Part Two: Distinguishing an Art Business from other Businesses

What distinguishes ‘art businesses’ from other businesses?

The ATO has recognised that art businesses, because of the nature of art activity, typically have different characteristics to those found in other businesses. For example professional arts businesses are often motivated by creative purposes and the desire to influence public opinion and a large part of being in business as a professional artist may involve activities directed towards reputation building and audience/market creation. 

However, as with all professions a professional arts business must be distinguishable from a hobby or recreation, and over the years the courts have established and applied the following indicators to be relevant to the question of whether a taxpayer's activities amount to the carrying on of a business, these being:

·       whether the activity has a significant commercial purpose or character; this indicator comprises many aspects of the other indicators;

·       whether the taxpayer has more than just an intention to engage in business;

·       whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity;

·       whether there is repetition and regularity of the activity;

·       whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business;

·       whether the activity is planned, organised and carried on in a businesslike manner such that it is directed at making a profit;

·       the size, scale and permanency of the activity; and

whether the activity is better described as a hobby, a form of recreation or a sporting activity.

For further information please feel free to contact us at Financial Control and Management.