For most of us, TikTok, Instagram, Facebook, and YouTube are no more than a pleasant distraction from the daily grind and a way to stay connected with friends and family. For others, these platforms are far more than that and have become a source of income, transforming hobbies into fully fledged careers through content creation and influencer marketing.

The global influencer market is worth US$21.1 billion and is predicted to hit US$24 billion by the end of 2024. With more and more companies realising the power influencers can have on promoting their brands, it’s a booming industry that shows no signs of slowing.

For some people, these platforms provide a bit of extra ‘pocket money’. For others, being an influencer is a lucrative income source. Either way, whether it's just a few hundred dollars or tens of thousands rolling in, influencers are still expected to pay tax on their income at tax time.

Tax on a side hustle

It’s a concept that surprises some people, says social media sensation and founder of Two Sides accounting practice Natalie Lennon CA, who uses the short-form video platform TikTok to explain the intricacies of tax and accounting.

“For the ATO, the line between a business or hobby is when the social influencer is able to monetise their work and make a profit. I think many people who may not earn a great deal from their side hustle forget it is actually income and are surprised that they have to pay tax on it,” Lennon says.

In fact, influencers have the same obligations as any other business owner or income earner when it comes to tax, she says. This includes keeping accurate records, reporting all income, and understanding what deductions they can claim to ensure they meet their tax responsibilities.

Paying the consequences

Influencers can earn money through a variety of channels, including sponsored posts and brand partnerships, whereby they receive payment for featuring and endorsing the brand, says Lennon.

Sharing unique affiliate links or discount codes can earn influencers a commission on sales generated through their referrals. Platforms like YouTube and TikTok offer monetisation options where influencers can earn money from ads displayed on their content. Some influencers might receive promotional items as payment, which is a common trap for many people.

“A lot of people don’t realise gifts must be declared. People get into trouble because they don’t realize you need to look at what the market value is of the things being gifted and declare that as market value income,” Lennon says.

Not tracking income and factoring in a tax bill down the track can also catch people out, she says. “I had one client who made A$250,000 and now has a A$91,000 tax bill because he hadn’t put anything aside.”

For influencers operating on a smaller scale, who may have a regular income source from employment, the main trap is staying on top of what they have earned.

“I think many influencers forget about extra income they have earned because they're not tracking it,” says Lennon.

“There may not be a fine, but if they haven't paid enough tax to cover the extra income, they will get a bill.”

Influencers in the tax office sights

While reports of high-profile Australian or New Zealand influencers who have dodged paying tax have yet to come to light, in other jurisdictions the tax authorities are starting to crack down. In China, Viya, the country’s most popular influencer, was fined US$210 million for tax evasion in 2021.

In Australia, the ATO uses data-matching technology to track undisclosed income from sources such as online sales, overseas bank accounts, and cryptocurrency. Last year, it issued a warning that it would be using the same technology to monitor influencers receiving gifts. It also said companies that provide gifts to influencers could face charges if they fail to report their value.

“My advice is to speak to an accountant early on and put some systems in place,” says Lennon.

What can be claimed?

The rules for claiming expenses are the same across the board, whether you're an influencer or not, says Lennon.

“Many influencers and bloggers think that they can claim a lot of personal items just because they blog or they post about it. That is a misconception. You have to always apportion it for private and domestic purposes,” says Lennon.

“For example, a travel blogger can't really claim all their expenses on a trip because they’re not working the whole time. Similarly, if they have been sent overseas to promote a resort or a car, they can only claim for things they are out of pocket for while doing the promotion, such as food or accommodation.”

Tax tips for influencers

Influencers in New Zealand are subject to similar obligations as those in Australia. These include:

●     Income reporting: All income from social media activities, including sponsored posts, brand partnerships, affiliate commissions, and gifts, must be reported as taxable income.

●     GST registration: Influencers must register for goods and services tax (GST) if their annual income exceeds NZ$60,000.

●     Accurate record-keeping: Maintain detailed records of all income and expenses related to social media activities.

●     Tax return filing: File an annual income tax return that includes all earnings from influencer activities.

●     Deductions: Claim legitimate business expenses, such as equipment, travel, marketing, and professional services, but ensure they are appropriately apportioned for business use.

●     Provisional tax: If the tax liability exceeds NZ$5000 (from 2020 onwards) or NZ$2500 (for years before 2020), an influencer may need to pay provisional tax in instalments throughout the year.

●     Declare gifts and free products: The market value of any gifts or promotional items received needs to be reported as part of influencer activities.

For more information, see the IR Interpretation statement: Content creators – tax issues.

The ATO offers a similar resource: Tax tips for social media influencers and content creators.