CATS4TAX – Tax Tip #7
If you have income that varies year to year, your tax liabilities can fluctuate dramatically as well. Tax concessions are available for special professionals. The concessions allow averaging of income and the tax you owe. Income averaging is designed for people who have lumpy incomes. It is more beneficial to those starting their career. Generally speaking, income averaging works by reducing the amount of tax owed in a high income year by comparing it to the previous four years
Who is a special professional?
A special professional is an author of a literary, dramatic, musical or artistic work, an inventor, a performing artist, a production associate or a sportsperson.
You are a special professional if you use intellectual, artistic, musical, physical or other personal skills in the presence of an audience, or you perform or appear in a film, on a tape or disc, or in a television or radio broadcast.
It's more to do with people who make original content, rather than those who use technical skills.
Production Associate
You are a special professional if you use artistic rather than technical skills in the production.
Sportsperson
You are a special professional if you compete in sporting activities where you primarily use physical prowess, physical strength or physical stamina. A navigator in car rallying, a coxswain in rowing or a similar competitor is also a special professional.
Who is subject to income averaging?
You are eligible for special professional income averaging if:
you are an Australian resident at any time during the income year
you are a special professional, and
you satisfy the first year requirements in either the current income year or an earlier income year.
Averaging can only be applied to your creative income, not your various side hustles, which are taxed at the normal rates.
Assessable professional income
It is income arising directly from the activities of a special professional and includes:
rewards and prizes.
income from endorsements, advertisements, interviews, commentating and any similar service.
royalties from copyright of a literary, dramatic, musical or artistic work.
income from a patent for an invention.
Should you think income averaging would be beneficial to your circumstances, talk to your tax professional.
Get in touch with CATS4TAX:
0404 483 685
.png)
Comments