Legal Guide to Affiliate Marketing in Australia

Navigating the Legal Landscape of Affiliate Marketing in Australia – Over the past years, the realm of affiliate marketing has experienced an impressive surge in popularity, evolving into a substantial revenue avenue for many individuals while simultaneously serving as a potent expansion tool for businesses aiming to broaden their horizons.

At its core, this advertising mechanism involves businesses enlisting online content creators as partners to steer traffic towards their products and services through the use of affiliate links. As these content creators, also known as affiliates, successfully channel visitors to the business’s website resulting in a purchase, they are compensated with a portion of the sales as a commission.

While the landscape of affiliate marketing is wide open with opportunities, it’s crucial to acknowledge the distinctive legal requirements of those promoting certain programs and products. If you have followed any crypto program in 2022-2023 the downfall of FTX and other big-name crypto programs that were highly endorsed by AAA celebrities (who likely didn’t even check the product themselves).

This comprehensive guide serves as an illuminating resource, delving into the legal intricacies of affiliate marketing from a dual perspective: that of establishing and managing an affiliate program, and that of joining such a program as an affiliate partner.

From legal obligations to ethical considerations, this guide sheds light on the regulatory obligations and best practices, ensuring that both advertisers and affiliates can harness the potential of affiliate marketing within the bounds of legality and professionalism.

Is affiliate marketing legal in Australia?

Affiliate marketing is indeed legal in Australia, subject to adherence to the country’s legal framework. This entails compliance with consumer protection, privacy, spam, and taxation regulations.

Distinguishing itself from illicit pyramid schemes, genuine affiliate marketing involves commission-based rewards for bringing in new customers who make purchases. In contrast, pyramid schemes thrive on recruitment-driven profits rather than legitimate product or service transactions.

Is affiliate marketing regulated in Australia?

Regardless of the business you run there is a business model to follow and with it some legal frameworks that you must comply with. Imagine an internet where no one had to comply with any legal framework……just wild

Here are Australia’s legal frameworks that affiliate marketers can work towards compliance for:

• Australian Consumer Law, which guards against misleading advertising
• Spam Act 2003, which regulates electronic communications
• Privacy Act 1988, governing how personal data should be handled, and
• Specific industry codes of practice, depending on the product or service being marketed

These regulations are enforced by various government agencies, including the Australian Competition and Consumer Commission (ACCC) and the Office of the Australian Information Commissioner (OAIC).

Do I need to follow specific industry codes of practice?

Yes, depending on the nature of the products or services you’re promoting, you may need to follow specific industry codes of practice when setting up an affiliate program.

For example, if you’re running an affiliate program in the health industry, you must comply with the Therapeutic Goods Advertising Code. If you’re in the telecommunications sector, the Telecommunications Consumer Protections Code applies.

What are the legal requirements for affiliate marketing?

In Australia, affiliate marketers and affiliate programs must ensure the following:

• Promotional content should not be deceptive or misleading. Products and services should be represented truthfully.
• Promotional materials should only be sent electronically (e.g. email, SMS) to recipients who have consented. All communications should clearly identify the sender and offer an opt-out option.
• Personal data collected from customers or users must be handled according to the Privacy Act 1988, which sets out standards for collecting, using, and storing personal information.
• Anti-competitive practices, such as price fixing, are not allowed.
• Affiliates must disclose that they will earn a commission or other benefit on any sales made through their affiliate links.
• Income earned from affiliate marketing must be declared for tax purposes.

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What are the risks of running an affiliate program?

Like any business venture, affiliate marketing isn’t all fun and games. You need to accept the good with the bad if you’re going to make it part of your marketing mix. Some of the risks include:

• Reputational risk: Affiliates act as representatives of your brand. If they engage in unethical or misleading marketing practices, it could harm your brand’s reputation. A good name is worth its weight in gold!
• Fraud: Affiliate marketing programs can be targets for fraudulent activities. This could include click fraud (where people repeatedly click on links to generate revenue) or false sales claims.
• Lack of quality control: It’s not easy to ensure affiliates promote your products or services accurately and effectively. Poor quality promotion could harm your brand and result in lower conversion rates.
• Management complexity: Running an affiliate program can be complex and time-consuming. You must track affiliate sales, manage payments, handle disputes, and support your affiliates.
• Market saturation: If too many affiliates promote the same product or service, it could result in market saturation, making it harder for your affiliates to drive sales and for your business to stand out.

Use an Affiliate Agreement or Affiliate Terms & Conditions document to mitigate these risks.

Do I have to disclose if I run an affiliate marketing program?

Yes, transparency is vital in affiliate marketing, and it’s considered best practice to disclose that you run an affiliate program. However, no specific law in Australia mandates businesses to announce they operate an affiliate marketing program publicly.

Can I stop someone from joining my affiliate program?

Yes, you have every right to decide who can join your program. Think of yourself as the bouncer at an exclusive club, keeping the ratbags out! You set the rules and criteria that affiliates must meet. And don’t forget to make these criteria accessible on your website.

How do I ensure my affiliates stay compliant with Australian law?

To ensure your affiliates disclose their affiliate relationship and stay compliant with Australian law, you can take the following steps:

• Clear instructions: Provide your affiliates with guidelines on how and where to disclose their affiliate relationship. You should also provide clear guidelines around marketing activities for your brand.
• Affiliate Agreement: Include a requirement in your Affiliate Agreement that affiliates must comply with all relevant laws, including those regarding disclosure. Make it clear that failure to comply can result in the termination of the affiliate relationship.
• Regular auditing: Review your affiliates’ content to ensure they make appropriate disclosures and meet marketing guidelines.
• Standardised disclosure text: Consider providing a standardised disclosure text or statement your affiliates can use.

Do I need an Affiliate Agreement or Affiliate Terms & Conditions?

Yes. An Affiliate Agreement or Affiliate Terms and conditions are crucial when setting up an affiliate program. This document forms the legal foundation of your relationship with your affiliates. It outlines the program’s rules, sets expectations, defines the responsibilities of each party, and helps protect your business from a legal and brand reputation perspective.

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What clauses should my Affiliate Terms & Conditions include?

Your Affiliate Terms & Conditions should include the following clauses:

• Commissions: Details on how commissions are calculated, when and how they are paid, and the circumstances where commissions may be denied or reversed.
• Obligations of the Affiliate: This includes compliance with relevant laws (such as disclosure requirements), restrictions on promotional methods, and responsibilities to represent your products accurately. You should also clarify any restrictions around pricing, discounts, geography, and any other limitations important to you.
• Obligations of the Company: These usually include providing promotional materials, tracking sales, and handling commission payments.
• Term and Termination: How long the agreement lasts, how either party can terminate the deal, and what happens when the agreement ends are factors that must be addressed. A good example is the stipulation that the affiliate may no longer use your brand IP once the agreement has terminated.
• Confidentiality: Any restrictions on the use and disclosure of confidential information.
• Liability: Disclaimers of liability and indemnity clauses.

A comprehensive and transparent Affiliate Agreement can help prevent misunderstandings, manage disputes, and ensure your affiliates understand and stick to their responsibilities.

Do I need a company to start an affiliate marketing program?

While a Pty Ltd company structure can provide benefits such as limited liability, starting an affiliate marketing program without one is not strictly necessary.

Individuals, partnerships, or sole traders can also run affiliate programs but should be aware of potential personal liability and tax implications. Our guide on choosing the right business structure will come in handy.

Are affiliate payments tax deductible?

Yes, in Australia, affiliate payments made to affiliates for their marketing services are generally considered a business expense and are, therefore, typically tax-deductible. However, you should consult your accountant to ensure proper handling of these deductions. No one wants to be caught out by the ATO!

Growth of Affiliate Marketing in Australia, post COVID the interest in make money online and affiliate marketing has skyrocketed over 260% in Australia

Source Google Trends

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Can I post affiliate links on social media?

Yes, affiliates can post affiliate links on social media. However, Australian law and the rules of many social media platforms require you to disclose affiliate relationships clearly and conspicuously. You should indicate when a link is an affiliate link by including a disclosure statement or using a hashtag like #ad or #affiliatelink.

Is it legal to post affiliate links on Facebook?

Facebook does allow affiliate marketing, but it prohibits certain types of behaviour, such as misleading practices or spammy content. If your posts violate Facebook’s rules, your content could be removed, and your account could be suspended or banned. You never control your social media content its always owned by the platform.

What are the legal obligations of an affiliate?

As an affiliate, you have several legal obligations, including

• Honest advertising: According to Australian Consumer Law, you must ensure your advertising is not misleading or deceptive. This means you must accurately represent the products or services you’re promoting.
• Disclosure: Everyone’s tired of dodgy websites, so don’t be one of them! Transparency is super important. You must clearly disclose your relationship with the business you’re promoting and that you earn a commission on any sales made through your affiliate links.
• Privacy laws: If you collect personal information from your visitors (e.g. for a newsletter), you must comply with the Privacy Act 1988, which sets out how personal data should be collected, used, and stored.
• Email spam: You must comply with the Spam Act 2003 if you send electronic promotional material. This requires consent from the recipient, identification of the sender, and the inclusion of an unsubscribe link.
• Compliance with the Affiliate Agreement: Affiliates are typically bound by an agreement with the business they’re promoting and must comply with the Terms and conditions outlined in the contract.
• Tax obligations: Affiliates are responsible for declaring any income earned from affiliate marketing and paying the appropriate taxes.
• Social media platform policies: If you are promoting on social media platforms, you need to follow the rules and guidelines of those platforms.

Do I have to disclose affiliate links in Australia?

Yes, in Australia, disclosure of affiliate links is legally required. The Australian Consumer Law (ACL) mandates transparency in advertising and marketing practices. 

As an affiliate, you must clearly disclose that your content contains affiliate links and that you earn a commission if users purchase using those links. This disclosure should be prominently displayed to ensure transparency and maintain consumer trust.

Google now requires that affiliate links are marked in your website HTML code. They recommend using the industry standard rel=”sponsored” tagging of affiliate links. Read more about Google’s stance on paid links here.

Does affiliate marketing count as a business?

Yes, affiliate marketing is considered a business. The criteria for qualifying as a business include the regular and systematic promotion of products or services and making a profit from the activities. 

Do I need an ABN to be an affiliate in Australia?

You should be entitled to an Australian Business Number (ABN) if you conduct business activities. Affiliate marketing usually requires an ABN. The scale of revenue may impact whether you need an ABN, so consult your accountant or tax professional for more advice.

An ABN allows you to operate as a business entity, report your income, and claim expenses related to your business. It also helps you comply with tax obligations and demonstrate that you engage in legitimate business activities.

Do I need a contract for affiliate marketing?

Entering into an Affiliate Agreement or Affiliate Contract is always advised, as it clearly indicates each party’s duties. Contracts help ensure a professional and mutually beneficial relationship between the business and the affiliate marketer.

These contracts typically cover elements like commission structure, payment terms, disclosure requirements, promotional guidelines, and termination clauses. If a dispute arises, the parties will have a clear set of guidelines to refer back to.

Is affiliate income taxable in Australia?

Yes, affiliate income earned in Australia is generally taxable, subject to the ATO’s tax threshold. According to the Australian Taxation Office (ATO), any payment received from affiliate marketing activities is considered assessable and must be declared on your tax return.

This includes commissions earned from affiliate sales, referral fees, or any other form of compensation received as an affiliate marketer. Any expenses associated with generating your affiliate income can be claimed as deductions against that income.

Can content creators write off expenses?

Yes, content creators, including affiliate marketers, can claim certain business-related expenses as deductions, for example:

• Equipment and tools: Cameras, lighting equipment, editing software, computers, and other necessary technology.
• Content creation expenses: Costs related to creating and producing content, such as props, costumes, set design, and location fees.
• Marketing and promotion: Expenses for advertising, social media management tools, website hosting, and domain fees.
• Education and training: Costs for courses, workshops, conferences, or relevant educational materials to enhance your skills and knowledge.
• Travel and accommodation: Business-related travel expenses, including transportation, accommodations, meals, and associated costs.
• Home office expenses: If you have a dedicated space in your home for conducting your content creation activities, you can claim a portion of your rent or mortgage, utilities, and other related expenses.

Can the ATO see my PayPal account?

For most people NO they can not, unless you become a target of interest and have started raising eyebrows within the tax department. This could be from years of good or bad history not just from affiliate marketing. The Australian Taxation Office (ATO) can access your financial information, including your PayPal account if looking into your account.

Under the Taxation Administration Act 1953, the ATO has the power to request information from financial institutions, including transaction details and account balances, to verify income and assess tax liabilities. 

The ATO may use this information to cross-reference with tax returns and identify discrepancies or potential non-compliance. Its in your best interest to not raise any questions about your business and to file your taxes and comply to any consumer laws within your region.

I never had this type of information when starting out so I hope this is helpful for people starting to build their affiliate marketing business in Australia.