The Final Countdown

With the end of the financial year fast approaching, find out what tax time means for Australian art collectors.

Words: Maddy Matheson

This financial year, if you have a home office or small business, you can now full-expense artwork purchases made before the end of the financial year because of tax incentives introduced in response to the Covid-19 pandemic.

Promoted as the Instant Artwork Write-Off, and with terminology floating around such as ‘Instant Asset Write-Off’ and ‘Temporary Full Expensing’, we asked Michael Fox, Principal of Michael Fox Arts Accountant & Valuer, Melbourne and the Art Market Consultant for Hadleys Art Prize, Hobart, to straighten it all out.

“The best way to think about the terminology is that ‘Instant Asset Write-off’ is the beginning of the scheme and ‘Temporary Full Expensing’ is the end of the scheme, for artworks purchased up until 30 June 2022. Technically the write-off can be claimed to 30 June 2023, as long as the art is bought and ready to be installed by 30 June 2022,” explains Fox. “There are also turnover limits for qualifying as a small business, but this is not relevant for the vast majority of taxpayers.”

The incentive means that you can “claim the entire cost of an artwork to the value of $150,000,” says Fox. “In fact, if you are in business, you may purchase any number of artworks up to this threshold and claim a tax deduction on each purchase.”

There are a few conditions to consider. “The artworks must be displayed in (the business) premises,” says Fox. “If you are a small business and work from home, you need a distinct home office area (enclosed with doors) and you must hold meetings there. The artwork must be tangible and capable of being moved.” Fox adds, “If you are an employee and work from home, you can use the pooling rules to claim artworks to a value of $1,000.”

When asked about the benefits of using this tax incentive, as opposed to financial years gone past, he explains, “Normally artworks cannot be claimed at all or if they are, only at a rate of 1% per year for expensive works. If you pay tax at a marginal rate of 40% and you claim a deduction of $10,000 on an artwork purchase, the government is essentially giving you a rebate of $4,000 to acquire it.

*Advice given in this article are for general information purposes only. Consult an accountant for business or personal tax advice.

You can contact Michael Fox with further enquiries here.

Image: Sue Cato with her dogs Comet, Luci(fur) and Callie. In the background, Alfredo and Isabel Aquilizian’s Portrait 1 – Foreign Landscape Panel. Photo: Nick De Lorenzo. Courtesy: Sue Cato. Image from the Collector Profile in Art Collector issue #89.

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