Content Creator’s Tax Risk Warning

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Whether you agree with it or not, the platform OnlyFans is increasing in popularity with the subscription service seeing over 190 million registered users and over 2.1 million content creators (recorded in May, 2023). OnlyFans, YouTube, TikTok and Instagram offer an opportunity for ‘content creators’ to profit from the audiences they generate. With the industry booming, the Tax Office has issued a warning to content creators to fulfil their tax requirements. Continue reading to find out more information. 

Content creators, plans for growth

In October 2022, Ami Gan, the CEO of OnlyFans, proudly announced a remarkable milestone for the platform. Since its launch in 2016, OnlyFans has paid out an impressive $10 billion to content creators. While primarily known for its adult content, the CEO envisions expanding the platform’s horizons, inviting creators from diverse fields such as chefs and personal trainers to utilise its subscription and reward model to generate income.

While there are inspiring success stories of content creators earning substantial incomes on OnlyFans, like Lucy Banks from Perth, who shared that she earned $60,000 in a single month, it’s important to note that most accounts take home less than $145 a month. Additionally, creators may receive various forms of “gifts” from their subscribers, further enhancing their earnings.

However, it’s worth highlighting that OnlyFans is not the sole platform generating revenue for Australians. There are numerous success stories across various platforms. For instance, Google’s AdSense calculator estimates that channels with 50,000 monthly views can generate an estimated income of $9,390 or higher depending on the industry. These examples underscore the fact that content creators can reap diverse benefits across a wide range of platforms.

Given the growing prominence of content creation as a source of income, it is crucial for everyone to have a clear understanding of their obligations. The Tax Office aims to provide clarity and transparency to content creators, ensuring they are well-informed about the expectations and requirements surrounding their earnings.

How content creators are taxed

Content creators encompass a wide range of individuals, including those who share make-up tutorials on YouTube, gamers who stream their gameplay on Twitch, and models who sell content on platforms like OnlyFans. When these individuals start earning money from their online endeavours, it becomes necessary for them to declare their income. Whether you are already in business or planning to establish one, understanding the income that requires reporting, the deductions you can make, and the registrations you might need becomes essential. It’s important to note that the ATO’s guide also makes it clear that accessible income covers not only money but also cryptocurrency and gifts, and individuals are expected to declare the market value of the gift as income and pay tax on the gift

The Australian Taxation Office’s (ATO) general statement that all gifts and products should be reported as assessable income fails to acknowledge the complexities that can arise in practice. In certain scenarios, such as creating content as a hobby rather than a profit-driven venture and receiving unsolicited gifts from companies, the situation becomes less straightforward and requires careful evaluation.

Moreover, the timing of income receipt holds significance for content creators. According to tax rules, income is considered earned “as soon as it is applied or dealt with in any way on your behalf or as you direct.” For instance, if you are an OnlyFans content creator, the income is deemed earned when it is credited to your OnlyFans account, not when you transfer the funds to your personal or business account. Therefore, attempting to keep the income hidden from the ATO by keeping it in your platform account will not exempt you from tax obligations. It’s worth noting that starting from July 1, 2023, a new reporting system will require electronic distribution platforms to report their transactions to the ATO. Initially implemented for ride-sharing and short-term accommodation platforms, this reporting regime will eventually encompass all other platforms, including OnlyFans, from July 1, 2024.

Registering for GST as a content creator

Typically, if your annual earnings reach or are expected to reach $75,000 or more, it is required to register for Goods and Services Tax (GST). However, there is an exception for Uber and other ride-sourcing drivers who must have an Australian Business Number (ABN) and be registered for GST, regardless of their earnings.

Nevertheless, it’s important to note that the obligation to register for GST as a content creator does not necessarily mean that all the money and goods received will result in a GST liability. The GST rules include special provisions that sometimes allow supplies made to foreign resident customers to be exempt from GST, although these supplies still need to be considered when determining the need for GST registration.

Furthermore, even if income received from foreign resident customers is GST-free, it is usually possible to claim GST credits for the expenses incurred in relation to these activities. This means that content creators can still recover the GST paid on their business expenses, even if their income from foreign customers is exempt from GST.

Deductions you can claim as a content creator

One advantage of operating as a profit-making venture is the ability to claim deductions for expenses that are directly associated with generating income. Certain items, such as video production equipment, microphones, and online stores, may be eligible for deductions. However, in some cases, these deductions may need to be spread over multiple income years.

It’s important to note that there are limitations on what can be claimed as deductions. Expenses like cosmetic surgery, gym memberships, everyday clothing, or hairdresser costs primarily for personal appearance cannot typically be claimed. The Tax Office considers these expenses to be unrelated to the income-earning activities and more aligned with private expenses. To understand the specific deductions available, it is advisable to refer to the Australian Taxation Office’s occupation-specific guides.

When does a hobby become a business?

Many begin content creation as a hobby with no intentions to grow the side hustle into a business. However, if you’re making income (or gifts) from your activities then you will need to be registered for an ABN and be paying tax on the income that you earn

The distinction between a hobby and a business can sometimes be confusing however some factors to consider is the regularity of your transactions, whether or not you are promoting yourself as a business, if you engage in marketing activities, whether you intend to develop a business and make a profit, the size of your operation, the scale and permanency of your activities, and whether you operate in a business-like manner. It’s important to be honest about your operations as you will find the risk isn’t worth the reward if you choose to twist the truth

If your activities are classified as a hobby, the income generated is not considered assessable, and consequently, the expenses incurred are not deductible. However, if you are actively conducting a business, you are required to declare the income earned. The advantage is that you are eligible to claim deductions for the costs associated with your business activities. It is important to analyse these expenses to determine whether they can be deducted upfront or spread over a period of time.

Have a question? Ask our team!

To ensure compliance and gain a comprehensive understanding of your tax obligations as a content creator, it is highly recommended to seek professional assistance. Our team at Breathe Accounting can provide specialised guidance and support tailored to your specific circumstances, helping you navigate the intricacies of taxation, deductions, registrations, and reporting requirements. For any quick questions we also recommend checking out the Community page on the ATO site, where you will find many FAQs on content creation and tax requirements.

By working with experienced professionals, you can focus on your content creation while having peace of mind knowing that your tax obligations are properly addressed. Book your consultation today!

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