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In Short
- Classify the Influencer's Status: Determine if the influencer is an employee or contractor to understand your tax obligations.
- Understand Their Business Structure: Engaging influencers through companies or trusts may exempt you from certain tax obligations.
- 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.
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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 for the purpose of avoiding 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 exemption that applies. You can read about these here.
Do I Need to Withhold From Payments Made to Influencers Under the PAYG Withholding System?
The short answer is most likely yes.
There are certain payments that attract PAYG withholding obligations. If such a payment is made, the person making the payment is required to withhold an amount from that payment 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 captured as a payment that attracts PAYG withholding obligations. The term "performing artist"is defined broadly and encompasses singers, dancers, models, actors, and former sportspeople.
The concept 'performing artist' also encompasses 'influencers'. This is because influencers are generally paid to promote goods or services. 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.
The term "employee" has an extended meaning for superannuation purposes. One of those extended meanings arises when a person "is paid to perform or present , or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills" (emphasis added).
Where this meaning is satisfied, for superannuation purposes, the person making the payment is deemed an employer, and the person receiving the payment is deemed the employee of the deemed employer.
The above extended meaning often captures influencers, given that influencers are inherently paid to participate in promotional activities, such as promoting another brand's goods or services. This means that if you engage an influencer to promote your products, you will likely be required to pay superannuation on the amount paid to them.
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.
Western Australia does not have relevant contract provisions. Unless a contractor is considered an employee under common law or is part of a labour hire business, there are generally no payroll tax consequences in Western Australia.
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 often have superannuation, PAYG withholding, and payroll tax obligations, unless an exemption applies. If an influencer engages as a non-sole trader (e.g., company or trust), they are generally not subject to superannuation or PAYG withholding obligations. However, they must still be considered for payroll tax purposes.
If you have any questions concerning tax, our experienced tax 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 1800 534 315 or visit our membership page.
Frequently Asked Questions
Do I need to withhold tax when paying an influencer?
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).
Do I have to pay superannuation for influencers?
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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
