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Ruling
Subject: Special Professional Income Averaging
Question 1
Are you a 'special professional' for the purposes of Division 405 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
Question 2
Is all income derived from your employment considered 'assessable professional income' for the purposes of Division 405 of the ITAA 1997?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2015
Year ended 30 June 2014
Year ended 30 June 2013
Year ended 30 June 2012
Year ended 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are an Australian resident for tax purposes.
Your employment contract lists your occupation and states that you must perform your principal duties and responsibilities including:
· duties in a profession
· provide promotional services
· perform promotional activities associated with the shows in which you appear
· endorsements of your employer in any medium
· provide interviews to print media or radio networks nominated by you employer, and
· attend and, if reasonably required, speak at functions (including client functions) designated by your employer as being associated with it's activities.
During the 2010-11 financial year the taxable professional income from your employment activity was more than $2,500.
You were an Australian resident for income tax purposes in the 2009-10 financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 405
Income Tax Assessment Act 1997 Section 405-20
Income Tax Assessment Act 1997 Section 405-25
Income Tax Assessment Act 1997 Subsection 405-25(1)
Income Tax Assessment Act 1997 Subsection 405-25(2)
Income Tax Assessment Act 1997 Subsection 405-25(3)
Income Tax Assessment Act 1997 Section 405-30
Reasons for decision
Division 405 of the ITAA 1997 applies special rates of tax on the above-average professional income of special professionals. It reduces the effect that fluctuations in special professional income would otherwise have on the income tax liability of these persons.
Under this division you are only subject to concessional tax treatment if:
· you are an individual
· you are an Australian resident at any time during the income year
· your are a special professional, and
· your taxable professional income is more than $2,500 in the current or earlier income year.
Subsection 405-25(1) of the ITAA 1997 states that you are a special professional if you are a performing artist.
Subsection 405-25(2) of the ITAA 1997 states that you are a performing artist if you exercise intellectual, artistic, musical, physical or other personal skills in the presence of an audience by performing or presenting:
(a) music; or
(b) a play; or
(c) dance; or
(d) an entertainment; or
(e) an address; or
(f) a display; or
(g) a promotional activity; or
(h) an exhibition; or
(i) any similar activity.
Further, subsection 405-25(3) of the ITAA 1997 states that you are also a performing artist if you perform or appear in or on a film, tape, disc or television or radio broadcast.
Application of income averaging to your circumstances
Your employment duties require you to appear on television broadcasts. Further, your employment contract states that you must provide promotional services as directed by your employer, and perform duties for promotional activities associated with the shows in which you appear.
Although not all of your employment duties fall into subsections 405-25(2) and 405-25(3) of the ITAA 1997, it is considered that your employment satisfies the requirements of section 405-25 of the ITAA 1997, and you are therefore considered a performing artist. As such, you are considered a special professional within the meaning given by subsection 405-25(1) of the ITAA 1997.
Section 405-20 of the ITAA 1997 states that you can include as assessable special professional income, any assessable income that you derive as a reward for providing services relating to your activities as a special professional.
Section 405-30 of the ITAA 1997 provides details of the exclusions from what can be counted as amounts of assessable special professional income. However, this only relates to income earned as an author of a literary, dramatic, musical or artistic work, or as the inventor of an invention. As such this section does not apply to you and the income you earn as a performing artist.
Therefore you can include as assessable special professional income any assessable income that you derive in relation to your employment.
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