Blogging - Am I A Business?

It is only a matter of time before the tax office scrutinises our internet activity as we roar forward into the era of social media.  Facebook, Websites, Blogs – these are all possible sources of revenue with opportunities for advertising, sponsored blogs and paid guest blogs.

So what is income and what isn’t?  And what do you need to declare for tax purposes?

The first step is to establish if you are carrying on a business or if you are merely carrying on a hobby on your blog or alike. 

Unfortunately there isn’t a simple answer as to whether you are carrying on a business or not.  It becomes more a question of fact, that is, the more facts that point to a business activity the increase in likelihood you are a business, not a hobby.  And just because your friend might be a business doesn’t mean you are too – each case is different and therefore each case needs to be examined individually.

As a guide, the tax office suggests using the following questions in determining whether you are a business:-

Ø  Does your activity have a significant commercial purpose or character? Ø  Do you have more than just an intention to engage in business?  For example are you not only blogging but also engaging sources of revenue such as advertising and sponsorship? Ø  Do you have a purpose of profit as well as a prospect of profit?  For example, are you actively pursuing advertising opportunities and entering into agreements which will be a form of income? Ø  Is there repetition and regularity to your activity?  For example, is paid advertising or sponsorship a one-off or “ad hoc” or is it a regular thing? Ø  Is your activity carried on in a similar manner to other businesses in your industry? Ø  Is your activity planned, organised and carried on in a business-like manner? Ø  Does your activity have characteristics of size, scale and permanency? Ø  Would it be true to say your activity is really better described as a business, rather than a hobby? Ø  Do you have a business plan? Ø  Have you done market research? Ø  How much activity to you spend on the activity?  Is it part-time or your main source of income? The more times you answer “yes” the more likely it is you are running a business. If you are running a business then your income will be assessable for income tax purposes.  You will need to obtain an ABN and raise tax invoices (detailing your ABN).  Should you earn more than $75,000 you will also need to register for GST. If you are a business, you can also then claim applicable expenses incurred to generate income.  For example, if you blog and communicate with prospective sources of revenue on the internet, an obvious expense is the charge of the internet.  The tools necessary to your business are your notebook computer, iPad or iPhone and printer, so these will all become items which can be expensed either immediately or over the deemed life of item (depreciated).  There may be other expenses too that are partly business and partly personal, for example monthly mobile telephone calls, or a portion of electricity charge for a home office. If you only answered yes a few times to the above questions it may be that you are carrying on a hobby not a business and thus any income earned is not assessable for income tax purposes and any expenses incurred are therefore not claimed as tax deductions.  For example, if the blog is something you do in your spare time and income earned from it is very ad-hoc, not actively sought and not the sole purposes of the blog, then it is more likely to be a hobby. Please note that this is general information and not advice.  As this is very much a question of fact, I suggest seeking advice from a qualified accountant.