The explosion of TikTokers and YouTubers has opened doors for content creators to profit from the audiences they attract. But now the Tax Office has given notice to the booming industry.
How content creators are taxed
The Australian Taxation Office (ATO) has recently provided an update in April that outlines the regulator’s expectations for how content creators should be taxed.
Income tax on money, gifts and goods
Unless content creation is a genuine hobby without any expectation of generating profit, income from content creation will be assessed for tax purposes. This means that gifts, cryptocurrency, appearance fees, and goods received from fans or companies are all subject to assessment for tax purposes.
However, the ATO’s blanket statement that all gifts and products should be reported as assessable income fails to recognise that this is not always simple in practice. If you create content as a hobby and a company sends you an unsolicited gift, the position is less clear. The timing of when you receive income is also important for content creators, and the tax rules assume that you have earned the income as soon as it is applied or dealt with in any way on your behalf.
Do I need to register for GST?
From 1 July 2023, a new reporting regime will require electronic distribution platforms to report their transactions to the ATO. If a content creator earns or expects to earn $75,000 or more per annum, they will generally need to register for GST, but this doesn’t necessarily mean that all the money and goods they receive will trigger a GST liability.
What deductions can I claim?
If content creators spend money to generate income, they can claim a deduction for certain expenses that directly relate to that income, such as video production equipment, microphones, and online stores. However, they cannot claim deductions for items such as cosmetic surgery, gym memberships, or everyday clothes, as the Tax Office does not consider these to be directly related to how they earn their income.
The ATO makes a distinction between something that is done on the side and carrying on a business, and the line between them can be fine.
If you have any questions on any of the above, please don’t hesitate to reach out to our team at Paris Financial.