Australian Tax Office determines YouTube income as taxable
If you make money from YouTube you are a “performing artist" and now have to pay income tax on it, according to the ATO. Digital savvy entrepreneurs, bloggers and filmmakers who could be making hundreds of thousands of dollars from advertising gained from their YouTube channels will now be taxed on it following an ATO ruling.
Tax experts say the decision could have wider ramifications for all online income sources.
Among Australia’s biggest and most recent hits is Elise Strachan, who dumped her flight attendant career for YouTube fame. Her channel “My Cupcake Addiction" has about 750,000 subscribers and is among the top three baking channels on YouTube, more than replacing her former income. Another local YouTube earner is Natalie Tran who gains more than $US100,000 ($121,000) from her site “communitychannel".
YouTubers receive approximately up to $12 for every thousand YouTube views through advertising revenue. If a YouTube user elects to feature advertising in his or her video the income is split between Google and the user. It's understood Google takes approximately 40 percent.
The ATO said in its ruling that it was clear YouTube celebrities should be deemed 'special professionals', the AFR reports.
“The income the taxpayer receives from Google for their YouTube videos is a reward for providing services relating to their activities as a special professional,” the ATO’s ruling says.
“Therefore, the income can form part of the taxpayer’s assessable professional income.”
YouTube users are not the only ones in the ATO's sights, with YouTube itself, which is owned by Google, potentially facing increased tax scrutiny in Australia. The Australian government has been mulling a 'Google tax' in recent months, with treasurer Joe Hockey considering tackling profit shifting by multinational enterprises.
PwC private client tax partner Paul Brassil said it was an acknowledgement by the Tax Office in the digital age that performers sought to gain income via YouTube and other digital means.
The ruling meant that people earning money from sources such as YouTube would be eligible for income-averaging concessions if they had unusually high income in a particular year.
“Most artists work hard for modest financial rewards between occasional successes – so it’s great to see the ATO being open to applying existing concessions to new income sources," he said.
Minter Ellison special counsel Hamish Wallace agreed, saying the Tax Office’s decision was a warning to anyone earning money online to seek professional advice. “I think there’s quite a few people out there who might be carrying out activities thinking it’s just a hobby, but from the ATO’s perspective it’s carrying on a business and generating taxable income," Mr Wallace said.
Allens senior associate Shaun Cartoon said the ATO’s decision could apply to anyone who gained rapid fame through a clip posted to YouTube.
“In the digital age, what starts out as a hobby can quickly turn into something commercial if a person develops an online following and derives income as a result" Mr Cartoon said.
“If there are a lot of hits and the clip is deriving income, it’s going to be hard to say that the income is not assessable for tax purposes, particularly if the activity is organised and repeated."