Edited version of private advice

Authorisation Number: 1052279366488

Date of advice: 12 August 2024

Ruling

Subject: Ordinary income - content creator

Question

Are the amounts received by the taxpayer from Google AdSense assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Question

Are the amounts received by the taxpayer from Amazon and other affiliates assessable as ordinary income under section 6-5 of the ITAA 1997?

Answer

Yes.

Question

Is the income received from Google AdSense, Amazon and other affiliates to be considered income derived from property and not personal services of the creator under section 6-5 of the ITAA 1997?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You create and upload videos on your YouTube channel.

You commenced your YouTube channel as a hobby.

You stated your motive for operating the channel was to generate income by building an online following.

You state you attempted to grow the channel in different ways and found success in creating content reviewing products.

You have an official website which is linked to your YouTube channel.

You have entered arrangements with Google AdSense, Amazon Associates Program, and other affiliate programs to monetise your YouTube content.

Under your Google AdSense agreement Google inserts advertisements in your YouTube videos. The income you receive is calculated on the number of views of the videos on your YouTube channel.

Under your Amazon Associates Program agreement, you include a link in the YouTube video description which takes the viewer to the Amazon listing for the product being reviewed. If the product is purchased as a result of that link, you are paid a commission on the sale.

Under your agreements with other affiliate programs, you have stated you include a link in the YouTube video description which takes the viewer to the product. If a product is purchased as a result of the link, you are paid a commission on the sale.

You also operate an Amazon storefrontas part of the Amazon Influencer Program.

The Amazon Influencer Program is described as "an extension of the Amazon Associates program, that brings product-related content from Influencers onto Amazon to help customers research and discover products they might be interested in".

You stated you upload review videos of Amazon products to the Amazon website and are paid a commission if a viewer watches 30 seconds or more of a review video and proceeds to purchase the product.

You have stated you are also engaged to create videos or content directly by the maker of a product. You have advised you treat this income as provision of professional services and is not to be considered as part of your application.

Your income received under these agreements is generally paid monthly and varies each month.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 84-5

Income Tax Assessment Act 1997 section 87-15

Income Tax Assessment Act 1997 section 87-60

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Ordinary income

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

Ordinary income is not defined and 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.

Your YouTube channel earns advertising revenue from Google AdSense which is generated when advertisements are placed in your YouTube videos by Google. This payment is calculated on the number of views your videos receive.

Your YouTube channel earns commission revenue from Amazon Associates Program and other affiliate programs which is generated when viewers purchase items from Amazon utilising the link located in the video description.

Additionally, you receive a commission revenue from Amazon Influencer Program as part of Amazon Associates Program which is generated when viewers watch 30 seconds or more of review videos uploaded to Amazon and complete purchase of a product.

The payments you receive are expected (and perhaps relied upon) as your entitlement to the payment arises under the agreement you elected. The payments also have the elements of recurrence and regularity as they are paid monthly.

Based on the facts you provided, we consider you are receiving income from your activities as a YouTube content creator and the income is ordinary income, assessable in the year it is derived. Accordingly, the amounts you receive from Google AdSense, Amazon and other affiliates are assessable as ordinary income under section 6-5 of the ITAA 1997.

Personal Services Income

The Commissioner's view on what constitutes personal services income (PSI) is outlined in Taxation Ruling TR 2022/3 Income tax: personal services income and personal services businesses.

Section 84-5 of the ITAA 1997 and paragraph 34 of TR 2022/3 states PSI is income that is mainly a reward for an individual's personal efforts or skills (or would be mainly such a reward if it was the income of the individual who did the work). Paragraphs 38 to 45 of TR 2022/3 states that the meaning of PSI does not include income that is mainly:

•         generated from the supply and sale of goods,

•         generated from the supply and use of income-producing assets, or

•         generated by the business structure.

Paragraph 41 of TR 2022/3 states the following factors are relevant in determining whether an amount is mainly for the use or supply of assets or the provision of personal efforts or skills:

•         the market value of the supply and use of the asset, compared with the market value of the personal services

•         the basis on which the contract price has been calculated and whether the contract price includes costs borne by the service provider for the supply and use of the asset in the income-producing activity

•         the significance or uniqueness of the assets

•         the gross value of the asset compared to the income of the service provider from the particular activity, and

•         the role the asset plays in generating the income.

Although you put in personal effort or skills into the production of the videos that you placed on YouTube and Amazon, the income is mainly generated through your ownership of the video and holding it available for viewing on the YouTube and Amazon platforms. The income you earnt was a result of your contractual rights as the owner of the videos through your agreement with YouTube and advertising agreements with Google AdSense, Amazon Associates Program, and other affiliate programs.

Your agreement with Google AdSense allows for the insertion of advertisements prior to or during your videos and the advertisement revenues to be shared with you.

Your agreement with Amazon Associates Program allows for the insertion of a product link in the description of your video which, if utilised by a viewer to complete a purchase of the product, results in a commission payment to you.

You have stated your agreements with other affiliate programs operate in a similar manner to your Amazon Associates Program, which allows insertion of a product link in the description of your video, if utilised by a viewer to complete a purchase of the product, a commission is paid to you.

As part of the Amazon Influencer Program you upload video reviews of products to Amazon which results in a commission payment where a viewer watches more than 30 seconds of a video review and completes purchase of a product.

This income is not directly in relation to your skills or personal efforts, it instead results from asset ownership which generates income indirectly from the use of the assets, being the videos, to advertise on behalf of third parties.

Therefore, your YouTube channel is an income producing asset and the income derived from your YouTube channel is considered income derived from property. The income received by you in relation to advertising placed within the videos on YouTube is not mainly a reward for your personal efforts or skills and so is not PSI under section 84-5 of the ITAA 1997.