Art of Business Covid-19: Tax and the Arts in Australia

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In this story our friends at Lowensteins, specialist accountants for the arts in Australia, share their thoughts on the impact of Covid-19 on the local sector, relevant tax relief options granted to date, and the latest on the Federal Government’s long-awaited arts rescue package.

As we face the advent of Covid-19, albeit in Australia, where we have achieved remarkable health outcomes, many businesses, particularly SMEs and those operating in the arts sphere, are focused on surviving.

For these businesses, cash management is very important.

As a key strategy it is essential not to feel overwhelmed or rushed into selling up or closing doors. It may be more effective to take a look at alternative methods of income and even though you may sell some stock at a loss at least it buys you valuable time until the economy recovers.

There are of course specific Covid-related issues to examine, like how to register for some of the packages and assistance, how to account for rental /interest deferrals and other record keeping issues like JobKeeper and the Single Touch payroll interfaces. All of these require special attention in the light of this particular situation.

The Australian Government have been especially helpful in providing much in the way of financial assistance, especially early on in the pandemic, assisting businesses with Cash Boosts for Employers, JobKeeper income support packages and increased Centrelink social security benefits.

These have all tapered down now that things do appear to be improving economically, but JobKeeper still exists as an income support measure offering amounts of funds to Taxpayers who meet the rather rigid criteria. This scheme has been extended to March 2021.

In addition, the Government has been spruiking its extended instant asset write-off scheme, that allows eligible businesses to write-off in one hit equipment that has cost any amount of money. Previously it was limited to amounts less than $150,000. I am not too sure how this will apply to those in the arts but certainly some other sectors of the economy will no doubt benefit.

With so many people working from home at the moment, it may be the case that claims for home office expenses will rise. The ATO is sure to be alert to this and will no doubt review claims carefully. Expenses in question may include:

• electricity expenses associated with heating, cooling and lighting the work area;

• cleaning costs for a dedicated work area;

• phone and internet expenses;

• computer consumables, including printer paper, ink and stationery;

• home office equipment, including computers, printers, phones, furniture and furnishings (taxpayers can claim either the full cost of items up to $300 or the decline in value for items over $300).

The ATO has advised that taxpayers will be able to use a simplified method to claim home office expenses at a flat rate of 80 cents per hour, provided a diary is kept. It may be the case that claiming the actual expenses method may produce a better tax result for some clients.

As far as government grants go, in response to industry concerns about a downturn in the arts as a result of the coronavirus restrictions, especially in the performing arts sector, the Australian Government announced a $250m arts rescue package, and announced it with great fanfare. 

Designed to specifically assist the arts, the package is structured in four streams:

• $75 million of capital funding to help production and event businesses put on new festivals, concerts, (RISE);

• $90 million in 'show starter' concessional loans to fund new productions and events that stimulate job creation and economic activity;

• $35 million in direct financial assistance to support Commonwealth-funded arts organisations to get them up and working (CASF); and

• $50 million fund to assist local screen production, both film and television.

This announcement was seen as a substantial commitment to the arts, being one of the most heavily impacted sectors of the recent pandemic.

The approach was broadly welcomed by many in the arts sector but there was still a major issue with a lack of income support measures for individual practitioners.

Some of these grant programs are now open for applications and they will be accepted through to May 2021.

Whilst these grants are to be welcomed, I would seriously question the complexity of the applications. Some are up to 22 pages long. There is also a long wait time (now some 10 weeks) after making the application. There are also requirements for Statutory Declarations to certify proof of income and expenses – all very time consuming.

And details for other grants still haven’t been released as yet.

We wait with great expectation reports on the usefulness of the new grant funding and urge the Australian Government to expedite the delivery of these grants and support packages.

Image credit: "Arte-ANDY-WARHOL-DOLLAR-SING-1981" by Revolucion Poster is licensed under CC BY-NC-SA 2.0