It is a possibility that the ATO has streamed your latest EP on Spotify but, it is a certainty that the ATO has specific tax concessions for musicians and other types of performing artists.
Fuck yeah! 🤘🤩🤘
Although it may seem hard to believe (given that these guys aren't known for being the understanding type...), the ATO understands that the music business can be tough and unpredictable.
Australian artists in eligible creative fields (known as “Special Professionals”) often earn significantly varying levels of income from year to year. Special Professionals Income Averaging (let’s call it SPIA from here on in) is a neat little tax concession available to musicians that enables you to spread your taxable income over several years - in turn, lowering your overall tax rate.
When applied strategically, SPIA can be advantageous to your tax planning as it will allow you to avoid paying too much tax in a year when your income is in a higher tax bracket than in previous years. This is because SPIA generally works by reducing the amount of tax payable in a high income year by comparing it to the previous four years income and then applying a tax concession on the amount that is “Above average”.
So, are you eligible for the Special Professionals Income Averaging tax concession?
To save you scrambling through pages and pages of boring tax legislation, we will make this easy for you! Just ask yourself the following:
- Are you an individual who is an Australian resident?
- Do you use intellectual, artistic, musical, physical or other personal skills in the presence of an audience?
- Do you perform or appear in a film, on a tape or disc, or in a television or radio broadcast?
- Does your income arise directly from royalties from copyright of a literary, dramatic, musical or artistic work?
If you answered yes to all of the above 4 questions, then you would be eligible to apply SPIA in the first income year for which the taxable income you have earned as a resident special professional is more than $2,500.
Sounds complex? We feel ya!
We agree that the definitions and eligibility rules within the SPIA legislation and the methods for calculating the tax benefit are a complicated area. It is super important to properly analyse your eligibility for SPIA and to be certain that the correct income has been reported in the right sections of your tax returns as the ATO will come knocking (and no, not for an autograph).
Alternatively, given the complex nature of SPIA, an accountant who is experienced in the music industry and who is well versed in performing the calculations will be more likely to correctly identify your eligibility and ensure that your income is correctly reported and the tax benefits achieved are legitimately maximised.
If this is new and you are keen to cash-in on those sweet tax savings please contact us for a 30 minute meeting for a free discussion to determine how this concession may apply to you!