‘OnlyFans’ Tax Warning

Due to the popularity of platforms such as Youtube, OnlyFans, Tiktok and Instagram, there are now an overwhelming number of content creators making a substantial income from the following they have grown online. The ATO has taken note of this industry and has new guidelines for content creators.

Firstly, what is OnlyFans?

It is mostly a subscriber-based platform, although creators can have the option of a free account to receive income solely through tips and paid messages. Most of the content shared on the platform is adult content, and this is how OnlyFans grew to the level it is at today. However, there is a small, yet growing number of creators such as artists, personal trainers, chefs, influencers and celebrities using OnlyFans to share more of their work and life.

There are currently over 170 million users worldwide, and although some creators are making millions of dollars per year, the average OnlyFans content creator only has 21 subscribers and earns on average $180USD per month.

Taxes for Content Creators:

The ATO released some new information about the rules for calculating how online creators determine their taxation lodgements. It is assumed that any income made from creating content online will be categorised as a business for tax purposes. The only way to avoid this is to be able to prove that you are only doing it as a hobby and not for the purpose of making any profit. Although, the ATO does consider a website where the audience needs to subscribe, such as OnlyFans, to be purely used for making profit

There is however, one main issue when it comes to these new tax guidelines. The ATO takes into consideration all aspects of income, whether that is in the form of tips and subscriptions, but also in the form of gifts, cryptocurrency and goods you receive. This makes things difficult as it is much more simple to report a specific amount of monetary income, than it is to report the value of physical or digital items received.

It also makes paying taxes confusing for the content creator, as they are often paid in the product from the company they are working with. OnlyFans creators sometimes use a system such as an Amazon wishlist, where subscribers and fans can access their digital store and pay to order products that are delivered directly to the content creator. In theory it makes sense that these creators declare the value of the items and gifts received as taxable income. However, it makes things incredibly complicated when the content creator is then asked to pay tax with cash on an item that they did not receive any cash for. The majority of the time the gifts received are either kept or used, not sold for the market value. This is something the ATO seems to have ignored while creating the new rules around reporting all gifts as taxable income.

Another important aspect that content creators need to keep in mind is the timing of when they are actually paid, compared to when they receive the money online. On OnlyFans, the money from subscribers is held in the creator’s account for processing for 7 days before being released. If they choose to withdraw some of their earnings, it then takes up to an additional 5 business days for that withdrawal to reach the creator’s bank account.

They also have the option of keeping the money in their OnlyFans account and withdrawing it whenever they need to. The ATO states that the income is counted from the day that it is paid to you by the subscriber or fan. The ATO is also in the process of implementing a reporting system for online platforms that will require them to report transactions directly to the ATO. This will affect OnlyFans and other similar platforms starting on the 1st of July 2024.

Do I need to register for GST?

The threshold for GST is when you earn $75,000 or more per year. Although there is one exception and that is for drivers who use platforms such as Uber, as they need to be registered for GST and have an ABN regardless of the amount of money they are making. Just because you are registered for GST as a content creator, it does not mean that it triggers a GST liability.

Claiming deductions for content creators.

As an online creator, you are able to claim most items that are purchased and used directly to generate income. For OnlyFans creators this would include products such as video and filming equipment, editing software, and microphones. There is a fine line between what is considered personal use and a business expense when it comes to work that involves showing yourself on camera. For example, if you went to the hairdresser to have your hair coloured and styled in preparation for an OnlyFans video or photo shoot, the cost of the hairdressing bill would not count as a deduction. The ATO does not believe that such an expense would be directly related to how you earn your money and would consider it a ‘private expense’. Click here to access the ATO’s guide to help clarify what is and isn’t deductible.

Is it a side hustle or a business?

At the moment there is a still an unclear distinction between an activity you do for business purposes and something you simply do in your spare time. It is different for each person according to their circumstances and the activity they do. Some other aspects the ATO would look at include whether the transactions are consistent, do you use marketing to generate income, does the activity have the potential to become profitable and whether you approach it in a way that is similar to how a business would run.

If the final conclusion is that the activity is simply a hobby, then none of the expenses are tax deductible as no tax will be paid. Reversely, if it is proven to be operating as a business, your income will be assessed, and you will be eligible for tax deductions.

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