The Australian tax Office (ATO) is this year taking a hard look at side hustles and income earned by social media influencers.
Many are now working multiple jobs or supplementing income with side hustles or trying to build a social media presence and turn that into a career.
This is what the ATO is interested in for tax returns for this financial year.
“While there are always new and different ways to make money, the tax obligations remain the same. Don’t fall into the trap of forgetting to include all your income thinking the ATO won’t notice,” says ATO assistant commissioner Tim Loh.
‘With tax time just around the corner, if you are bolstering your income with new activities, make sure all your records are up-to-scratch.
“This could be anything from animal breeding to earning income through digital platforms, such as ride share or food delivery, or even online content creation, like social media influencers.”
The ATO is running an advertising campaign to remind taxpayers about their obligations if their side hustle is generating income.
“If you’re an online content creator earning money or receiving gifts, you’re also likely to be running a business and there are tax obligations you need to comply with,” says Loh.
“Sometimes it’s hard to tell if you’re ‘in business’ and we recognise not everything you do to make money is considered a business.
“The ATO won’t consider activities as ‘in business’ when they are a one-off transaction (unless it is the first step in carrying on a business or intended to be repeated) or an activity from which you don't seek to make a profit.”
Kate Musgrove, managing director, APAC at Bazaarvoice, experts in user generated content, welcomed the ATO’s crackdown on influencer gifts as a form of income.
“Brands need to be aware of the financial ramifications that come with improperly working with influencers,” she says.
“However, what I think is just as, if not more important, is understanding the long-term reputational damage that comes with being inauthentic.
“Bazaarvoice research has shown that 86% of people would avoid using a brand again once losing trust in it. A tip for marketers and brands is to be transparent about partnerships, making sure that paid social posts are clearly labeled as such. This doesn’t just help with consumer trust; it also helps to avoid any unnecessary fines or penalties.”
Stacia Grooby, strategy director at Five by Five Global, said historically, the company has spent huge amounts of unbillable time trying to educate influencers on the issues around ABN, tax and super.
“When we did the analysis we saw what a margin killer it was,” said Grooby.
“The problem is way more acute in the video games industry where we’re often contracting very young adults with relatively large fee payments on behalf of our clients.
“Ultimately, we decided to take a leadership position and partner with Hnry - a digital accounting service for contractors, freelancers and sole traders that automatically handles all their tax payments and lodgments as they earn.
“We’re mandating all our freelance and contract talent to use Hnry and we’re building a neat integration to streamline the process.”
The ATO has sophisticated data-matching and analytical tools to identify taxpayers that under-report income.
The Sharing Economy Reporting Regime starts from July with the ATO getting data from more electronic distribution platforms.
The ATO will match this information with the information taxpayers provide on their tax return or activity statement to identify income that has not been included.
“It doesn’t matter whether you are carrying on a business or simply earning additional income through a digital platform, such as a website or even an app, you must keep accurate records of your income and include it in your tax return,” says Loh.
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