Lets dispell a myth first: there is no dollar threshold that constitutes being in business as an artist.
(e.g at $5,999 its a hobby and at $6,000 you are conducting a business)

So how do you determine that you are conducting a business?

The following indicators must be considered when determining whether you are carrying on a business;

• Whether the activity has a significant commercial purpose or character; this indicator comprises many aspects of the other indicators;
  An amatuer will undertake their activities for personal pleasure, a professional on the other hand will use their abilities towards a commercail end.
• Whether the artist has more than just an intention to engage in business;
  If it is your intention to carry on a business, do the following apply?
  Regular activity, systematic, organised, business like approach to the activity, attempts to bring the art work or services to the public, actual sales of art work or services to the public and so on.
• Whether the artist has a purpose of profit as well as a prospect of profit from the activity;
  Is your motive to make a profit? Are you marketing your art, creating industry contacts, offering and selling your work to the public, doing commissions and consulting, publically exhibiting your art, entering competitions and building your reputation?
  Even if you are doing all of these and no profit is made, that doesn’t exclude your motives.
• Whether there is repetition and regularity of the activity;
  As the artist are you producing regular work and participating in regular activities to promote and enhance your standing as an artist?
• 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;
  Are you carrying on your business like a recognised industry peer, do you have qualifications, recieve public recognition, becoming eligible for Government Grants, been offered positions on a board or as a teacher?
• Whether the activity is planned, organised and carried on in a business like manner such that it is directed at making a profit;
  As an artist, do you keep good records of income and expenses, use contracts to record agreements, use business professionals, have a business plan, rent exibition space?
• The size, scale and permanency of the activity.
  The activity must be beyond your personal needs and the volume of output must be sufficient enough to provide your work to the relevant markets.

So if you are in the business of being an artist you would be attempting to build public recognition, and awareness of your work, find suitable markets to sell your work so you can gain a profit from your abilities.

On the other hand if you are creating art for your pleasure and the sales that are made are to family and friends. The costs involved far outweight any income received and there is no intent to make a profit, then your creative work is considered a hobby.

I have attached a link to taxation ruling TR 2005/1, it contains about 45 pages of reading, with examples and cases.

From 1 July 2010 the new fuel tax credit rate is 15.543 cents per litre.

The new rate replaces the following the fuel tax credit of 16.443 from the 1st July 2009 to the 30th June 2010.

The Australian financial year runs from the 1st of July to the 30th June each year, for the year ending in June 2011 the following tax rates apply to an individual residents taxable income.

The taxable income is the balance of assessable income less allowable deductions.

The tax payable is calculated on the taxable income as per the tax rates below. As the taxpayers earnings increase it will pass through the relevant tax brackets.

Some mistakenly think that as you move into a higher tax bracket, all of your earnings are taxed at the higher tax rate. Thankfully this is not the case, only the income above the tax bracket is taxed at that rate.

Using the chart below if your income was $85,000, only $5k would be taxed at 37% not the full $85k.

The income tax rates for the financial year ending 30th June 2011 for and individual who is a resident for income tax purposes.

The above rates do not include the Medicare levy of 1.5%, which is subject to income thresholds.

Nor does it include any income tax offsets, these apply to the taxpayers individual circumstances.

The reductions in tax from the 2010 year means that the following savings in 2011 will be made on these weekly incomes:

$600 per week the savings are $2.00

$900 per week the savings are $8.00

$1,200 per week the savings are $7.00

How does the Australian Taxation Office deal with a situation like this, do they allow you to claim any deductions against the holiday home rental income?

First we should look at what is assessable income. Renting your holiday home to family and friends at a minimal cost isn’t considered assessable income as it is merely re-imbursing you for out of pocket expenses. The rent received via commercial renting on the other hand is assessable income. The next question, how are the expenses offset against the assessable income?

As with all tax deductions, the Australian Taxation Office requires that the personal use of a deduction can not be claimed. Clearly using the property for yourself and letting your family and friends use it at none commercial rental rates is personal use. Therefore no deductions are allowed for the property’s expenses for these periods.

So, what you use and what friends and family use is not tax deductible, therefore the expenses for the rest of the year are tax deductible, well, no its not quite that simple. What you now need to prove is that you are actually trying to rent the property out, this will need to be done by going through a property agent, or maybe listing on an internet holiday rental web site. The more that you can show that you are actively finding a tenant the more likely you will be able to claim the deductions for the property.

In one year if you personally use the property for say 6 weeks and actively look for tenants for the remainder of the year, then you can claim 46/52 of your deductions for the property. Also bear in mind that while you are actively looking for tenants it doesn’t mean that your property needs to be tenanted 100% of the time.

To see what can be claimed. Look at my other post http://www.accountantplus.com.au/wordpress/?p=261