In Short
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Classify the Influencer’s Status: Determine if the influencer is an employee or contractor to understand your tax obligations.
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Understand Their Business Structure: Engaging influencers through companies or trusts may exempt you from certain tax obligations.
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Comply with PAYG and Superannuation Requirements: Ensure you meet withholding and superannuation obligations when applicable.
Tips for Businesses
When engaging influencers, clearly define their role and business structure. If they’re employees, withhold PAYG tax and pay superannuation. For contractors, ensure payments are correctly classified to avoid unnecessary tax liabilities. Always consult with a tax professional to ensure compliance with all obligations.
Table of Contents
- Is the Influencer an Employee or a Contractor?
- What Is the Influencer’s Business Structure?
- Do I Need to Withhold From Payments Made to Influencers Under the PAYG Withholding System?
- Do I Need to Pay My Influencer’s Superannuation?
- Are There Payroll Tax Implications When Engaging Influencers?
- Should an Influencer Be Charging Me Goods and Services Tax (GST)?
- Key Takeaways
- Frequently Asked Questions
In the age of social media, it is a very popular strategy to engage influencers to promote products and branding. Doing so can bring in new income streams by significantly increasing the reach of your goods or services. However, if you choose to engage an influencer to promote your products, be aware of your tax obligations. This article explains the tax implications of engaging influencers and provides guidance on managing these implications.
Is the Influencer an Employee or a Contractor?
If you have chosen to employ the influencer (e.g. as a casual worker) then the tax implications are straightforward – you will need to withhold from payments made to the influencer under the pay as you go (PAYG) system, pay their superannuation into their nominated superannuation fund, and include amounts paid to them in your taxable wages for payroll tax purposes.
If the influencer engages with you as a contractor or even as someone who merely promotes your business’s products and branding for credit or a commission-based structure (for the purposes of this article, we will call them contractors), there can still be tax implications. These are discussed below.
What Is the Influencer’s Business Structure?
If the influencer is a contractor, the first question to ask is what their business structure is. If the influencer engages through a non-sole-trader structure (e.g. a company or a trust), there are generally no PAYG withholding or superannuation obligations. The exception to this is if an avoidance scheme has been entered into to avoid the tax implications of engaging a sole trader for services. An example is directing the influencer to set up a company because you do not wish to pay their superannuation.
Payments to non-sole trader influencers can still attract payroll tax obligations. However, there may be an applicable exemption. You can read about these here.
Continue reading this article below the formDo I Need to Withhold From Payments Made to Influencers Under the PAYG Withholding System?
The short answer is most likely yes.
In fact, certain payments are subject to PAYG withholding obligations. If such a payment is made, the person making it must withhold an amount and pay it directly to the Australian Taxation Office (ATO).
Payments made to an Australian performing artist contracted to perform in a promotional activity are treated as PAYG withholding obligations. The term ‘performing artist’ is defined broadly and includes singers, dancers, models, actors and ex-sportspersons.
The concept ‘performing artist’ also captures ‘influencers’. This is because influencers are generally paid to promote goods or services. Essentially, this means that someone paying an influencer for such services would need to withhold tax from those payments and remit it to the ATO.
Do I Need to Pay My Influencer’s Superannuation?
The short answer is also likely to be yes.
These superannuation contributions must be made directly to the influencer’s chosen superannuation fund (or, if they do not choose one, to their stapled fund). Paying the superannuation directly to the influencer with the expectation that they will pay it into their own superannuation fund will not overcome this obligation for you and your business.
Are There Payroll Tax Implications When Engaging Influencers?
Payments to the contractor can be considered “wages” for payroll tax purposes. Whether a payment to a contractor is considered wages for payroll tax purposes depends on whether the arrangement satisfies the “relevant contract” provisions. These provisions apply when:
- there is a contract, undertaking or arrangement from one person to another person or entity; and
- the person provides services for or in relation to the performance of work, unless an exemption applies.
Most states and territories have exemptions for contractors who work under a certain number of days. If the services are not required for more than a specified number of days, there may not be payroll tax implications. However, seek advice in the state or territory where the influencer provides services, as each jurisdiction differs.
Should an Influencer Be Charging Me Goods and Services Tax (GST)?
The short answer is usually no, even if the influencer is registered for GST.
One of the requirements for someone to charge GST is that they are carrying on an “enterprise”. Certain activities are specifically excluded from the meaning of “enterprise”, including those that are subject to certain PAYG withholding obligations. This includes payments to influencers.
As such, your influencers should not be charging you or your business GST if you are withholding from their payments.
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Key Takeaways
While engaging influencers is a great way to promote your brand, it does not come without tax obligations. Influencers are a particular class of persons where there are almost always superannuation and PAYG withholding obligations, as well as payroll tax implications unless an exemption applies.
Despite this, an influencer who engages as a non-sole trader is generally not subject to superannuation or PAYG withholding obligations. However, they must still be considered for payroll tax purposes.
If you have any questions about the tax implications for your business, our experienced taxation lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Yes, most likely. Payments made to influencers for promotional activities are subject to PAYG withholding obligations. You need to withhold tax and remit it to the Australian Taxation Office (ATO).
Yes, in most cases. If an influencer is paid to participate in promotional activities, you will likely need to pay superannuation contributions to their superannuation fund.
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