The end of the tax year is fast approaching, and while we wouldn’t usually automatically associate taxes and art; Michael Fox, Gallery Director of Fox Galleries in Collingwood, and Principal of Michael Fox Arts Accountant & Valuer, has good news. You can claim an artwork purchase as a part of your business’s 2020 tax return! He explains the premise further in our latest blog, so read on to find out more and start picturing the potential for gorgeous artwork on the walls of your home office:
CLAIMING ARTWORK AS A TAX DEDUCTION
With 30 June drawing near, and with many people being required to work from home as a result of COVID-19, now is a good time to ask: can I claim an artwork purchase on my 2020 tax return?
The ATO (Australian Taxation Office) has adopted a shortcut method of claiming running costs of your home office, if you are working from home only due to COVID-19, from 1 March to 30 June, that includes purchases of artworks to the value of $300. Artworks costing more than $300 bought by employees have to be claimed using the usual decline in value rules.
However, if you are a professional in business and you are working from home, it is possible to claim much more than $300 per artwork. In fact, you could claim up to $150,000 per painting or sculpture.
Why? Artworks are both investments and depreciating assets according to the ATO. They are normally subject to a very low rate of depreciation due to their useful life being assessed as 100 years, meaning the usual rate for artworks is only 1% per year.
But the fact that artworks are held to be depreciating assets qualifies art for the instant asset write-off measure, the threshold for which has recently been lifted from $30,000 to $150,000 per individual work. The artwork has to meet four criteria to be eligible for the instant asset write-off:
1. It is tangible;
2. Capable of being moved;
3. Purchased with the dominant purpose of display in a business premise; and;
4. Not be trading stock.
There is no bar as to whether art is bought second hand or whether the parties involved in the transaction are related to each other, as long as the work is bought at arms-length.
There is no limit to the number of artworks costing less than $150,000 that an eligible business may claim a tax deduction for.
The instant asset write-off is now available to almost every business in Australia. From 12 March any business with a turnover of less than $500 million may claim a 100% tax deduction for an artwork costing up to $150,000.
What an incentive! We can’t think of any better excuse to redecorate the home working spaces we are seeing oh-so-much of right now. If you’d like to discuss this opportunity further with Fox Galleries, or any of our Melbourne galleries – don’t hesitate to reach out.
Fox Galleries exterior
Featured art from first to last:
Michael Fox Arts Accountant & Valuer profile photo.