The rise of ‘content creators’ like OnlyFans, YouTubers, TikTokers, and others presents opportunities for them to make money from the audiences they attract. But now the growing sector has received notice from the Tax Office.
Since its start in 2016, OnlyFans has paid out $10 billion to content creators, according to CEO Ami Gan, who made the announcement in October 2022. Although the network is well-known for its adult content, the CEO of OnlyFans wants to expand its reach and give other content producers, such as chefs and personal trainers, a way to use its membership and incentive model to make money. While there are numerous accounts of video creators making significant sums of money on the platform, such as Perth-based Lucy Banks, who told Channel 7 that she made $60,000 in one month, the average monthly income is apparently between US$150 and US$180. Additionally, creators may get ‘gifts’ in a variety of ways from their followers.
There are numerous additional platforms that Australians are using to make money besides OnlyFans. The anticipated monthly income for financial channels with 50,000 views is $15,012 (According to Google’s AdSense calculator). The Tax Office wants to make sure that everyone is completely clear about their expectations because there are several content creators that turn a profit in a number of different forms.
How content creators are to be taxed
The Australian Taxation Office (ATO), has updated its expectations for how content creators will be evaluated for tax purposes.
Income taxes on cash, gifts, and goods
Unless your work as a content creator is truly a pastime with no prospect of making money, it’s likely that any revenue you earn will be taxed. In most cases, the expectation of turning a profit is clear for subscriber-based websites like OnlyFans.
Additionally, the ATO’s advice makes it clear that assessable income includes appearance fees, merchandise you receive, cryptocurrency, and presents from fans in addition to cash. And for the majority of content producers, this is where the issue is. Money-based income is simple to measure and report. Goods-based non-monetary income is more difficult to measure. Let’s imagine a business delivers you a handbag with an $800 suggested retail price. You are free to keep the bag. The Tax Office anticipates that you will report and pay tax on the market value of the bag as income. When you have to pay actual money to the Tax Office for a “free” item, it may cause a cash flow problem (if you receive many goods throughout the year) or larger inducements like a destination vacation.
The ATO fails to acknowledge that it is not often that easy in practise and that all “gifts” and “products” should be declared as assessable income. The situation is a little less apparent if you produce content as a pastime rather than a business, for instance, and a company sends you an unexpected present. It actually depends on the circumstances.
For content creators, the time of when you receive payment is also crucial. The income is deemed to have been generated “as soon as it is applied or dealt with in any manner on your behalf or as you direct,” according to the tax laws. This is when your OnlyFans account gets credited, not when you instruct the money to be sent to your personal or business account, for example, if you are an OnlyFans content producer. Therefore, hiding money from the ATO in your platform account won’t spare you from having to pay tax on it. Additionally, a new reporting system that takes effect on July 1, 2023, will mandate that electronic distribution platforms report their transactions to the ATO. Starting with platforms for ridesharing and short-term lodging, the regime then expands to include all other platforms, including OnlyFans, as of July 1, 2024.
Do I need to register for GST?
In general, you must register for GST once you earn or anticipate earning $75,000 or more annually. Uber and other ride-sourcing drivers are an exemption to the $75,000 barrier; regardless of their earnings, they are required to have an ABN and register for GST.
Even though a content provider must register for GST, not all of the funds and commodities they receive will necessarily result in a GST liability. For instance, the GST regulations include some unique clauses that occasionally permit supplies made to consumers who are foreign residents to be GST-free (although they often still need to be taken into consideration when evaluating whether the supplier needs to register for GST).
It will typically still be feasible to claim back GST credits for the expenses made in connection with these operations, even if GST-free money is received from foreign resident clients.
What can I claim as deductions?
The benefit of operating a profitable business is that you can deduct certain expenses that are directly related to the income you make. Items like microphones, video production equipment and so forth may be tax deductible, albeit the deductions may not always be made all at once. However, you typically cannot deduct expenses for cosmetic procedures, gym memberships, “everyday” clothing, or visits to the hairdresser simply because you “need to look good.” The Tax Office believes that they are often still essentially private expenses and that they are not necessarily connected to how you make your living (for more information on what you can deduct, see the ATO’s occupation specific guides).
When does a side hustle become a business?
It might be difficult to tell the difference between something you do on the side and running a business. The regularity of your transactions, whether or not you are marketing yourself as a business (building a brand name, etc.), whether or not you engage in marketing activities, whether you intend to develop a business and make a profit (or have the capacity to generate a profit over time), the size, scale, and permanence of your activities, and whether you operate in a brisk or slow manner are some factors that can help you determine whether you are carrying on a business or a hobby.
If your activities are purely recreational, neither the revenue nor the expenses are deductible. If you run a business, you must report the revenue earned but may also deduct the costs of doing business (although this still needs to be examined to determine whether deductions can be made immediately or over time).
Are you a content creator based on the Gold Coast or Logan that needs to sort out your business and tax obligations? Chat with an accountant based locally in Ormeau. Get in touch with MB Accounting and Business Services, your local Ormeau Accountant. We can help you set up your business effectively, efficiently and and we’ll help you with your tax today.