Who is a Special Professional?
A Special professional is one who uses their artistic and intellectual skills and abilities rather than their technical skills. The artistic path is not very lucrative, save for a handful of exceptional people. Most of them do not enjoy the benefit of a stable income or job and must take whatever work they can get their hands on, even if it’s in an entirely different continent. However, there are incentives for those who have chosen this fickle path.
This is a concession that is especially important for people in the creative industries, but it is also complex and requires specialist knowledge and advice. Essentially, the ATO has given them a concession which enables them to pay a lesser amount of tax on their above average income (of the last 4 years), effectively lowering their tax rate.
Division 775 of the Income Tax Assessment Act 1997
One of the most obscure concessions, which benefits most special professionals, especially those who frequently travel to perform internationally. This applies to any Australian taxpayer holding a foreign bank account. While there are certain conditions to be met, they can disregard any Forex gains/losses, which would affect their taxable income.
Taxability of Performance Income for residents of USA
Exclusively for a resident of the United States, the Governments of Australia and USA have a “Double taxation Avoidance Agreement”, where only the income earned for a performance in Australia, in excess of $10K is taxed in Australia.
Travel Per Diems
Special professionals travel the most among any other taxpayers. It seems logical to provide them with concessions to claim their per diem (Food and Incidentals) while not in their home city. The ATO has prescribed certain rates for travel within Australia and for International claims, the rate is determined based on the cost group to which the country belongs to.
The Arts Business Test
It is common practice for a Business/Partnership to offset their losses in business against their income from other sources. To do this, they would have to meet certain criteria and pass any one of four available “tests”. If the business is involved in the Arts, the ATO has provided the benefit of the Arts Business Test where, if the assessable income from other sources (excluding capital gains) is ≤ $40K, they can offset the losses in the current year itself.
While all these benefits are available to the artistically inclined, they aren’t used very effectively. Getting the most out of these concessions offered by the ATO would require a genuine understanding of the unique and specialist dynamics of the industry along with expert knowledge and advice. Even then, those in the lower income brackets would not enjoy these concessions as much as their higher income counterparts.