Tax and Superannuation
Running your practice as a business means being obliged to deal with tax issues. Being on top of these issues from the start can save you from nasty surprises!
Tax ruling for professional artists
In 2005 the Australian Tax Office (ATO) issued the Public Taxation Ruling: carrying on business as a professional artist (TR 2005/1).
This Ruling provides clearer income tax entitlement guidelines, as to who can be regarded as a professional artist rather than a hobbyist in order to claim their art business expenses against all forms of income, whether from their art practice or any other income source.
Australian Business Number
Whether you should have an ABN or not depends on how your practice operates. If you do not have an ABN then you would be considered to be operating your practice as a hobby. When you decide to register for an ABN you are making commitment to operate as a business as opposed to being a ‘hobbyist’. Once you become a business with an ABN you will need to undertake the required paperwork and tax procedures as prescribed by the ATO. You also need to continue to show the ATO that you are operating as a business.
GST
When you are GST (Goods and Services Tax) registered you must charge GST on all your income and pay this GST directly to the ATO.
The tax implications of artwork sales, grants, and income you receive as an artist are dependent on whether you are an artist in business or a ‘hobbyist’.
If you are in business, have an ABN and are also registered for GST, then GST must be charged and you should issue a Tax Invoice.
If you are in business but aren't GST registered, you should issue an Invoice without a GST component.
Either way you need to quote your ABN on the invoice.
If you do not have an ABN, you need to complete a Statement by a supplier form and attached it to your invoice to explain why you are not quoting an ABN. If you don't do this, 46.5% of the payment will be withheld by the ATO.
If selling artwork through a gallery, they will also deduct their commission plus GST.
The following guides explain GST in more detail.
End of Financial Year
The End Of Financial Year (EOFY) brings with it the start of tax time – a concept that brings anxiety and confusion to most people, including artists. While it’s tempting to put off doing your tax until just days before the October deadline, it’s a good idea to sort it out well before then as it can take a bit of time to gather everything you need, and well, the sooner you lodge it, the sooner you could receive money back. The following guides outline what and how to claim on your income and expenses.
Superannuation
Like other working people, artists need superannuation in order to have some retirement income in their old age. While it is currently not legislated that visual artists be paid superannuation on the artist fee they receive for the commissioning or loan of their work for exhibition, NAVA supports the principle of industrial fairness and the making of super contributions for artists.
Not sure what to write on your Super Choice Form? This guide tells you where to get the information you need and which sections to fill in.
Contractors working in the arts
Some contractors working in the arts may be deemed to be employees for superannuation purposes and the employer may be required to make superannuation contributions on their behalf. NAVA’s factsheet on superannuation contribution obligations for employers explains what might determine whether a person is an employee or a contractor for superannuation purposes.
Note: Under the law, the employer must pay an amount equal to 10% of the earnings into the employee’s or ‘deemed employee’s’ super fund account. In the cases where paying superannuation is not legislated as outlined above, a gallery or arts organisation may make super contributions for their artists under the principle of industrial fairness. Contributions can be made direct to the artists’ super fund in the same way that super contributions are made for all employees, or alternatively they may ask the artist to add a super contribution allocation to their invoice and the artist may deposit this to their fund as a voluntary contribution. It is important to note that the 10% is an addition to the agreed fee or payment, rather than a deduction. Please see NAVA’s Code of Practice for recommended fees and wages for artists and art professionals.
