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Edited version of your written advice
Authorisation Number: 1012718265819
Ruling
Subject: Professional arts business
Question
Are you carrying on a business as a video artist?
Answer
Yes
This ruling applies for the following periods:
Year ending 30 June 2013
Year ending 30 June 2014
The scheme commenced on:
1 June 2013
Relevant facts and circumstances
You have commenced activities as a video artist and have obtained an ABN.
You spend approximately 12-14 hours per week carrying out the activities undertaking the following tasks:
• Formulating new ideas
• Study of camera and video editing skills
• Managing current film projects
• Browsing for competitions and festivals to enter
• Updating your online portfolio/website
You have entered numerous competitions and festivals and have been involved in exhibitions including a solo exhibition.
You have contacted various art agencies seeking advice and seek to discuss the logistics of your creative industry with professional filmmakers, producers and artists. You are aiming to develop your profile to the extent that the majority of your income will be earned as a professional video artist.
You have maintained a record of the income and expenses you have made in relation to the activities.
You receive other income from other employment while you work to increase your contracted video artist activities.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 995-1
Income Tax Assessment Act 1997 Subsection 35-10(5)
Reasons for decision
A professional arts business is a business you carry on as the author of a literary, dramatic, musical or artistic work, or a performing artist or production associate (subsection 35-10(5) of the Income Tax Assessment Act 1997).
Taxation Ruling TR 2005/1 provides guidance on the principles to be applied in determining whether a professional artist is carrying on a professional arts business. The ruling recognises that there are special factors affecting artists. However, a professional arts business must be distinguishable from a hobby or recreation. Paragraph 10 of TR 2005/1 states that the courts have held that the following indicators are relevant to the question of whether a taxpayer's activities amount to the carrying on of a business:
• whether the activity has a significant commercial purpose or character
• whether the taxpayer has more than just an intention to engage in business
• whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity
• whether there is regularity and repetition of the activity
• whether the activity is of the same kind and carried on in a similar manner to that of ordinary trade in that line of business
• whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit
• the size, scale and permanency of the activity, and
• whether the activity is better described as a hobby, a form of recreation or sporting activity.
No individual factor is determinative, but should be weighed up in conjunction with the other factors.
TR 2005/1 discusses Pedley v FC of T [2006] AATA 108 (Pedley's case) at paragraphs 95A and 95B:
The taxpayer was well qualified in the field of arts and had worked as a professional artist for 20 years. She had a studio, employed an accountant, had a website and sought to publicise her work. The taxpayer took part in many exhibitions over the years but few sales or commissions eventuated. Her activities were funded in part by income from lecturing in art and by grants. The question for decision was whether the taxpayer was carrying on a business as a professional artist.
The Tribunal held that the taxpayer was carrying on a business as a professional artist during the relevant year. It found that the taxpayer had more than merely an intention to carry on business as an artist, and that her career in this respect was her major occupation to which other activities were subordinate. Although the taxpayer had been unsuccessful in commercial terms, it was not necessarily the case that this would always be so.
We consider that your case is similar to Pedley's case. After weighing up the relative business indicators and objective facts surrounding your case it is considered that you are carrying on a professional arts business for taxation purposes.
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