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For online content creators, Patreon is more than a crowdfunding platform; it’s a gateway to boosting income while embracing creativity. Whether you have a Patreon account or are considering setting one up, this platform empowers artists to receive donations from patrons and offer tiered subscription packages to fans.
However, despite the personal touch, any income from Patreon may be subject to Australian income tax. To avoid potential pitfalls and hefty penalties, seeking the expertise of a professional tax agent for accurate tax submissions and minimizing tax liability is a prudent step.
As an artist and creator on Patreon, you offer a service to your fans. Even if you’re not sending them physical goods, they’re still receiving some form of value in exchange for their patronage. Therefore, Patreon subscriptions and donations count as income, just the same as actual sales of your work.
So yes, you are obligated to pay tax on your Patreon income. Unless you fall under the tax free threshold of $18,200 in a financial year, your earnings will be taxed at your marginal tax rate.
To cut it down to bare basics, if you’re starting your Patreon account with any intention of generating a profit, you’re running a business.
If you’re not expecting a profit but are carrying on business-like activities with regularity – such as tracking your income, planning your launches, and marketing your page – then you’re running a business.
Basically, it’s safe to say that by starting a Patreon for any other reason than to raise funds for a charitable cause, the ATO considers you to be running a business endeavour.
If the thought of giving up some of your hard-earned income at tax time leaves you feeling a bit deflated, there is a silver lining. You can offset any business-related expenses against your taxable earnings. This reduces the amount of tax you have to pay.
However, it’s important to make sure that the expenses you claim are solely used for business-purposes only. Alternatively, you can claim a percentage of an item that you use partially for your Patreon account, and partially for personal use.
Anything you purchase specifically for the running of your Patreon may be deducted as a business expense. This could include things like –
Just make sure you keep your receipts, and track your expenses in a spreadsheet or ideally use accounting software. You’ll be thanking yourself for being organised when it’s time to do your tax return!
Get in touch and take the stress out of tax time.