scale of your activities, and whether you operate in a business-like manner all go toward determining whether what you are doing is a business or merely a hobby.

If your activities are just a hobby then the income is not assessable, and the expenses are not deductible. If you are carrying on a business, then you need to declare the income earned but you also get to claim deductions for the cost of the business activities.