Considering the modernity of digital content creation as an income-producing activity, it’s not unusual to encounter uncertainty among content creators regarding their tax obligations. In addition to its unprecedented nature, confusion arises due to the fact content creation is a rather unique source of income, as portrayed by the many ways a creator can generate profits.
In addition to the standard, monetary method of producing income (etc. payments from social media platforms, advertisements, and appearances), creators are also required to report non-monetary income received during the financial year, including but not limited to gifts of assets and/or experiences such as…
- Cosmetics, accessories, gaming consoles
- Vacations i.e., flights, accommodation
- Admission fees to events
- Cryptocurrency and shares
As income tax returns are numerical in nature, the Australian Taxation Office (ATO) expects content creators to appraise all non-monetary gifts at their market value when preparing their returns. For instance, products received free of charge by a content creator, are expected to be reported as income in the creator’s tax return at their retail price. Alternatively, products may be offered to content creators at a discounted rate, in which case the creator will only be obligated to pay tax on the benefit received from the discount.
Therefore, it’s prudent for content creators to exercise caution when accepting gifts of high market value, as the resulting tax liability may be harsh and without adequate cashflow to cover the liability creators may find themselves in a difficult situation…
Another important tax obligation for content creators to consider is goods and services tax (GST). GST is an additional tax of 10% charged on certain goods and services consumed or sold in Australia. Taxpayers in business are obligated to pay and report GST if their annual GST turnover exceeds $75,000. The annual GST turnover is calculated by totalling a taxpayer’s income (monetary and non-monetary) over a 12-month period and subtracting any corresponding GST on applicable income. It should be noted that non-monetary income is subject to GST and should be calculated based on the accepted market value. For example, if a gifted product’s retail value was $320, the creator should report GST on sales of $29.09 to the ATO.
Due to the global nature of the internet, content creators often source income from foreign advocates and supporters. Therefore, as the creator’s goods and services are not ‘consumed’ in Australia, its unlikely the income will be subject to GST. If a content creator cannot distinguish between foreign or Australian income, the income is taken to be taxable and subject to GST as per the ATO’s ruling.
Although foreign income is exempt from GST, it’ll still contribute to the $75,000 threshold when calculating the annual GST turnover. Content creators exceeding the $75,000 annual GST turnover threshold should register for GST immediately, and depending on their expected turnover, will be required to report their GST liabilities to the ATO either annually, quarterly, or monthly through Business Activity Statements (BAS).
We urge any content creators who are unsure of their tax obligations to please contact our office to gain assistance and peace of mind from any one of our friendly tax accountants!
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Author: Amy Murphy
Email: amy@faj.com.au
