Excepted business activities
We refer to certain primary production and professional arts business activities as 'excepted activities'. An exception to the non-commercial loss rules allows net losses from those excepted activities to be claimed in the year incurred.
To be eligible to offset your loss from a primary production or professional arts business activity, your assessable income from other sources not related to that particular business activity in the income year must be less than $40,000, excluding any net captial gains.
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Primary production business
Primary production business activities include:
- plant and animal cultivation
- fishing and pearling
- tree farming and felling.
Professional arts business
A professional arts business is a business you carry on as:
- an author of a literary, dramatic, musical or artistic work
- a performing artist
- a production associate.
The terms 'performing artist' and 'production associate' are defined in the Income Tax Assessment Act 1997. The term 'author' is a technical term from copyright law.
You must consider whether your activities as an artist constitute carrying on a business.
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Author of an artistic work
The term 'author' is a technical term from copyright law and an individual needs to be the author of the work. As a general rule, the author of an original literary, dramatic, musical or artistic work is the person who reduced, to a material form, the expression of an idea.
An author can, for example, be a novelist, artist, sculptor, architect, composer, or photographer.
The material expression of the idea (the 'work') must be in an original form for the person who reduced it into material form to be considered the author. Original in this sense does not mean novel or inventive, nor does it require a particular standard of quality, unless that is a requirement of the work itself; for example, works of artistic craftsmanship.
The work must have originated from the author as a result of their own unaided efforts and they must have used some skill or labour in producing the work. This means that a person who copies another's work is not the author of that work; nor is a pure functionary, such as a typist or printer.
In order to be an author of a literary, dramatic, musical or artistic work, the individual must have created an original work in a material form. There must be an element of originality in the material expression – it cannot be a direct copy – and the material expression must be a 'work' that originated from that person. For example, the author of a musical work is its composer and the author of an artistic work is the artist, sculptor or photographer who created it.
You are a performing artist if, as part of your profession, you present or perform in front of an audience:
- a play
- an entertainment
- an address
- a display
- a promotional activity
- an exhibition
- any similar activity.
You may also be a performing artist, even if you do not perform in front of an audience, if you appear in (or on) a film, tape, disc, or television or radio broadcast.
You will be a production associate if you provide artistic support – as distinct from technical input – for any of the activities mentioned in Performing artist. An example of technical input would be a camera operator or stagehand.
You may be a production associate if you are:
- an art director
- a choreographer
- a costume designer
- a director
- a director of photography
- a film editor
- a lighting designer
- a musical director
- a producer
- a production designer
- a set designer
- any person who provides similar services to the activity.
What is not a professional arts business
Running an art gallery that doesn't display your art
In general terms, a professional arts business is a business you carry on as an author of an artistic work. This can be the artist, sculptor or photographer who created the work.
If you own an art gallery and you:
- do not create or exhibit your own work, it's unlikely you are carrying on a professional arts business
- create artwork and sell only your artwork at your private gallery (and your gallery qualifies as a business, rather than a hobby) you may be carrying on a professional arts business.
Direct sellers are not considered to be carrying on a performing artist business.
Even if your business includes elements of a 'performing artist', you are not a performing artist. The overall impression must be that the activities are sufficiently substantial in themselves to constitute the carrying on of a business as a performing artist.
You may use your intellectual, artistic, musical, physical or other personal skills in the presence of an audience, but it is unlikely that you would be considered as working in the entertainment field or performing arts industry. Your primary objective is to sell your products, not to entertain your audience.
An exception to the non-commercial loss rules allows net losses from certain primary production or professional arts business activities to be claimed in the year incurred.