Ask LH: Can I Turn My Instagram Feed Into A Tax-Deductible Business?

Hey Lifehacker, I'm a bit of a coffee and food connoisseur (snob more like it), and I also use Instagram to let everyone know where I am and what I think of what I'm having. What is stopping me from creating a "business" and a website where I rate food and coffee on Instagram (and my website) and writing the costs of this off against my personal income tax?

I have a trip to the US booked for next year and it sure would be nice to write THAT off against my taxable income. There are plenty of people on Instagram I am following that appear to be doing just this and I'm wondering how they are doing it!

Thanks Taxable Traveller

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Dear TT,

For any specific tax issues, it's always best to seek advice from a professional, and that goes double when you're trying to set up a new business. With that said, to have any chance of your claimed travel deductions surviving an audit by the tax office, you would need to demonstrate that you had a clear business plan, and the potential for the site to earn money in the future. Simply saying "I post reviews online" isn't going to be enough, we imagine.

In the case of an Instagram-driven business, you would absolutely need your own web site. Instagram doesn't allow individuals to place ads in their own stream, so you have no way of making money from Instagram itself. Setting up a site that showcases your pictures and comments and also features advertising means you at least have a fighting chance of making money.

One other aspect to be aware of is that the ATO is generally quite strict about apportioning costs. If you take a trip overseas and claim it all against business, the onus will be on you to demonstrate that the entire trip was for work purposes -- and merely claiming that you review coffee probably won't cut it.

Bottom line? If you're serious, develop a real business plan and put some time into it. If you want to keep enjoying food and coffee as a hobby, keep doing that. If you end up with a massive audience, you can revisit the idea of it being a business.

Cheers Lifehacker

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Comments

    I think it's fitting that this question was addressed during evil week.

    I'm assuming that you are looking to trade as a Sole Trader, which means the ATO will also require you to pass one of the tests under the Non-Commercial Losses Rules in order to claim a loss against your other income. The test used most often is a turnover of $20,000 in any one financial year.

    Did the business make a loss and your turnover was less than $20,000? The loss cannot be claimed against other income.

    Did the business make a loss and your turnover was greater than $20,000? You can claim the loss against your other income. You still have to be aware of apportioning costs as mentioned in the article above.

      This.

      To be honest Angus, I'm really not sure why you answered - or didn't answer this one.

      There is a clear threshold that separates your business from a hobby, this would have been the starting point. If you don't meet those thresholds, it doesn't matter how good your business plan is.
      https://www.ato.gov.au/Business/Non-commercial-losses/Income-requirement-and-business-tests/

    I would have thought that you're business expenses are only claimable against your business income.if you're making advertising revenue from your website then claiming your expenses should be no drama. Im not sure you'd be able to claim against income from your primary job that's not related...

      You can as a sole trader if you have an operational business. You combine your income with your business profit or loss to have your total taxable income. Doesn't matter if the activities are related.

    Be careful. Someone I work with had a part-time photography business. She had a holiday in Europe, and claimed 90% of the trip on tax. She got audited and the ATO discovered holiday snaps at many locations totally unrelated to her business. She got a massive fine. Taking some professional shots at each stop along the way, is not enough for the ATO to say that was 90% of your trip.

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