Tax on OnlyFans income NZ

The digital economy has revolutionized the way we create, share, and consume content. As a content creator, you are part of a dynamic and rapidly evolving landscape where your creativity can reach global audiences and generate diverse income streams. However, with these opportunities come responsibilities, particularly in understanding and managing your tax obligations. So is there tax on OnlyFans income NZ?

This guide aims to provide you with essential information on how to manage your finances effectively, ensuring you meet your tax obligations while maximizing your deductions and minimizing your tax burden.

Is there tax on OnlyFans income in NZ?

Initially, lets determine whether your activity is a hobby or a business. IRD, consider the following factors:

1. The frequency and regularity of payments you receive.
2. The nature of your relationship with those who pay you for your content creation.
3. The purpose behind the payments you receive.

According to the IRD, if you earn more than $200 in untaxed income from any source, including content creation, during a tax year, you must report it on an Individual tax return – IR3. This indicates that the threshold for reporting is low!

Therefore, if you monetize your content and receive regular payments from subscribers or platforms like OnlyFans or Fansly, this income is likely taxable. This is because:

1. Subscriber payments are received monthly.
2. Subscribers pay to access your content.
3. You create content with the intention of generating income.

Ok, so I’m in business. What is income for tax purposes?

Income can come from a wide variety of sources, such as:

• Onlyfans/Fansly/Fancentro payments
• Payments for advertisements embedded in the online content
• Donations or gifts, including non-monetary gifts
• Payments for promoting products or brands
• Commissions earned from affiliate marketing and links
• Pay per view content or custom requests
• Monetising your Snapchat

What happens if I receive gifts from fans?

Content creators often receive funds through online payment or donation platforms. Although these payments may be labeled as “gifts” or “donations,” the terminology does not determine their nature or whether they are considered income. Such payments can become taxable income if they result from the content creator’s online presence. For example, placing a link to an Amazon wishlist, where fans can purchase items for you, are likely to be considered taxable income.

Surprisingly, you must declare gifts as income. The Inland Revenue Department (IRD) has 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!

Keeping good records

It’s essential to keep records of all your income and expense receipts and maintain them for the last seven years in case of an audit. The IRD emphasizes the importance of good record-keeping for all businesses. Failing to keep accurate records can be risky and may result in:

• The IRD treating you as having more income than you actually do.
• Disallowing deductions for expenses you could have claimed if you had kept proper records.
• Imposing penalties and interest for underpayment of tax.

 Deductible expenses against your content creation income

Tax deductible expenses are costs that a business incurs in the process of earning income. These expenses can be subtracted from gross income to determine net taxable income. Tax is paid on the net income.

Key points about tax deductible expenses:

100% Business-Related

Only expenses that are directly related to the business and necessary for earning income are deductible. Personal or private expenses are not deductible.

Example: 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.

Partially Deductible Business-Related

Some expenses may only be partially deductible due to the nature of the expenses and the need to distinguish between business and private use.

Items such as clothing, makeup, and props may not be automatically tax deductible. To be eligible for deduction, an expense must have been specifically acquired for use in your video content. For example, you may by make-up but this is used in both your filming and in your non-business day-to-day life. An apportionment then may be required.

Non-Deductible Expenses:

Some payments are non-deductible meaning they cannot be claimed as an expense. These include:

1. Capital Expenditures: Costs for assets/equipment over $1,000.
2. Loan Principal Repayments: Repayments of the principal amount of loans.
3. Private Expenses: Personal costs such as life insurance, living costs and private interest payments.
4. Entertainment Expenses: Only 50% of these costs are typically deductible.

Items such as clothing, makeup, and props may not be automatically tax deductible. 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 dress, wear it in a video once, and then incorporate it into your regular wardrobe, it unlikely to have a stronger enough connection to your income to qualify as a taxable business expense.

Learn more: Tax Deductible Clothing

Understanding which expenses are deductible helps businesses reduce their taxable income, thereby lowering their tax liability. Eg: A Model earns $60,000 a year but incurs $15,000 of expenses in connection with their content creation. This leaves a total of $45,000 of income that will be taxed.

Examples of deductible expenses against my OnlyFans income

The following are examples of expenses that could be deductible (in full or part) by an OnlyFans model as part of their work.

Home expenses – If part of your home is used for business purposes, you can only deduct the portion of home expenses (such as rent, power, rates/water, and internet) that corresponds to the business use of the home. This requires an apportionment based on the area used for business versus the total area of the home.

Marketing and Advertising costs – Costs associated with creating brand awareness of driving traffic to your OnlyFans page/website etc.

Depreciation losses – An allowance for a reduction in value of assets over $1,000+GST such as camera equipment. The cost of assets over $1,000 are spread over time as opposed to claimed in the year of purchase.

Professional fees – Fees associated with accounting or legal matters.

Subscriptions & Phone/Internet –Subscriptions for online content or applications such as photo editors. In addition, broadband and phone plans may be expensed.

Learn more: What expenses are tax-deductible in NZ?

Tax on OnlyFans income NZ – GST

GST is a tax in New Zealand that is charged on the supply of goods and services. OnlyFans models are creating media, which is a supply to the OnlyFans (or similar) platform. A business, 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, you will be required to register for GST and file GST returns as part of their accounting requirements.

Learn more: GST for New Zealand Businesses: A Comprehensive Guide

Summary – Tax on OnlyFans income NZ

While content creation is a business, it’s important to recognize that engaging an accountant becomes truly beneficial when your operations reach a certain scale. For smaller creators, managing finances yourself might suffice. IRD have great resources on this which we have summarised above, but you can access these in full here.

However, as your audience and revenue grow, the complexities of financial management increase, making professional accounting services invaluable. Larger content creator businesses can greatly benefit from our expertise, ensuring financial health and compliance, and allowing you to focus on what you do best—creating engaging content!

 Why Choose Business Like NZ as Your Accountant?

At Business Like NZ, we understand the unique challenges small businesses face. Our extensive experience with various industries allows us to identify and navigate common pitfalls and tax opportunities effectively. We recognize that discussing the Adult Modelling industry can be hard to talk about. To ensure your comfort, we can connect you with one of our female Directors and Client managers, making it easier for you to discuss your business and tax matters openly.

 If you would like to discuss your tax obligations with us, please contact us at the office.