Tax time can feel overwhelming and stressful even for the average single Australian person. With all the jargon and trying to work out what is claimable or not, it can make anyone want to pull their hair out in frustration. So what do you do when you’re earning money streaming on a platform based overseas? Do you need to declare it to the ATO? It can turn a simple tax return into a nightmare.
So let’s start at the beginning.
Am I earning income from my streaming or creative services?
For Twitch or Mixer, monetisation is simple: you will have completed an onboarding process. Twitch requires all content creators who get paid from Amazon to fill out an online tax interview. This provides them with legal information for tax purposes in the United States of America. This does not mean that, due to being in another country, you can ignore it. It is required by all content creators regardless of their country of origin to fill out for tax purposes. Mixer has a similar process for Mixer Partners, also requiring your Tax File Number to fill out the onboarding process.
Do I need to declare income to the Australian Tax Office, even after it’s taxed overseas?
It is always in your best interests to be completely transparent when doing your tax return. In your tax return there is a section where you can declare overseas income. If you are receiving payments from Twitch or Mixer, you should be filling this out.
With one exception…
Quite simply when declaring income as a Creative or Artist, you need to work out if you are working as a hobby or as a business. If you are earning your income as a business, you need to declare to the Australian Tax Department. If you are earning income as a hobby then there may not be requirement to declare your income to the ATO.
What is the difference between a hobby and a business?
The Australian Tax Office defines a hobby as a pastime or leisure activity which you don’t make a profit from. If you do not have a set schedule for your hobby, you don’t intend to make a profit from it, or if you sell your items for the cost of materials or less, you qualify as a hobby under the ATO’s definition. If you’re still unsure which definition you fall under, you can use the ATO’s tool to help.
If you are using your stream with an “aim to make a profit” then you are considered a business.
So what qualifies as a business?
Unfortunately, it’s not as simple as a monetary amount to earn when considering if you are a business. Some questions you could ask to clarify if you are a business are:
- Is the activity being undertaken for commercial reasons?
- Is your main intention, purpose or prospect to make a profit?
- Do you regularly and repeatedly undertake your activity?
- Is your activity planned, organised and carried out in a businesslike manner?
If you answered yes to any of these, it is highly likely that you are trading as a business and you should be declaring to the ATO. Luckily, if you are still unsure, the ATO has a handy little online tool for Artists and creatives that will assist you in finding out. https://www.business.gov.au/planning/new-businesses/a-business-or-a-hobby/
If the online tool doesn’t set your mind at ease, you can talk to a certified accountant or business advisor in your area who can help you decide whether you’re running a business or a hobby, or get a private ruling from the ATO, which will provide an answer that protects you from penalties and interest.
So your stream is considered a business, what do you do next?
Here are some tips to make tax time a little easier when streaming on Twitch or Mixer:
- Apply for an ABN – If you do not have an ABN, then any businesses or services that you are working with will be required to withhold tax from any payments that they make to you. You will also get access to government information, services and concessions for business and claim tax deductions for business expenses against your taxable income
- Keep records of all your income – This includes payments from Twitch or Mixer, merchandise sales, endorsements or sponsorships, and donations (these are actually tips, as you are not a charity and therefore taxable income). Document the income as it comes in. The Australian Dollar fluctuates throughout the year and calculating your income at the end of the year could lead to a debt with the ATO. There are some great accounting software that allow you to collate all this data together for your convenience. Programs like MYOB or XERO allow you to manage income and expenses easily for your channel, although we recommend crafty base for its integration to PayPal.
- Speak to an accountant – Reasons to get yourself an accountant:
- You work from home and need to claim deductions
- You have shares/dividends, or investment properties,
- You worked a portion of this financial year overseas, or other complicated things beyond the scope of a normal claim.
- An accountant can help you work out the best way to approach your circumstances and offer advice on how to ensure all your income and expenses are recorded correctly. If ever in doubt it is recommended you speak to a professional.
- Find an Accountant – https://www.cpaaustralia.com.au/FindACpa/Locate.mvc/Index
- Get yourself a business PayPal account – Keeping your business money separate allows you to keep track of your earnings and none will get lost within your personal PayPal or accounts. An ABN is required to set up a business PayPal. Using a business PayPal is also how you can protect your full name from being given to tippers. Setting up a separate bank account for your business transactions helps as well.
- Do not rely solely on monetisation sites, such as Streamlabs or Streamelements, for any kind of reporting of your income – these sites do not take into account PayPal fees or conversion fees and as a result can be unreliable with the correct amount you need to declare. The most reliable source will always be your bank and PayPal statements. It is always best to keep your information in your own accounting software or speak to an accountant.
Tax time can feel overwhelming and stressful. With these few tips and a professional account’s insights, you will have more time to spend on the things you enjoy, like working on your channel. All circumstances are different. Please contact an accountant or the Australian Tax Office to find out more.
(We have plans to write an article covering Content Creation and Tax for New Zealand, closer to their tax season.)
The information in this article and the links provided are for general information only and should not be taken as constituting professional advice from a trained professional service provider.
WomANZ members are not financial advisers. Our members should consider seeking independent legal, financial, taxation or other advice to decide how the information relates to your unique circumstances.
WomANZ is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this article.