Private ruling: Special Professional Income
Date of advice: 6 October 2015
Published: October 2015
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you a 'special professional' for the purposes of Division 405 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 405-15 | Income Tax Assessment Act 1997 Section 405-20 | Income Tax Assessment Act 1997 Section 405-25 | Income Tax Assessment Act 1997 Subsection 405-25(1) | Income Tax Assessment Act 1997 Paragraph 405-25(4)(b) | Income Tax Assessment Act 1997 Paragraph 405-25(5)(a) | Income Tax Assessment Act 1997 Paragraph 405-25(5)(b)

Reasons for decision: Summary: Division 405 of the ITAA 1997 applies special rates of tax on the above-average professional income of special professionals. It reduces the effect that fluctuations in special professional income would otherwise have on the income tax liability of these persons. Under section 405-15 of the ITAA 1997, you are only subject to this concessional tax treatment if: • you are an individual • you are an Australian resident at any time during the income year • your are a special professional, and • you satisfy the first year requirements, that your taxable professional income is more than $2,500, in the current year or an earlier income year. Subsection 405-25(1) of the ITAA 1997 states that you are a special professional if you are: 1. the author of a literary, dramatic, musical or artistic work; or 2. the inventor of an invention; or 3. a performing artist; or 4. a production associate; or 5. a sportsperson. A taxpayer is a production associate if they provide 'artistic support' for the activity of making a film, tape, disc or television or radio broadcast (paragraph 405-25(4)(b) of the ITAA 1997). Paragraph 405-25(5)(a) of the ITAA 1997 states that a taxpayer is taken to provide artistic support if they provide services in any of the following roles: (i) an art director; or (ii) a choreographer; or (iii) a costume designer; or (iv) a director; or (v) a director of photography; or (vi) a film editor; or (vii) a lighting designer; or (viii) a musical director; or (ix) a producer; or (x) a production designer; or (xi) a set designer; or (b) you provide similar services relating to the activity. No definition of the expression 'similar services' is included in the ITAA 1997. However, the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 4) 1987, which accompanied the introduction of the former Division 16A of the Income Tax Assessment Act 1936 (now Division 405 of the ITAA 1997), makes reference to the requirement for an artistic contribution and not merely a technical one (for example, by operation of camera or sound equipment). In your case, you are employed as a lead effects artist and your role is typical of someone who provides artistic support and contributes artistically to the production of a movie. As such, you are considered a production associate who provides artistic support for the activity of making a movie, and are therefore a special professional within the meaning given by subsection 405-25(1) of the ITAA 1997.

Relevant facts: You worked as a lead effects artist in the making of a feature film.