Content Creators: The ATO's Tax Warning

With the rise of the content creator era, platforms such as TikTok, YouTube & OnlyFans have offered an opportunity for creators to profit from the audience they generate, but the tax office has put the booming industry on notice.

Back in October 2022, OnlyFans CEO Ami Gan announced a milestone for the platform, it had paid out $10 billion to its content creators since its launch in 2016. Despite being known for its adult content, OnlyFans has expanded its offerings to other creators such as chefs, athletes and musicians  to use the platform to generate an income. While there are plenty of stories of creators generating a large income from the platform, the average creator reportedly earns around $220 -$270 per month.

But OnlyFans is not the only platform generating revenue for Australians, Google AdSense calculator estimates that for finance channels with 50k monthly views, creators could be generating around $15k of income. Case in point, while creators are generating income on a varying scale the ATO wants to ensure everyone is clear on their expectations.

An update released by the ATO in April outlines the  expectations for how content creators will be assessed for tax purposes.

Income tax on money, gifts and goods

If you generate income as a content creator, then it’s more than likely it will be assessed for tax purposes unless the activity is a genuine hobby with no intention of generating a profit. However, for subscriber-based sites such as OnlyFans, it is usually clear that the intention is to generate a profit.

The ATO’s guide also states that assessable income covers not only money but appearance fees, goods you receive, cryptocurrency, or gifts from fans. Herein lies the problem for most content creators as some of these perks can be difficult to track. For example, if a company gifts you a handbag with the retail value of $800, the ATO expects that you declare the market value of that bag as a part of your taxable income. If you were to receive more substantial incentives such as a destination holiday, this could create problems when you have to pay actual money for a supposedly ‘free’ product.

The ATO’s expectation that all ‘gifts’ should be reported as assessable income fails to recognise that it's not always quite as simple in practice. If you create content as a hobby and a company sends you an unexpected gift, the situation is much less clear.

The timing of when you receive income is also important, as the tax office considers 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”(1). For instance, if you’re an OnlyFans content creator, your income is considered earned when your OnlyFans account is credited, not when you have paid the funds to your personal or business account, so holding your income in your platform account won’t protect you from paying tax on it.

From 1 July 2023, a new reporting system will be implemented for electronic distribution platforms like YouTube & OnlyFans to report their transactions to the ATO. The requirement will begin with ride-share and short-term accommodation platforms and eventually extend to all other platforms by 1 July 2024.

Do I need to register for GST?

If you earn or expect to earn $75,000 or more per year, you will need to register for GST. The exception being ride-sourcing drivers who must have an ABN and be registered for GST regardless of their income.

However, just because a content creator is registered for GST, doesn’t necessarily mean a GST liability will be triggered for all money and goods received. Special provisions exist that sometimes allow supplies made to foreign resident customers to be GST-free, although they will still need to be considered when determining if GST registration is required. Even if GST-free income is received from foreign resident customers, its usually still possible to claim GST credits for expenses related to these activities.

What deductions can I claim?

The benefits of having a profit-making venture such as a content creator, you can claim a deduction for certain expenses that are directly related to that income. This might include equipment for video production, microphones, and online store etc. however, these deductions may have to be spread over several income years.

Expenses like cosmetic surgery, gym memberships, everyday clothes, or hairdressers' costs can’t be claimed because they are not directly related to income generation and are often considered private expenses. You can check the ATO's occupation specific guides to see what expenses can be claimed.

When is a side hustle a business?

Determining whether your activities constitute a business, or a hobby can be difficult and there is no single criteria to distinguish between the two. Factors such as the frequency of transactions, whether you present yourself as a business entity (developing a brand name etc.), engage in marketing efforts, if you intend to make a profit, the size and permanence of your activities, and whether you conduct yourself in a business-like manner are all taken into consideration.

If your activities are deemed to be a hobby, any income you receive is considered a side income and is not necessarily subject to the same tax rules as a business. On the other hand, if you are running a business, you are required to declare your income for tax purposes which means you are entitled to claim deductions for expenses related to your business activities. However, the eligibility of these deductions may be subject to analysis to determine whether they can be claimed immediately or need to be claimed over a period of time.