Can you believe we have hit EOFY? When it comes to tax questions and being a blogger, it can be very confusing on what my actual entitlements are. Am I a business or is my blog classified a hobby? I haven’t had the best experience with my accountant in the past on my rights as a blogger. I have found the entire process frustrating as I feel I can get more answers on good old google then a professional I am paying, sad, isn’t it? I finally got some answers from Liz Russell, senior tax agent at leading online tax service Etax.com.au. If you too are a blogger/influencer and are also confused, keep reading.
DO BLOGGERS HAVE TO DECLARE THEIR INCOME? IS THERE A CERTAIN AMOUNT I NEED TO MAKE FROM BLOGGING BEFORE TELLING THE ATO?
In order to determine whether you need to declare any income made from blogging on your tax return, you need to determine whether your blog is a hobby or a business.
There is no magical dollar amount that you need to make before blogging income needs to be declared to the ATO. The relevant detail is the intention behind your blog: are you looking to make a profit/money from the blog or not? Even if you spend a lot of money to setup your blog, take photos of beautiful locations and purchase products with the specific purpose of writing about them on your blog, this can still classify as a hobby, in which case any incidental money you make from brand partnerships and sponsorships won’t need to be declared on your tax return. (But that also means you can’t claim any deductions for your expenses running the blog either.)
Here are a few questions you can ask yourself to help determine if your blog is a business or a hobby:
|It’s a hobby if you…||It’s a business if you…|
|Blog as a past-time or leisure activity||Blog for commercial reasons|
|Blog in your spare time for recreation or pleasure||Intend to make a profit or if there is a prospect of a profit|
|Have no intention of growing or sustaining your blogging activities for increased income||Carry out business/blogging activities with regularity and repetition|
|Your blog is consistent with industry norms|
|Your blog could be considered as having substantial size, scale, and permanence|
|Hold a separate bank account for your blogging activities|
|Have a registered business name|
|Work on the blog during regular business hours|
If your blog is considered a business, you will need to declare all of your income, including trips, sponsorships, products sent to you for reviews, gifts and freebies. (If you’re not sure how much a gift or freebie is worth, ask your tax agent and they can help you work it out). For more information on businesses versus hobbies, take a look at the ATO website: https://www.business.gov.au/info/plan-and-start/a-business-or-a-hobby
WHAT CAN FULL-TIME BLOGGERS CLAIM?
Whether you’re working on your blog full-time or after hours, provided it’s classified as a business rather than a hobby, you can claim essentially any out of pocket expense you make to operate and maintain your blog. These deductions could include:
- Internet related expenses such as hosting fees, blogging software fees, and domain name registration fees.
- Traditional office equipment i.e. desk, chairs, filing cabinets.
- Communications-related expenses such as long-distance calls, mobile phone bills and Internet connection.
- Computer equipment such as laptops and cameras.
- Supplies and stationery.
- Advertising and design i.e. contest prizes, promotional giveaways, logo and letterhead design, custom blog design, social media ads, Google ads.
- Professional associations dues and subscriptions to books or magazines related to your work.
If you work from home, you might be able to deduct a portion of your household bills for that space rent, electricity, water, natural gas.
For expenses that are used for both work and personal use, you will need to apportion these so you are only claiming the work component. If you work from home and use the Internet connection for personal use as well, for example, you will need to figure out what percentage of this usage is work-related, and only claim a deduction for that.
Expenses also need to be reasonable and connected to the running of your blog. While laptop bags are considered a legitimate expense if you need to carry your laptop to or from an office, splurging on a $10,000 designer bag to do so will most likely raise a red flag at the ATO.
Finally, you can’t claim expenses that have already been reimbursed or paid for by a third party. If you’ve been invited to review a holiday destination, for example, and all of your expenses have been paid for by your host, then you can’t claim these again as a tax deduction. You need to actually be out pocket for the expense to qualify as a tax deduction.
DO I NEED TO TELL MY ACCOUNTANT I HAVE AN ABN/BLOG IF I HAVEN’T MET THE TAX-FREE THRESHOLD?
Yes -You need to tell your accountant about your ABN/blog even if you the income derived from the blog did not met the $18,200 threshold. Why? Because the money you earn from both your blog and your day job (if you have one) is combined together into one pot of income, and it’s this total income that is used to calculate the tax that you owe the ATO.
You can also claim deductions specific to the blogging income to help improve/boost your overall tax refund the same way that you claim deductions against your 9-5 income.
I DON’T HAVE A WORK PHONE. CAN I CLAIM PART OF MY PHONE BILL?
You might be able to claim a portion of your mobile bill.
Let’s say your phone bill costs you $75/month, and work use accounts for 30% of your usage over the entire year:
$75 x 12 months = $900/year
$900 x 30% = $300/year
You would be able to claim $300 of your $900 annual phone bill as a business expense.
How do you find out what percentage of your bill is business versus personal?
If you have a phone plan where you receive an itemised bill, you need to determine your percentage of work use over a four-week representative period which can then be applied to the full year.
If not, you need to work out the work-related percentage using a reasonable basis. This could include:
* the number of work calls made as a percentage of total calls
* the amount of time spent on work calls as a percentage of your total calls
* the amount of data downloaded for work purposes as a percentage of your total downloads
Now that’s a lot to take in, I know, so Ill leave you hear for now. Stay tuned in the next couple of days for the best part! What gadgets can you buy? Can you really claim on a Louis Vuitton handbag, and my last-minute tax purchases. All claimable through the ATO’s asset write off scheme. Big thank you again to Liz for answering all my questions.