It’s that most hated time of year again, and as always, creative businesses and professionals are in an interesting position with regard to deductions. Many of us are individuals, small businesses, AND professional artists. We cross multiple possible areas of deductions (according to the ATO Tax Rulings) so it’s super important to double-check all of your supposed deductions with your accountant or directly with the ATO. There are an awful lot of surprisingly grey areas around some claims.
For more useful info about your tax situation, check out https://creativeplusbusiness.com/tax-time-for-creative-business/
So what is a tax deduction? (From www.ato.gov.au)
A tax deduction is an eligible business or professional expenses that you can subtract (or deduct) from your overall assessable income to reduce your taxable income, which can mean paying less tax.
The three golden rules for claiming your business expenses are:
- The money must have been spent for your business (not exclusively a private expense).
- If it is for a mix of business and private use, only claim the portion that is related to your business (this is called apportioning).
- You must have records to prove it – digital records are fine, but you’ll need paper copies of original receipts as well.
You can watch the ATO’s Income tax deductions webinar about the principles of income tax deductions that apply to all businesses.
You can claim a deduction for most expenses you incur in running your business if they are directly related to earning your assessable income. This is true for sole traders, partnerships, and companies — but the generosity of deductions and what you’re entitled to claim will vary.
You also need to work out if the ATO would classify you more as a hobby than a business. If you’re not yet considered to be a ‘business’ for the purposes of tax, your deductions will be very limited. Do the test here to find out if you’re a hobbyist, a business, or somewhere in between: http://start.business.gov.au/
Here are some of the most common small business deductions available, and how to calculate what you might be able to claim:
Working From Home: https://www.ato.gov.au/Calculators-and-tools/Home-office-expenses-calculator/
Using your Car for Business or Professional Travel: https://www.ato.gov.au/calculators-and-tools/work-related-car-expenses/
Other kinds of Work-Based Travel: https://www.ato.gov.au/uploadedFiles/Content/IND/Downloads/travel-expenses.pdf
Workshops, Training, and other Self-Education Expenses: https://www.ato.gov.au/Calculators-and-tools/Self-education-expenses/
And more info about the tax implications of hiring other people: https://www.ato.gov.au/business/your-workers/
You might also be able to claim a deduction for Repairs, maintenance and replacement expenses, general operating expenses (like stationery and insurance), and a bunch more.
Take a look at the ATO’s Other operating expenses page for a full list of what you can claim.
Some of you lucky folks also have extra special tax deductions just for you. Check out:
Performing artists – income and work-related deductions
Media professionals – income and work-related deductions
Teachers and education professionals – income and work-related deductions
Adult industry workers – income and work-related deductions
Check out these other resources for more lists of deductions for creatives:
TAX DEDUCTIONS FOR FREELANCERS by eTax Accountants
TOP 10 TAX CLAIMS FOR ARTISTS AND CREATIVE PROFESSIONALS by Michael Fox, Arts Accountant and Valuer
COMPREHENSIVE HOW-TO GUIDE FOR MUSICIANS AND MUSIC WORKERS by Music Industry Inside Out
ARTISTS – WHAT CAN YOU CLAIM by Lowensteins
Remember, it’s important to speak to an accountant about your specific needs. If you’re looking for an accountant that specialises in the creative industries, check out our Groovy Accountants. This free listing allows you to check them out — we don’t necessarily endorse them, but we do recommend you give them a call and find out more for yourself.
Finally, for those of you who are curious and have a few hours to spare, check out the original Tax Rulings here:
TR 2005/1 – Income tax: carrying on business as a professional artist
TR 95/20 – Income tax: employee performing artists – allowances, reimbursements and expenses
TR 98/14 – Income tax: employee journalists – allowances, reimbursements and deductions
We highly recommend the examples… “Jennifer has been painting for several years. She is employed as a public servant, but works on her art in her spare time…Jennifer does not make any concerted efforts to sell her art works!”
Go forth and get your taxes sorted for this financial year just gone — preferably with champagne in hand and 80s bangers as your soundtrack!