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Tax and the creative arts

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Tax time is coming up in Australia, but this advice applies to anyone dealing with bureaucracy.

Australia has a provision in the tax system for residents working in the creative arts. It caters for situations where a person might receive an advance or a commission of a lump sum that would usually attract taxation at a certain level, but instead takes into account the fact that this money is not the artist’s monthly salary but a once off payment that needs to be spread out over several months or years. All very well and good.

So I was disappointed to read in Stephen Feneley’s Arts About column in The Sunday Age Preview magazine about an artist who had received critical acclaim in her field, but who was required to pay back tax rebates she had claimed for her expenses. The government’s reasoning was that her art was a “hobby”, not a profession, because she didn’t earn enough.

I’m sure many in the creative arts reading that report groaned (or worse) in frustration, disillusionment, and anger. The truth is, though, that politicians will always pay only lip service to the arts until such time as they can be used in a political way – such as propaganda, or, more commonly, providing tax. Perhaps Hollywood has better clout, but the creative industries in Australia don’t pay enough tax to be taken seriously. In fact, they are in serious threat of being sidelined or even cancelled due to lack of investment funds. Sad, if you think of the famous creative names who have come from Australia. Note how many of these people have had to move to the US in order to grow their careers.

So what do you do when you’re told your passion is only a hobby? My advice is: call it a hobby for tax purposes if you have to. The income earned from a hobby, up until a certain amount, is tax free. The flip side, though, is that you cannot claim expenses. However, you can request that your past tax returns be reviewed if your circumstances change. I highly recommend that you check with a tax specialist if you start earning a professional income from your art, because in some instances your unclaimed expenses in previous years can be claimed against your income in this year. Remember that a consultation is usually tax deductible the following year, so it’s worth getting the advice.

If somebody's form doesn't cater for your real occupation and you have to fit yourself into a traditional label somehow, don’t stress about it. Bureaucrats don’t care what you do, and they certainly don’t care about what you’re passionate about. Trying to fight the system will only take precious time and energy away from your art.

But if you do want to give a voice to your frustration at the lack of acknowledgement and respect artists receive, you can always vent in the usual, and not so usual, ways. Write to various politicians, complain to companies' customer relations departments, or check what your local creative society is attempting to do and offer to assist. If you want to take up the crusade yourself, I’m sure thousands of artists would love you for it. But think carefully about what it would cost you in lost productivity. Or consider working your message into your art...

copyright © Elsa Neal 2006 (Please contact the for permission to reprint this article.)

Further reading at Amazon.com

Tax Deductions A to Z for Writers, Artists, and Performers by Anne Skalka

Home Business Tax Deductions : Keep What You Earn by Stephen Fishman

The Business of Being an Artist by Daniel Grant