As an influencer, you’re in a unique position to receive income from a variety of sources. In order to maximise your earnings and understand the tax implications of your work, it’s important to be aware of the different types of influencer accounting situations that may arise.
In recent years, there’s been a rapid growth of influencers and content creators, becoming one of the fastest growing customer acquisition methods for brands. A job that until recently was uncommon, nowadays there are millions of influencers and content creators, whether it be their full-time job or a side hustle.
But when you consider the deliverables of an influencer or content creator, their job is not that different when compared to say, an artist. You’re being paid for your content and service, meaning you're running a business, making you a professional service, earning taxable income.
Does Your Contract Protect You As An Influencer?
The number 1 rule with contracts is to read the fine details that you would usually skim over. The last thing we want for you is that the contract doesn’t reflect the arrangement, which could come back to bite you.
For example, if you were promoting Company A and a consumer purchased the product under your influence and had a negative experience, you could be held accountable. Not being protected could open you up to the possibility of litigation.
Are you covered by professional services insurance for limited liability? Speak to our General Insurance team now and we can make sure that you are protected.
Do I Declare All My Earnings Even if it's Just Free Gifts?
In most cases, you likely do not have to declare earnings when you have received a free gift; however, there are a few things to consider in the long term.
For instance, if Company A reaches out to you or simply sends you their products with no deliverables discussed, you’re probably in the clear, and you can enjoy the freebies! But, if deliverables and pricing are discussed at any point between the company and the influencer, then the earnings should be declared. The influencer needs to ensure that all documents are accounted for and clear. This includes invoices, contracts, or briefs that include deliverables, rates, and costs.
This is because once deliverables are discussed, there is a liability for you to deliver services, becoming a business. This is then called assessable income and becomes a part of your earnings in your tax return. So make sure you’re declaring those earnings so you don’t get in trouble with the ATO.
How Do I Declare Free Gifts?
You should declare the value of the gifts at market value. For example, if you receive a pair of $60 sneakers that you are required to create content for or promote as deliverables with no extra rates on top of that, you should declare the market value of the item.
Will the ATO Even Know if I Get Free Gifts?
The ATO may not be aware of these sorts of earnings if you don't keep records, but that doesn't mean they won't eventually catch up with you. With the growing number of influencers and content creators, the ATO are being more thorough with their checks. And, as we saw in the October Federal Budget announcements , the ATO is increasing compliance and collections activity, largely due to the large budget deficit.
Supported through a lot of data matching, there is likely a task force specifically looking for these things in individual’s statements, so they could come across it. Not to mention, an influencer who is earning good money from their trade will be all over social media, so if they’re lying to the ATO about what they’ve been gifted or earning, and things end up getting serious, there’s going to be plenty of evidence. As always, it's best to seek professional advice when unsure about how to declare something on your taxes.
Do I Declare All My Cash Earnings if it's Under $20,000?
The right answer is yes. However, this is where specific details come into play with what exactly is being declared, so it becomes specific to each individual.
As part of data matching, the ATO may reach out to you if there are traceable earnings that haven’t been declared on your end. For example, Company A paid you $20,000 for marketing which you didn’t declare in your tax return. The ATO may find out about this through data matching tools and approach you to amend your tax return.
This is why we recommend seeking professional assistance so you avoid the possibility of being liable.
Claiming Business Tax Deductions
Conventional Clothing Tax Deductions
Wondering if you can claim Conventional Clothing? That’s a no from the ATO. More specifically, you can’t claim deductions on clothing if you:
- Operate a business as a lifestyle influencer
- Earn assessable income from various activities, including interviews, fashion magazines and social events.
- Are expected to dress in a manner that is consistent with the business brand and your public image
- Incur expenses in having conventional clothing made to order and worn during interviews, for print media and at various events.
The circumstances where expenditure for clothing is considered to be deductible is when the clothing is consistent with being considered occupation specific, a compulsory uniform/wardrobe, a non-compulsory uniform/wardrobe or protective (clothing and footwear).
Equipment and Apparel Tax Deductions
Are you entitled to a deduction for exercise equipment incurred in carrying on your business to the extent it is not capital in nature or used for private or domestic purposes? Yes.
Where the cost of the exercise equipment is greater than $300, are you eligible to claim the decline in value of the depreciating asset as a deduction pursuant? Yes.
Are you entitled to a deduction for your own branded apparel? Yes.
Relevant circumstances where this applies:
- You are a fitness advisor.
- You use your social media accounts to promote your business to your followers.
- You derive income from selling products through your website which is linked to your social media.
- You also promote and endorse other businesses products under a social media influencer agreement or affiliate service on your social media in exchange for payment or goods and services.
- You purchased home exercise equipment which you use in the creation of fitness content which you produce, film and act as a presenter or instructor in.
- When you appear in social media content you wear your own branded fitness apparel which has your logo on it for the purpose of promoting your business. You also sell this apparel on your website.
Accounting Recommendations and Key Considerations for Influencers and Content Creators
GST Registration
If your earnings cross the $75,000 mark per financial year, you need to register for GST and submit regular Business Activity Statements (BAS).
ATO Audit Risk
Influencers and content creators who claim personal expenses inappropriately are at risk of being audited or even receiving financial penalties from the ATO.
Record Keeping
This is the No.1 recommendation from influencer accountants and legal advisors. Records to keep include invoices, receipts, contracts and bank statements so you have the documentation if asked for verification. But if you don't have the records to prove the case they are reasoning, they have more power than you and that is when you could become liable for something you didn’t foresee.
Hourly Basis vs Project Basis
This is important to consider as both an employee or contractor. If you’re hired or engaged on an hourly basis you are considered an employee, in this case the business is liable for you and you are working under the company name. In comparison, when you’re engaging on a project basis you are considered a contractor, and could become liable for yourself rather than the business being liable. This is when reading the fine print of contracts becomes important and if protection is not provided, then you should seek it.
Seeking Professional Advice
This is important at all levels of your influencer or content creator career. Advisors ensure you keep on track, keep your records in order, are protected in unforeseen situations, have the right intentions in mind and guide you through your business journey with support.
Influencers, Accountants and Lawyers are Your Friends. Let’s Talk!
While rapid growth in this industry is great news, it's crucial that you protect yourself with professional services insurance, ensure your contract covers you in liable instances and find an influencer accountant that understands you. While also having contracts clearly state what you will and won't do for certain brands. So, whilst the ATO are yet to give a rock-solid answer on whether influencers and content creators need to declare free gifts received, it’s important to keep detailed records of what was given to you and when. Seeking professional advice from an influencer accountant or lawyer can save you a lot of headache down the road.
Get in touch with one of our business advisors to talk through your influencer or content creator obligations.
