What sort of income do you earn from YouTube?

By December 15, 2015September 10th, 2018Entertainment Industry, Tax


More and more young (they mostly seem to be young!) content producers are finding a growing audience using free-to-view online streaming services such as YouTube. Such services provide a great platform for producers to find a market for their typically niche offering without the difficulty, risk, and costs associated with more traditional distribution channels.

So, you’ve created the content, uploaded it and have found an audience racking up the views, you’ve fought off the trolls, and now you’re in a position to actually start making some money from your loyal viewer base. If you’re killing it, Google (as owners of YouTube) will get in touch to discuss how you can monetise your views and what kind of money you can expect, but don’t wait on that, take a look on their site to register for the partner program to ensure when you’re eligible that you don’t miss out.

Below I’ll go through a few of the different ways you can earn money and some of the things to think about. Before I do that, I have to recommend you hire a good accountant and a good lawyer. It’s important that both of which have the relevant experience – monetising online success is a very new space and not one that all professional advisers will be savvy to.

DOWNLOAD our free eBook which covers the basics of tax for small business owners.

Advertising revenue (i.e. pay for views)

Once you hit a certain number of views and/or followers, you should be getting in touch with Google to  discuss getting paid a split of the advertising revenues Google is earning off the back of your videos. Once you’re in the big leagues you’ll be offered a contract that will specify how you’ll get paid. Importantly, the wording of the contract will dictate the tax implications of the money you’ll receive. This is important because due to the various pieces of anti-avoidance legislation in Australia (e.g. Personal Services Income and Part IVA) some kinds of income can be taxed more favourably, such as royalties, than other types of income, such as fees for services (e.g. advertising revenue). There is also an argument floating around that this type of income could be classified as a licencing fee rather than any kind of advertising revenue. Point is, this can get complicated and have far-reaching implications, so please do get professional advice!

Digital sales

Many an app has been sold off the back of a loyal online following and there are a few tax issues to be aware of before entering into an agreement with iTunes or the Google Play store. Please note that I’ve said “app” here, but really this could apply to almost any piece of digital content you sell.

  • Foreign withholding tax – does the sale constitute a royalty? Normally it will be a royalty meaning it’ll be subject to a rate of withholding tax from the country of sale. These amounts will vary from country to country and can generally be varied downward if there is an appropriate agreement in place between Australia and the country of sale. The withholding is the obligation of the payer (e.g. iTunes) and will affect the cash you receive. It also should be noted that whilst you can use the foreign tax withheld as a tax credit here in Australia, you can only apply it to foreign profits – not Australian profits – which can lead to issues if you’ve made a foreign loss (e.g. you may have undertaken a promotional tour in the US with lots of costs attached).
  • Sales taxes – Australia has the GST, the UK has the VAT, the various states of the United States have their own sales taxes. It’s important to be aware of the  possibly nightmarish implications of needing to register, account, and return sales taxes in the various jurisdictions you sell your app in around the world.
  • Structuring – are you selling your app at such volumes that the tax impact of the money crossing borders back here to Australia is no longer cost effective? It may be time to look at setting up an entity in the foreign jurisdiction to cut down on paying unnecessary levels of tax.


The sales strategy behind (part) of any pop stars success is the sale of merchandise – simply select an ordinary object (e.g. pillow case, mug, lanyard, any useless junk, really), slap a logo on it and resell it for ten times the original cost. Brilliant.

These are a few of the many issues to consider before jumping head-first into selling merchandise with the view to capitalise on your viewer base:

  • Outsourcing – you may decide to outsource the entire merchandise function to a third party supplier. They are around and they can handle everything if you want – design, manufacturing, sales, distribution, advertising, etc. Before jumping into bed with a third party you’ll need to do your research and get some credible references. We’ve seen a few cases where clients have been burnt by less than competent third party merch suppliers.
  • Warehousing – if you decide to go it yourselves, where will you store your merchandise? Your parent’s garage might suffice to start with, but with any level of success you’ll find yourself outgrowing the garage and needing to find proper warehouse space. Have you budgeted this in? Is it reflected in your sales price?
  • Stock –  as any regular view of Shark Tank can tell you, it is incredibly important not to tie up too much cash in stock! However, it’s also important not carry so little your viewers are unable to buy that hat they want when they want it. Stock levels are a delicate dance and having a reliable supplier who can supply on demand can help dramatically with this and reduce the need to predict the future.

So, if you find yourself in the fortunate position of being able to make some money off your YouTube channel – or any online venture – please get in touch, we’d love to help ensure all the relevant issues are considered so you can maximise your earnings. We work with many of Australia’s highest ranked YouTube channels and find it an interesting and constantly evolving area to be involved with.