{"id":2133,"date":"2023-04-12T07:22:08","date_gmt":"2023-04-11T21:22:08","guid":{"rendered":"https:\/\/bookanartist.co\/blog\/?p=2133"},"modified":"2023-05-16T15:11:03","modified_gmt":"2023-05-16T05:11:03","slug":"are-art-commissions-taxed","status":"publish","type":"post","link":"https:\/\/bookanartist.co\/blog\/are-art-commissions-taxed\/","title":{"rendered":"Are art commissions taxed? Answering your freelance artist tax questions with Hnry."},"content":{"rendered":"

Do you need to pay taxes on art commissions?<\/b><\/h2>\n

Are art commissions taxed? Typically, yes. Art commissions are considered taxable income and the artist who receives payment for their work\u00a0<\/span>must report it on their tax returns. Similar to other sources of income.\u00a0<\/span><\/p>\n

Benefits of Book An Artist\"Book<\/a><\/h2>\n

Check out some more benefits for artists using a marketplace to commission art!<\/span><\/a><\/p>\n

We know navigating the tricky waters of business management can be confronting. In order to provide the most accurate information to answer ‘are art commissions taxed?’ we reached out to one of our partners. <\/span>Hnry<\/span><\/a> who are an all-in-one Accounting service for Sole Traders who understand the ups, downs, lefts and rights of taxes in Australia.<\/span><\/p>\n

Hnry\u2019s Insight: Hobby vs. a side-hustle<\/strong><\/h2>\n

We spoke to Hnry\u2019s Senior Tax Accountant Danielle Williams who helps break down the distinctions surrounding “are art commissions taxed?”. <\/span><\/p>\n

\u201cIf selling your art is more a hobby than a side-hustle, you don\u2019t need to pay taxes on your earnings. Unfortunately, figuring out if your work is a hobby or a side-hustle isn\u2019t straightforward.\u00a0<\/span><\/p>\n

The ATO has <\/span>created some basic guidelines<\/span><\/a> that cover what counts as a business, and what doesn\u2019t. But to a certain extent, it\u2019s up for interpretation.\u00a0<\/span><\/p>\n

For example, a business \u2018involves a set of continuous and repeated activities you do for the purpose of making profit\u2019. BUT if your art is \u2018a hobby or recreation from which you don\u2019t seek to profit,\u2019 then it may not be a business.<\/span><\/p>\n

This speaks to your intention as an artist: are you doing it to make money? Or are you doing it purely for the love of it, although you\u2019ll accept compensation for your time and effort?\u00a0<\/span><\/p>\n

We recommend you be honest with yourself in answering this question. Think about it this way: would you continue creating at the rate and scale you currently are if you weren\u2019t being paid? If yes, what you\u2019re doing is probably a hobby. If not, you\u2019re running a business, mate \u2013 and you\u2019ll need to pay taxes.\u201d<\/span><\/p><\/blockquote>\n

\"Mural
Photo of Mural Artist by Eepeng Cheong<\/a> on Unsplash<\/a><\/figcaption><\/figure>\n

Hnry\u2019s Insight: The tax-free threshold<\/strong><\/h2>\n

Danielle says \u201cIn Australia, earnings up to $18,200 are exempt from income tax. However, it\u2019s important to note that this tax-free bracket applies to ALL your income combined, not just your PAYG salary or your self-employed earnings separately.\u00a0<\/span><\/p>\n

For example, if you earn $15k as an employee, and then an extra $5k as an artist, your combined income will be $20k. $18,200 of that income will be income-tax free, but you\u2019ll have to pay tax on the remaining $1,800 at a rate of 19%.<\/span><\/p>\n

Basically, if you\u2019re making under $18,200 altogether, you won\u2019t have to pay income tax. But if your total earnings are above the tax-free threshold, you\u2019ll need to pay income tax \u2013 no matter how you earn your income.\u201d<\/span><\/p>\n

\"Illustrator
Photo of Illustrator by Jonathan Borba<\/a> on Unsplash<\/a><\/figcaption><\/figure>\n

Hnry\u2019s Insight: Paying and charging GST<\/strong><\/h2>\n

\u201c<\/span>Goods and Services Tax, or GST<\/span><\/a>, is a flat-rate tax levied on the price of goods and services. You\u2019re not paying this tax out of your earnings \u2013 instead, you\u2019re collecting this tax from your clients on behalf of the government, which you then have to pay as part of your regular GST returns.\u201d Danielle shared with Book an Artist\u00a0<\/span><\/p>\n

\u201cYou only have to do this, however, if you\u2019re making more than $75,000 over a 12 month period in self-employed income. And if you don\u2019t meet this threshold, there\u2019s no requirement to register for GST.<\/span><\/p>\n

For starters, if you\u2019re GST registered, you\u2019ll need to add an additional 10% on to your regular prices, making your work more expensive for your clients.\u00a0<\/span><\/p>\n

The only real benefit would be if you can claim a GST return \u2013 for which you\u2019d need to pay more in GST than you collect. For more information, see the ATO website<\/a>.”<\/span><\/p><\/blockquote>\n

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Tl;dr:<\/strong><\/p>\n