Zest Accountants
At Zest Accountants, we understand the unique challenges and opportunities that accompany your dynamic career. From dealing with multiple income streams to navigating complex international tax regulations, we know that managing your finances can feel like a daunting task. That’s where we come in.
Below provides an overview of key areas that YouTube creators need to consider to ensure they are meeting their tax obligations in New Zealand.
We at Zest work closely with YouTube creators and would love to help you and be a part of the journey.
At what point it becomes taxable?
Firstly, it is necessary to determine what is the difference between a side hustle/hobby versus a business activity that will require tax paid to the IRD.
The IRD recommend to avoid using labels such as ‘Hobby’ or ‘Side Hustle’ but to instead consider the following:
1. How often you receive payments and whether they are regularly received
2. The relationship between you and anyone who pays you for your content creation work
3. The reason you received the payments.
The IRD also state that “If you receive more than $200 untaxed total income during a tax year from any source including content creation, you need to tell us about it. You do this on an Individual tax return”
Therefore, if you monetise content and receive regular amounts from subscribers or platforms such as Patreon, then the amounts are likely income and taxable. This is because:
1. Payments are likely to be received monthly from Adsense,
2. YouTube is paying you to advertise on your videos,
3. By joining the YouTube Partner Program you are creating content with a purpose of generating income.
What is YouTuber Income?
Income can come from a wide variety of sources, including:
Receiving Gifts
It’s common for content creators to receive funds via online payment or donation platforms. While these payments may be labeled as “gifts” or “donations,” the terminology used doesn’t dictate their nature or whether they constitute income for the content creator. Payments of these kinds may become income if they are a result of the YouTubers online presence. These types of exchange are likely to be considered taxable income.
As crazy as it sounds, you do need to declare gifts as income, the Inland Revenue Department (IRD) have made it clear ‘If content creators do not want to be taxed on receipt of a non-monetary item, they should not accept the item.’
If you receive non-cash benefits to promote, such as gifts, hotel accommodations, travel benefits, or other significant kickbacks, be prepared for the IRD to closely examine your tax return. Brands and content creators alike are using social platforms not only to promote themselves, but their products as well and just as we are spending hours watching, so are the IRD!
To navigate the complexities of influencers taxes, it is recommended to collaborate with a registered tax agent well-versed in the intricacies of the platform. Simply get in touch using the link below to see how we can help take the stress out of tax time.
Overseas Income
A person who is a tax resident in New Zealand will be taxable on income even if they earn this income from overseas (outside NZ). Therefore, it is likely expected income will be reported as income to the IRD regardless of the countries source.
It is also important to note that being a NZ tax resident is different from immigration status. For example, a person who has a visa for NZ but is not a citizen, is likely to be a tax resident, if they meet the threshold.
In simple terms, this threshold usually means when the first of these happens:
1. They have a permanent place of abode (eg: a house, rental, flat share); and
2. Have not been away from New Zealand for more than 325 days in any 12-month period.
If you meet the above, you are a tax resident and are liable for tax.
Keeping good records
You should keep records of all your income and expense receipts and maintain these for the last 7 years in the event of audit. The IRD state that it is important for online content creators to keep good records. Failing to keep good records is risky. In some cases, failing to keep good records can result in Inland Revenue:
- treating a person as having more income than they actually do (for example, if their income needs to be determined based solely on deposits in their bank account or assets they have acquired);
- disallowing deductions for expenses a person could have claimed if they had kept a record of their expenses; or
- imposing penalties and use of money interest for underpayment of tax.
Expenses
So What can I Deduct?
The key thing to look at is whether the costs have a relationship to your content creating activities, if it is, there’s a good chance you can deduct these costs and reduce your tax bill,
For an expense or loss to qualify for deduction, it must be associated with generating income, indicating a connection between the cost and the business or income-generating endeavor. In the context of a business, deductible expenses are permissible, even if the business is not currently profitable, provided there is an evident intention to generate a profit.
Understanding what qualifies as a legitimate business expense and what does not is crucial. The challenge arises in the realm of content creation, where expenses often extend beyond conventional business-related items.
Items such as video equipment, office gear, and props may not be automatically deductible during tax season. To be eligible for deduction, an expense must have been specifically acquired for use in your video content. For instance, if you purchase a new outfit, wear it in a video once, and then incorporate it into your regular wardrobe, it does not qualify as a taxable business expense.
On the other hand, if you acquire a costume exclusively for a video, something you wouldn’t typically wear in your daily life, it is more likely to be considered a legitimate business expense.
The following are examples of expenses that could be incurred by an YouTuber as part of their work:
Goods and Services Tax – GST
GST is a tax in New Zealand that is charged on the supply of goods and services. YouTubers are creating media, which is a supply to the YouTube (or similar) platform. A creator, generally only needs to register for GST if their total income exceeds or is expected to exceed $60,000 in a 12-month period. Once the threshold of $60,000 is met, an YouTuber will likely be required to register for GST and file GST returns as part of their accounting requirements. We at Zest offer GST services.
Why use Zest as your Accountant?
You can perform your own returns, however it can certainly be a minefield of complexity, and without expertise, there is risk that it will not be performed correctly or you’re missing out on tax benefit opportunities.
At Zest Accountants, we understand the unique challenges and opportunities that accompany your YouTube pursuit. That’s where we come in. We work with creators and know the common pitfalls that they face. We also have expertise in ensuring creators are taking advantage of possible benefits that is available to them, particularly through the complex areas of expense deductions.
We love the product that content creators add to our lives, this is why we are the only New Zealand accountants that specifically focus on content creation. You can be assured that we understand what you do, and look forward to helping.
Your Accountant
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