Have you picked up an online side hustle recently? The last few years has certainly inspired many people to try and earn some extra cash from streaming on Twitch or publishing on YouTube.
But whether you’re planning on becoming the next big thing online, or are just mucking around and earning a bit of coin in the process, it’s important you don’t neglect your tax obligations. Because the ATO will certainly expect their slice of the pie at tax time.
Which brings us to the big question…
Do I have to pay taxes on money I make from Twitch or YouTube?
Yes you certainly do. It doesn’t matter if you earn your living at a traditional desk job, as an independent contractor, or by streaming / publishing videos online. When you receive payment from your services, even if it’s a one-off payment, it’s income.
Even if your income is in the form of a Twitch donation, it’s income. Don’t be fooled by the name, the only entities that can accept donations tax-free are registered charities.
That being said, there are a few things to consider when assessing your Twitch or Youtube income from a tax perspective.
How do I work out my taxable income from Twitch or Youtube?
Youtube and Twitch have slightly different structures in terms of how their users can make money.
Forms of income on Twitch include donations, bits, subscriptions, brand partnerships, and merchandise sales. While making money on YouTube happens through either adsense earnings or affiliate income.
Tracking this income is easy enough – look at your bank statements and note which deposits come from your channel’s subscribers. Keeping a ledger of your earnings will save you a massive headache at tax time – there are a number of online bookkeeping options available, or if you’re not making much, a simple spreadsheet will do.
The next step is to work out the amount of tax you will need to pay.
How much tax do I have to pay on my Twitch or Youtube earnings?
The first thing to determine is whether your endeavour is a hobby, or a business. The ATO has guidelines around this. But as a general rule of thumb, if you’re using the platforms with the intention of making a profit, or are making money regularly, your income is classified as business income and you will have to pay taxes on your earnings. Even if you’re not earning much, you still have to lodge a tax return declaring your income to the ATO.
If you find that your side hustle is actually viewed as a business by the ATO, you may want to consider getting an ABN and registering for GST.
Do I need to get an ABN and register for GST?
If you’re conducting your online activities as a business, you’ll need an ABN. They’re free, and the process of applying for an ABN is pretty straightforward.
You don’t need to register for GST if you’re making under $75,000. However, registering for GST means you can claim the GST component of purchases made for your business, including equipment, subscriptions, and software.
If you don’t register for GST, you cannot claim back the GST on your business-related expenses. So it’s up to you whether it’s worth registering or not. But when you hit $75,000 in income, you are obligated to register for GST.
Will my streaming income affect the tax back from my main job?
You need to pay tax on every source of income, including your online earnings as well as your day job income. When you lodge your tax return, all your income gets put together and taxed at your marginal income tax rate.
If you’re an Australian resident for tax purposes, you won’t pay tax on the first $18,200 of your income every financial year. If you’re earning more than that from all your income sources, you’ll pay tax on that income.
The amount you pay will be determined by a number of calculations including your income bracket, any investments you have, and how many tax deductions you have claimed against your business income. A registered tax agent can help you work all this out.
How do I lodge my taxes for my online business?
Working with a tax agent that specialises in Youtube and Twitch taxes can help you maximise your deductions and ensure you’re meeting your obligations at tax time.
Our team here at National Accounts understand the particular nature of earning income through online publishing and streaming, and can help you maximise your tax benefits when you lodge your tax return.
Get in touch using the link below to see how we can help take the stress out of tax time.