Last year, I decided to get serious about treating my acting career as a business, and a business first and foremost needs to have its finances in order. Against all my natural instincts, I buckled down and documented all my incoming and outgoing industry dollars, created budgets and financial goals, and most daunting of all for me: set out to fully comprehend my tax obligations and breaks as a full-time actor. When I first started searching online, I could not find what I was looking for anywhere, even on official tax websites, so I paid an expert (an international accountant specialising in the entertainment industry) to do my taxes in front of me and answer all my questions. The relief, benefit (and refund!) that resulted far outweighed what it cost me. In case you are in the same boat I was, I thought you might be interested in what I learned!
NB: It’s important for me to emphasize that I have no accounting training, and I am not in any way attempting to give anyone personalized tax advice. What I am doing is sharing my personal experience of what I learned about my own taxes as an actor based in Australia in the hope it may give you insight into what you may need to know or inquire further about. While this article is most useful for actors paying Australian taxes, it may also give insight as to what questions to ask for actors based in other countries too-- and for those in the U.S., you must check out this awesome (free) webinar from The Actor's Green Room that covers just about everything. OK, here we go!
- For tax purposes, I needed to Make a Decision about my Status as an Actor: I must decide whether I am a ‘professional arts business’ or a ‘hobbiest’ actor. To qualify as a ‘professional arts business’, the Australian Taxation Office (ATO) holds that the following indicators are relevant:
* whether the activity has a significant commercial purpose or character * whether you have more than just an intention to engage in business * whether your purpose is profit (or 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 business like 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
If acting is my hobby, it seems I do not need to report my income derived from acting, nor can I make claims on its costs. Also, none of the other points in this article would apply.
If acting is my profession, I need to then decide my “business structure”: in other words, whether I am a Sole Trader, a Partnership, a Company, an Incorporated Association, or a Trust. The Arts Law Centre of Australia writes on its website that “The majority of professional artists (earning under $80,000 per annum) are sole traders, due to the lower annual compliance costs.” Depending on the circumstances, I may also need to register my business name, get an Australian Business Number (ABN) and for register for Goods & Services Tax (GST). If interested, readers can get more info on this from the ATO’s website.
- Keep Records as I go. Preferably in an Excel Spreadsheet or similar. Separate my sheets according to my tax year, and whether the money is coming in (payment) or going out (potentially claimable expense) of my pocket. Be as specific as possible about my expenses. Downloadable example spreadsheets are available on several accountants’ websites, including this one. Keep all my receipts, or, use a receipt app (like Quicken), or, consider getting a separate credit card which I only use for my business expenses. If travelling for work for more than 6 nights, keep a travel diary. I may also want to keep a driving log for the number of kms/miles I rack up for business versus the total number for the tax year (see point 7 below).
- I can Claim a lot more things than I thought. Some things, like my acting classes, union membership, casting profiles, headshot, showreel, website costs, were obvious to me. Other things were not so obvious, like parking costs at shoots (if not reimbursed or paid by production), my agent’s fees (get your agent’s statements at end of financial year), magazines or journals with content directly related to acting, and any research costs for a role I have already been hired for. As a general rule, whenever trying to ascertain whether something is likely to be claimable as an expense, one should ask themselves: “was the expense incurred in producing the work? Without incurring these expenses, would I be able to earn my income?”-- and then check and see if they are on the exceptions list (see point 4 below)!
- There are important Exceptions to the general questions above which surprised me. For example, I cannot claim expenses for auditions, only for jobs for which I have been already hired. So generally, no claims for getting work, only for doing work. Also, I cannot claim for anything that falls into the “medical” category-- this includes gym or other physical fitness memberships (unless I have to dramatically change my physique for a specific role I have already been hired for), travel insurance, and skin treatments. Also anything included in the “private” or “domestic” categories, such as childcare, cannot be claimed. One accountant told me I could claim thank you cards and gifts, however the ATO documents referenced below clearly state one cannot claim these. Also surprisingly, you cannot claim for the cost of attending an awards night-- it is considered a private cost. I know, craziness.
- The following categories are Grey Areas: 1) Grooming (eg, hair cuts, manicures, eyelashes, etc): if I need to get these for a particular role, or one-off for an ‘event’, these are claimable. Stage/Screen make-up is claimable, every day private use make-up is not. If you use the same for both, take a percentage. 2) Meals: basic sustenance during work hours is not claimable, not even when travelling away from home for work. If I’m having a business meeting and need to order drinks, coffee or even light refreshment, that’s claimable. 3) Clothing: if it is clothing specific to my work, eg for a specific role or work events, then I can claim 4) Transport: I cannot claim for travelling to and from my home to workplace. If travelling in between shooting locations, or if the shooting location changes every day, then I can. 5) Movies/Plays/Books: generally, for my “continuing education” in a field I specialize in, I can count 50%. If I’m going to see or read something specifically for a role you’ve been hired for (eg, a director I’m about to work with, my colleagues in a play, research for a role) I can claim 100%. Remember to write the name and description of movies/plays/shows I claim to have content directly related to your current work.
- There’s an easy way to estimate what I can claim for things with Shared Usage, such as a my home office, car, and phone: I estimate number of hours I have used said item for work purposes and divide by total number of hours I have used said item (if I really can’t guess, keep a record for a typical week). This proportion of Car maintenance and even car-wash can be claimed.
- There is something called the Special Profession Income Averaging Scheme which allows you to average your income over a 5-year period. Actors fall into this special profession category. It’s a huge help to those who have inconsistent income, because it means you won’t get taxed at a high rate if you make a huge amount one year, and then nothing the next year-- rather, you’ll get taxed on what you make in the average of those years. To qualify, you have to fall into one of these special profession categories and earn at least AU$2,500 from your business income in whatever you deem to be your ‘first year’ of the five.
- If I make a Loss (ie, my expenses are greater than my income) in my acting business for any given year, the loss will carry over indefinitely. In some circumstances, acting business losses can be deducted against income earned from other sources, with something called a ‘non-commercial loss concession’. Read more about that here.
- Regarding Travelling for Work (say for a film festival of a film I am in), I can claim costs incurred for travel, accommodation, short-term car rental, parking fees, tolls, using vehicles other than cars, and taxis. Not for travel insurance though. And not for groceries, but can claim for meals that arguable needed to be eaten out. If I take my family with me on the trip, I can only claim for my part of the travel. If it was partially business, partially personal, take a percentage.
- Spending a significant amount of time in another country can get tricky. If you remain an Australian resident for tax purposes you need to keep paying Australian taxes, but if you don’t, you could lose your medicare and other benefits. Seek further advice if I plan to do this.
Well, that’s the bulk of it! I hope it helped someone else out there :-) I would love to hear from others any similarities, differences and resources from other countries. Oh, and also: I wanted to give a huge shout out to an amazing resource I found in my research: Monica Davidson has an awesome website and service, offering business and tax workshops, advice, list of trusted arts accountants, lawyers and more amazing resources-- definitely worth checking out.
And in case you’re dying to read the original documents I drew upon yourself, here are the links:
TR95/20 is the definitive tax authority document: http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR9520/NAT/ATO/00001#P26
This pdf summarizes it for Performing Artists: http://www.inthepicture.com.au/performer_deductions.pdf
Occupational rulings guide 2014-2015: https://www.ato.gov.au/forms/occupational-rulings-guide-2014-15/
TR2005/1 Ruling on Carrying on a Business as a Professional Artist: