Income averaging

Making money from your art?

You may qualify for ‘Income Averaging’

The ATO acknowledges that some individuals, depending on what they do, can earn wildly inconsistent levels of income from year to year.

For instance, a creative might spend a year writing a novel, preparing an exhibition or making a film, and make little or no money, but then sell the work next year for a tidy profit.

It is arguably unfair for a creative who earns little or no money in one year to then be taxed quite heavily in the next when their ship eventually does sail in. For this reason, income averaging seeks to smooth out these fluctuations.

The concessional tax treatment allows eligible creatives to compare their higher level income in the boom year with their ‘average’ obtained in the previous 4 years. In simple terms, if the difference is large enough, only a proportion of that higher income is included in the tax calculation, providing tax relief from what otherwise would be the normal rules.

The calculation itself is far more technical than that, and beyond the scope of the information provided here, but the point is – these rules exist for you!

Creative Crunchers can activate your Income Averaging

Because our business specialises in the arts and entertainment industries, Income Averaging is in our DNA. This is an element of tax law that is broadly misunderstood, and we see many cases where Income Averaging has been misapplied, miscalculated, or completely left out, leaving unsuspecting creatives in the lurch.

We support the arts by supporting you. Creative Crunchers provides specialist accountancy and financial advice for Australia’s ‘special professionals’.

Who is a ‘special professional’?

  • The ‘author’ of a literary, dramatic, musical or artistic work (i.e. its creator)
  • A performing artist
  • A production associate (who uses artistic rather than technical skills eg. an art director or costume designer)
  • An inventor
  • A sportsperson
  • A computer programmer (in some cases)

Talk to the creative accounting specialists for accurate advice around your eligibility.

Reach out