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Accountants can bring enormous value to clients operating as content creators but a detailed understanding of their work is essential, says business services partner Koraly Sowter.
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BDO flags unique tax challenges with influencer clients
28 March 2024
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10 minute read
After specialising in content creators and influences for a number of years, BDO partner Koraly Sowter said this is an industry where accountants can potentially add a lot of value.
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The business services partner has been specialising in advice for content creators for over five years after agreeing to provide tax services to a client’s son, who happened to be a YouTube creator.
Sowter said that when many of her potential clients come to her, they have usually started earning a substantial amount of money but have no idea what their obligations are.
“There’s often a bit of a learning curve in terms of financial literacy,” she said.
“Some of them don’t even realize that they’re running a business when they come to us, but essentially that’s what they are, they’re business taxpayers, just in a different industry.
“We represent around 30 content creators and some of them are the largest in Australia and have built corporations like a production company.”
When she takes on a new client, Sowter will start by conducting a review of their business setup including ABN and business name registrations, review prior year returns for potential tax rebates and also ensure their GST obligations are being met.
One of the important areas to review, she said, is ensuring they have the appropriate business structure.
“Often, they’re initially operating as sole traders when they come to speak to us. So, we look for opportunities to structure them in a way where the income isn’t just running straight through their tax returns,” said Sowter.
“This is important for risk and asset protection, particularly where they have employees and also so that they’re not losing 47 per cent of their income to tax.”
Sowter said to determine the best business structure for a client, she’ll conduct a cost-benefit analysis.
“Obviously, with the more structures you have, the more cost there is and more annual compliance as well,” she noted.
Given the differences in payment structures offered by different content platforms, practitioners dealing with content creators must understand the payments their clients are receiving and how they should be treated from a tax perspective.
“With Twitch, for example, they receive donations so we need to ensure that payments are analysed and categorised correctly,” she said.
Identifying what is a genuine business expense can also be a challenge in this particular industry, she said.
“Ordinarily, you wouldn’t think of a video game as being a deductible expense but if they’re buying this game out to test on their YouTube channel then for them it might be,” she stated.
“Some creators also don’t realise that chair they sit in, or headphones they use or computer screens genuinely contribute to them earning an income and are therefore deductible.”
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