Adsense and Australian Tax: How do you pay it, what do you pay?
Wednesday, August 22nd, 2007Suppose you live and work in Australia, blog part-time (or even full time) and earn money from Adsense. How does it work from a tax point of view?
If you live and work in Australia, and just get a few extra dollars from Adsense—which would be the case for most part-time bloggers—you are what the U.S. tax service (IRS) deems a non-US business with no U.S. activities. Google defines the various tax types on their Adsense Tax Information page.
In this case, when you fill in you tax information on the Adsense site, Google will record you as being a Foreign Publisher with no U.S. Activities, and will not withold any tax from your Adsense money.
You must declare this as foreign income on your Australian tax return.
To give you an example.
- Suppose you earn $A40,000 for the year
- On this amount, you pay $6,300 tax
- But, you also earned $A5,000 from Adsense (note that this is in Australian dollars, foreign income must always be converted to Australian dollars, but that’s fine with Adsense, because they do that for you)
| Income source | Income | Tax paid | |
| Salaried job | $A40,000 | $6300+medicare | |
| Adsense earnings (foreign income) | $A5,000 | $A0 | |
| Total | $A45,000 | $7800+medicare |
You have under paid your tax by $1,500.
You must declare the money. Adsense have a record of paying it, the banks have a record of it going into your account. If you do not declare it you’re likely to find the ATO knocking on your door one day, wanting to audit you.
However, you did expend money to earn that $5,000. You may have had to create a blog site, pay hosting fees and pay for your domain name, not to mention the PC you use to create the blogs. This is where the value of a good tax agent comes in. They will know what to claim, and when it is reasonable and valid to do so. (If your Adsense income is $5 for the whole year, you’re not going to be able to claim much.)
If you are a U.S. business, or an non-U.S. business with U.S. activities the whole thing changes, because there is U.S. tax to take into account, and that is beyond the scope of this blog. See a specialist tax preparer or accountant in this case.
September 29th, 2007 at 5:38 pm
[…] If you are an Australian publisher, there is a good example to read here. It touches on some important issues for Australian taxpayers. […]
October 6th, 2007 at 8:10 pm
Regarding your example of someone who earns income as an employee as well as from Adsense someone in that category really should set up as a sole trader with ABN etc if earning 5 grand a year because that’s beyond what the ATO considers a hobby
A big benefit of doing so is eligibility for the 25% Entrepreneurs Tax Discount for Australian Small Business
PS you may find my articles on Adsense Income & Tax issues in Australia helpful as well
October 11th, 2007 at 6:55 am
Good point, Neerav.
To see how the Entrepreneurs’ Tax Offset (ETO) works when you earn money from another job as well as money from Adsense, check out the “Sole Trader with other business income” calculation on the ATO’s “Simplified tax system: the 25% entrepreneurs’ tax offset” page (http://www.ato.gov.au/businesses/content.asp?doc=/content/67700.htm).