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Edited version of your written advice
Authorisation Number: 1051188199043
Date of advice: 10 February 2017
Ruling
Subject: Application of the above average special professional income tax provisions
Question
Are you considered a production associate for the purposes of special professional averaging?
Answer
No
This ruling applies for the following period
30 June 20xx
The scheme commenced on
1 July 20xx
Relevant facts and circumstances
You entered into an agreement with a Company to assist with the development of computer software
Your contract did not state that you undertook any artistic or creative duties in the development of the computer software.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 405-15(1),
Income Tax Assessment Act 1997 subsection 405-25(1),
Income Tax Assessment Act 1997 subsection 405-25(4) and
Income Tax Assessment Act 1997 subsection 405-25(5).
Reasons for decision
The meaning of special professional, performing artist, production associate, sportsperson and sporting competition is contained in section 405-25 of the Income Tax Assessment Act 1997 (ITAA 1997).
Section 405-25(1) of the ITAA 1997 states that you are a special professional if you are:
(a) the author of a literary, dramatic, musical or artistic work; or
(b) the inventor of an invention; or
(c) a performing artist; or
(d) a production associate; or
(e) a sportsperson.
Subsection 405-25(4) of the ITAA 1997 states that you are a production associate if you provide artistic support for the activity of making film, tape, disc or television or radio broadcast.
Although the word 'XXX' appears in your job title this does not automatically entitle you to the special professionals averaging provisions. To be eligible for the averaging provisions your duties must meet the criteria of production associate under subsection 405-25(5) of the ITAA 1997.
In order to meet the criteria of special professional you need to use artistic rather than technical skills or know how in the production. There are a number of different types of producer and not all of them have an artistic input in a production.
As the meaning of artistic is not provided in the income tax legislation, it is taken to have its ordinary meaning. The meaning of artistic in The Macquarie Dictionary, (www.macquariedictonary.com.au), is to be of, like or befitting an artist and to be naturally gifted to be an artist.
Your duties as a contractor facilitating funding through your network of personal and business contacts are not considered to be artistic as they are of a managerial or administrative nature. Under your contract you facilitated the funding for the development of the software and provided a report at the end of each month. This is evidenced by the agreement between yourself and Company. Your role assists those with artistic input in the production to create their ideas by taking care of the funding rather than the provision of artistic input.
It is considered that your work duties do not meet the requirements to satisfy the criteria to be a production associate for the purposes of section 405-25 of the ITAA 1997. You are therefore not considered a special professional for the purposes of income averaging.
Further issues for you to consider
IT 2660 - Income Tax: Definition of Royalties
10 (a) … Amongst other things, copyright can cover music, literary and artistic works, various forms of mechanical, electronic and biological knowledge, equipment and processes. Where, for example, the copyright is licensed to someone to manufacture and sell records, compact discs, books, prints of art works, motor vehicle engines, packaged computer software etc., for an amount based on the number of units produced or sold, the amount would be a royalty.”
ATO view documents
Taxation Determination TD 93/65
Taxation Ruling TR 93/12
IT 2660 - Income Tax: Definition of Royalties