Edited version of private advice

Authorisation Number: 1052122835736

Date of advice: 12 October 2023

Ruling

Subject: Assessable income

Question 1

Is your activity of content creation an enterprise under section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

Question 2

Should you be paying income tax from the donations you receive as a result of your content creation?

Answer

Yes.

Question 3

Are you required to be registered for GST under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

Question 4?

Is your supply of content to Australian resident donors a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

Question 5?

Is your supply of content to non-resident donors a GST-free supply under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 2022

The scheme commenced on:

1 July 2021

Relevant facts and circumstances

You are an online digital content creator on social media platform including YouTube, Instagram, Facebook, Rumble and your website.

You post content online including daily videos as well as pictures and other posts.

Your YouTube channel has over XXX subscribers.

You have a second YouTube channel, this has XX subscribers.

Under agreements with YouTube, you supply a right to YouTube to use the content produced by you.

Your Instagram channel has over XXX followers.

Under an agreement with Instagram you grant them a license to use the content produced by you.

Your Facebook Channel has over XXX followers

Under an agreement with Facebook you provide them permission to use content that you create and share.

You have a Rumble Account.

Under an agreement with Rumble you are appointing Rumble as your exclusive, worldwide, perpetual Agent for the content submitted and grant Rumble exclusive right to distribute, display, reproduce, licence, rent, sell, monetise and exploit the content.

You have no influence on who subscribes to your social media accounts and the number of subscriptions can vary each month as subscribers may subscribe one month and then unsubscribe if they are unsatisfied with your content.

Your viewers are all over the world and there is no ability within the relevant Social Media Platforms to determine where they are located.

You also receive donations from your viewers through PayPal in their respective currency.

You do not issue any invoices to your viewers who make donations to you.

You average 4-5 hours a week on social media work

Your content can be watched for free. Your YouTube channel and Instagram account have a link to your PayPal in each page's description where viewers have the option to donate money. Specifically, some of your YouTube videos also have a link to "PayPal Gifts for Media Content" in the video's description.

You have received donated money from viewers, the donations are a token of gratitude for the online digital content you created.

You have not monetised your YouTube channel which prevents you from getting revenue from YouTube or any of their affiliated companies.

You do not get paid for according to the number of views of your videos.

Your only source of income is from voluntary donations from your online digital content creation.

You gave a rough estimate of receiving $XXX for the 2022 financial year.

In the 2022 financial year you were in Australia for the whole year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 995-1(1)

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Section 9-20

A New Tax System (Goods and Services Tax) Act 1999 Section 23-5

A New Tax System (Goods and Services Tax) Act 1999 Section 23-15

A New Tax System (Goods and Services Tax) Act 1999 Section 38-190

Reasons for decision

Question 1

Is your activity of content creation an enterprise under section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999) (GST Act)?

Summary

You meet the several criteria of being in business of content creation. Your activities have a prospect of profit. Your activity is regular and repeated daily. Your content creation would not be considered to be a hobby. Your behaviour is similar to other content creators. Therefore, as you are in business you are considered to be an enterprise.

Detailed reasoning

Taxation Ruling TR 97/11 Income Tax: am I carrying on a business of primary production? (TR 97/11) provides the Commissioner's view of the factors used to determine if a taxpayer is in business for tax purposes. Its principles are not restricted to questions of whether a primary production business is being carried on. In the Commissioner's view, the factors that are considered important in determining the question of business activity as outlined in TR 97/11 are as follows:

•         whether the activity has a significant commercial purpose or character

•         whether the taxpayer has more than just an intention to engage in business

•         whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity

•         whether there is regularity and repetition of the activity

•         whether the activity is of the same kind and carried on in a similar manner to that of ordinary trade in that line of business

•         whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit, and

•         the size, scale and permanency of the activity.

TR 97/11 states the indicators must be considered in combination and as a whole and whether a business is being carried on depends on the 'large or general impression gained' (Martin v. FC of T (1953) 90 CLR 470 at 474; 5 AITR 548 at 551) from looking at all the indicators, and whether these factors provide the operations with a 'commercial flavour' (Ferguson v. FC of T (1979) 37 FLR 310 at 325; 79 ATC 4261 at 4271; (1979) 9 ATR 873 at 884). However, the weighting to be given to each indicator may vary from case to case.

Based on the factors of your situation, we have considered the following indicators:

Does the activity have a purpose and prospect of profit?

You have stated that you have no source of income outsider of content creation. The creation of content has generated $XXX of income for you in the 2022 financial year. It is reasonable to assume you post these videos for the purpose of making income.

Is the activity regular and repeated?

You spend 4-5 hours a week making content. You load videos daily on your YouTube channel. You make related posts on your Instagram page. You also have content on Facebook and Rumble. It is reasonable to say your activities are regular and repeated.

Can the activity be described as a hobby, a form of recreation or a sporting activity?

Though you have not monetised your YouTube channel or other social media channels your YouTube channel and Instagram channel have links so "PayPal" gifts can be donated. You rely on the contributions made as your only source of income. As a result, the activity could not be described as a hobby or form of recreation.

Is the activity of the same kind that is carried on in a similar manner to that or ordinary trade in that line of business?

Your activity of regular creating and posting content is synonymous with other content creators. You use the same platforms to post content as other creators. Though you have not monetised your channel most content creators rely on contributions from members and sponsors to make a living. It is reasonable to say you are carrying on in a similar manner to other content creators.

Your activities have a prospect of profit. Your activity is regular and repeated daily. Your content creation would not be considered to be a hobby. Your behaviour is similar to other content creators. Therefore, as you are the in business of content creation.

Paragraph 9-20(1)(a) of the GST Actstates an enterprise is an activity, or series of activities, done in the form of a business. Therefore, as established above you are in the business of content creation, your activities undertaken come within the definition of an enterprise.

Conclusion

In weighing up the relevant factors the Commissioner considers that you are carrying on a business of content creation in the relevant income year and you are running an enterprise

Question 2

Should you be paying income tax from the donations you receive as a result of your content creation?

Summary

The income you earn from content creation is considered to be assessable income. It has several characteristics of assessable income. You earn the income in a manner similar to content creators. It is considered to be your primary source of income.

Detailed reasoning

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income).

Ordinary income has generally been held to include three categories, namely income from rendering personal services, income from property and income from carrying on a business.

Other characteristics of income that have evolved from case law include receipts that:

•         are earned

•         are expected

•         are relied upon; and

•         have an element of periodicity, recurrence or regularity.

YouTube advertises itself as a way for content creators to make income and provides numerous guides and resources on how to be successful. Though you have chosen to not monetise your channel you still provide a link to your PayPal on your videos which results in donations from viewers.

The income you received from your viewers has the characteristics of income:

•         You received the income by providing a service, in this case it is in the form of your daily videos

•         You currently relied upon the income to make a living to the point where you have no other source of income

•         You release a video each day and spend on average 4-5 hours a week on content creation

Your behaviour is synonymous with professional content creators in the industry. Professional streamers create videos regularly to maintain a level of engagement. They often sustain their profession though contributions from viewers via PayPal or Patreon. From the information you provided we can assume you make in the range of $XXX yearly. This is not an insignificant amount and is your primary source of income.

Whether a "gift" is assessable income depends on the character of the gift in the hands of the recipient. Hayes v FC of T (1956) 11 ATD 68 reaffirmed that the question in each particular case is as to the character of the receipt in the hands of the recipient and that the test to be applied is an objective, not subjective, one. Relevant factors to consider have been provided in Taxation Ruling IT 2674 Income tax: gifts to missionaries, ministers of religion and other church workers - are the gifts income? and include:

•         how, in what capacity, and for what reason the recipient received the gift

•         whether the gift is of a kind which is a common incident of the recipient's calling or occupation

•         whether the gift is made voluntarily

•         whether the gift is solicited

•         if the gift can be traced to gratitude engendered by some service rendered by the recipient to the donor, whether the recipient had already been remunerated fully for that service

•         the motive of the donor (but it is seldom, if ever, decisive), and

•         whether the recipient relies on the gift for regular maintenance of himself or herself and any dependants.

On such an objective analysis, if nothing more appears than the receipt of some money or property, what is received is capital not income. However, if the facts surrounding the transaction show that the payment or transfer was made without legal obligation but is nevertheless so related to the recipient's employment, or to services rendered, or to a business carried on that it is, in substance and in reality, not a mere gift but the product of an income-earning capacity, it will be regarded as assessable income of the recipient (Taxation Determination TD 2006/22 Income tax: is disaster relief money received from charities, to which local, state or federal government or their agencies have made payments, assessable income of taxpayers carrying on a business?).

In your case the "gifts" received are as a result of services rendered in the form of content creation through your videos.

The money you have received through PayPal from your viewers has the characteristics of income and although it is a gift it is also a reward from your personal services. As such it is considered to be ordinary income and will be assessable under section 6-5.

Question 3

Are you required to be registered for GST under section 23-5 of the GST Act?

Summary

You are required to be registered for GST as your GST turnover exceeds the registration turnover threshold.

Detailed reasoning

Section 23-5 of the GST Actstates:

You are required to be registered under this Act if:

a)    you are *carrying on an *enterprise; and

b)    your *GST turnover meets the *registration turnover threshold.

Note: it is the entity that carries on the enterprise that is required to be registered (and not the enterprise).

(Terms marked with asterisks (*) are defined in section 195-1 of the GST Act).

Section 188-10 of the GST Act is relevant for working out whether your GST turnover meets, or does not exceed, a particular turnover threshold.

You have a GST turnover that meets a particular turnover threshold under subsection 188-10(1) when:

a)    your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or

b)    your projected GST turnover is at or above the turnover threshold.

The registration turnover threshold is $75,000.

Section 188-15 of the GST Act defines 'current GST turnover.' Your current GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month, subject to certain exclusions.

Section 188-20 of the GST Act defines 'projected GST turnover. Your projected GST turnover at a time during a particular month is the sum of the * values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, subject to certain exclusions.

Both current and projected GST turnover exclude:

a)    supplies that are *input taxed; or

b)    supplies that are not for *consideration (and are not *taxable supplies under section 72-5); or

c)    supplies that are not made in connection with an *enterprise that you *carry on.

This content is made in connection with the enterprise you carry on and there in no provision in the legislation where this could be input taxed, therefore we must consider if these supplies are made for consideration.

A supply is defined in subsection 9-10(1) of the GST Act as "any form of supply whatsoever" and includes:

(a)  a supply of goods;

(b)  a supply of services;

(c)   a provision of advice or information;

(d)  a grant, assignment or surrender of real property;

(e)  a creation, grant, transfer, assignment or surrender of any right;

(f)    a financial supply;

(g)  an entry into, or release from, an obligation:

                      i.        to do anything; or

                     ii.        to refrain from an act; or

                    iii.        to tolerate an act or situation;

(h)  any combination of any 2 or more of the matters referred to in paragraphs (a) and (g).

The definition of supply is extremely broad. You grant permission to YouTube and other social media platforms to use or share your content. While you have not monetised any of your content, you are still making a supply to the relevant social media platform. Furthermore, as the creator of this content, when you upload this to the platform you make this supply available to your viewers, many who follow or subscribe to this content. Therefore, we consider that your supply of content that your viewers access via a social media platform still fits within the definition of a supply.

Subsections 9-15(1) & (2) of the GST Act state that consideration includes:

a)    any payment, or any act or forbearance, in connection with a supply of anything; and

b)    any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.

It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply.

The Goods and Services Tax Ruling, Goods and services tax: financial assistance payments (GSTR2012/2) explains the commissioner's view on the need for sufficient nexus between the supply and the consideration in paragraphs 124 and 128:

A financial assistance payment is consideration for a supply if the payment is 'in connection with' a supply. Consideration can also be 'in response to' or 'for the inducement of' a supply.

Further, the fact that a voluntary payment can be consideration for a supply means that there does not have to be an enforceable relationship for there to be a sufficient nexus between the supply and the payment. However, the payment must have a sufficient nexus to a supply.

Notwithstanding the fact that you do not have a contractual relationship with any of your viewers and the relevant social media platform is making the supply of your content to your viewers, there is sufficient nexus to the supply as the voluntary donations are made as a response to the supply as they are a token of gratitude to thank you for creating your content. Viewers have to access your YouTube Channel or Instagram page to access your PayPal details before they can make a donation. Therefore, voluntary payments made as a gratuitous response to viewing your content are consideration for these supplies and included in the calculation of GST Turnover. As your GST turnover exceeds the registration turnover threshold of $75,000 you are required to be registered for GST.

Question 4

Is your supply of content creation to Australian resident donors a taxable supply under section 9-5 of the GST Act?

Summary

Your supply of content to Australian resident donors is a taxable supply.

Detailed reasoning

Section 9-5 of the GST Act states you make a taxable supply if:

a)    you make the supply for consideration; and

b)    the supply is made in the course or furtherance of an enterprise that you carry on; and

c)    the supply is connected with the indirect tax zone; and

d)    you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

As established above, you make the supply of content and receive donations as consideration for this supply. This supply is made in the course of your enterprise as a content creator. Therefore, the supply must be connected with the indirect tax zone to satisfy paragraph (c) of section 9-5 of the GST Act.

Section 9-27 of the GST Act states an enterprise of an entity is carried on in the indirect tax zone if the entity is an individual and the enterprise is carried on through a fixed place or through one or more places in the indirect tax zone for more than 183 days in a 12 month period. As you operated your business of content creation in Australia for the whole of the 2022 financial year your supply of content is connected with Australia.

As such, your supply of content satisfies paragraphs (a) to (d) of section 9-5 of the GST Act outlined above. There is no provision under the GST Act that makes your supply of content input taxed or GST-free.

As the supply of the content to resident donors is a taxable supply, GST is payable.

Question 5

Is your supply of content to non-resident donors a GST-free supply under table item 2 of subsection 38-190(1) of the GST Act?

Summary

Your supply of content to non-resident donors is a GST-free supply.

Detailed reasoning

Your supply of content is made to the non-resident donors for which you receive consideration in the form of PayPal donations.

Under subsection 38-190(1) of the GST Act, certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone (Australia) are GST-free.

Table item 2 of subsection 38-190(1) of the GST Act provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done is GST-free if:

(a)  the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone; or

(b)  the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

There is no need to consider paragraph (b) as paragraph (a) is satisfied.

Therefore, your supply of content to the non-resident donors is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.

Where a supply is GST-free, no GST is payable on the supply.