The Rise of Content Creation
Content creators across various niches have become more successful in generating substantial incomes. OnlyFans, for example, has paid out an astounding $10 billion to creators since its launch in 2016. Similarly, platforms like YouTube and TikTok have allowed content creators to reap the benefits of their hard work and audience engagement.
ATO guidelines for content creators' tax obligations.
The ATO released guidelines in April outlining its expectations for how content creators should be assessed for tax purposes. Generally, if you earn income as a content creator, it is likely subject to taxation unless your activities qualify as a genuine hobby without profit-making expectations. Subscriber-based platforms like OnlyFans typically leave no doubt about the intent to generate profit.
Registering for GST as a content creator
Content creators must be mindful of when they recognise income for tax purposes. Income is considered earned "as soon as it is applied or dealt with in any way on your behalf or as you direct." Therefore, keeping funds in your platform account to avoid tax obligations is not a viable strategy. Starting from July 1, 2023, a new reporting regime will require electronic distribution platforms, including OnlyFans, to report their transactions to the ATO, ensuring greater transparency.
If your annual or expected earnings as a content creator exceed $75,000, you must register for Goods and Services Tax (GST). However, there are exceptions. Nevertheless, registering for GST does not necessarily mean all money and goods received will trigger a GST liability. The GST rules include special provisions that may make supplies to foreign resident customers GST-free. Content creators can still claim GST credits for expenses incurred with those activities, providing some relief regarding overall tax liability.
Claiming deductions and expenses
Content creators can claim deductions for expenses directly related to generating income. Equipment used for video production, such as cameras, microphones, editing software, and costs related to maintaining online stores or websites may be deductible. However, personal expenses, such as cosmetic surgery, gym memberships, everyday clothing, or hairdressing costs for personal appearance, are generally not deductible. Content creators can refer to the ATO's occupation-specific guides to better understand what expenses can be claimed.
Differentiating between a side hustle and a business
Determining whether an activity is a hobby or a business can be challenging. Factors such as transaction regularity, self-promotion (using a brand name), marketing engagement, profit intent, scale, and business-like operations play a role. If the activity is classified as a hobby, you don't have to pay tax on any income generated, and expenses incurred cannot be claimed as deductions. However, if it's a business, you must declare the earned income, and some costs related to income generation may be claimed as deductions. Careful analysis is required to determine which expenses can be claimed all at once and which need to be claimed over time. It's crucial to understand the activity's nature to ensure you're filing your taxes correctly.
We can help you
At LEAD Advisory Group, we specialise in taxation, accounting, financial planning, lending, business development, and self-managed super funds (SMSF). We provide tailored assistance and customised solutions that can help content creators achieve their business and financial goals. With our up-to-date knowledge of tax regulations, we offer proactive guidance to optimise financial outcomes. Partner with us today to shape your financial future in the ever-changing digital landscape.