The end of the financial year: make the most of your tax $$$

Make the most of the last two weeks of June for Tax deductions. Internet has many helpful links, but we’d love to hear from you. How many of you are carrying on in a professional artist business as Sole Traders, Companies or in Joint Artist Ventures? Do you have any tips?

Here are some questions the ATO also suggests asking yourself before claiming your business expenses:

• Do you depend on income from the activity?
• If there are losses, are they due to circumstances beyond your control or did they occur in the start up phase of the business?
• Do you have the knowledge needed to carry on the activity as a successful business?
• Does the activity make a profit in some years?
• Do you expect to make a profit in the future from the appreciation of assets used in the activity?

10 common tax deductions to consider:

Please note this article should not be taken as legal advice or replace legal tax consultation. Always consult an accredited accountant before making decisions regarding your tax.

1. Car expenses

You have two options here: you either can track the mileage you travel for artistic business purposes and deduct the government rate per km; or you can calculate what it costs to operate your car for the year and apply the percentage that you use for your business to determine the expense. For either method, make sure to record the starting mileage for your car each year.

2. Travel expenses

If you’re traveling for the purpose of your art business, keep receipts for airfare, car rental, taxis, public transportation, meals, lodging and other expenses.

3. Housing costs

If you operate your art business from your home, you may deduct a percentage of your housing costs (mortgage, water, electricity, insurance, % of home phone & internet usage etc.) based on the proportion of the house that is used solely for the business. You’ll need to know the square footage of your office space and the total square footage of your home to determine this proportion. An accountant will help you with that calculation. Make the right decision here from the start as claiming your mortgage & rates may later be subject to Capital Gains Tax if you ever sell the property.

4. Office or studio space

You may not deduct the expenses for both an office at home and elsewhere, such as a studio. If you buy or rent a studio/office space somewhere else, this is another business expense.

5. Telephone landlines

You can deduct the cost of a phone line for your business as long as you also have a personal line.

6. Education

You may be able to deduct the cost of your business related seminars and workshops, so record and keep those receipts.

7. Internet and website expenses

You may claim a proportion of your Internet and website expenses that support your art business. Be sure to record an appropriate % for your personal use, where applicable.

8. Equipment

Equipment that lasts more than one year (cameras, computers, etc.) is considered “as assets” and are subject to different rules. Assets must be used for more than 50% qualified business use, and depreciated over the expected life of the item – meaning that you deduct only a portion of its cost each year. Maintain a spreadsheet with the date of purchase and the depreciation schedule so that you will know the basis of the equipment if you sell it before the end of the five years.

9. Insurance

Insurance to protect your equipment or business investment and license is also deductible.

10. Accountant and solicitor fees

You may deduct your accountant and solicitor fees (including fees for registering your copyright) that support your art business activities.

In all cases, you are required by law to keep the receipts for five years in Australia.

Here are some helpful sites:

Individual income tax rates
ATO: carrying on a business as a professional artist
Arts Law: Taxation of professional artists
Summary Table
What is a professional arts business?
How to Start a business checklist
Insurance for artists
Debt Recovery (VIC)