Private ruling: Special professional income averaging
Date of advice: 12 March 2026
Published: 4 May 2026
Ruling period: Year ended 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Do the income averaging rules under Division 405 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to you in relation to the income you have earned from your live performance activity in the 2023-24 financial year? | A1: Yes

Relevant facts and circumstances: You have been providing live performances for less than X years. You have been an Australian resident throughout the time you have been undertaking this activity. You have completed several relevant post graduate qualifications and have developed your practice while completing these qualifications. You have supplemented this learning with targeted professional development activities both in Australia and overseas. You have also accepted unpaid speaking engagements related to your activity. Your live performances involve the simultaneous exercising of visual artistic skills and dramatic expression in performances that are based on and respond to the ongoing flow of events and conversations in the venue where you are performing. As part of your performance you create a visual record of the events and conversations as they occur. The visual artistic skills you are exercising include choices on composition, emphasis, metaphors, images, and colour that reflect your interpretation of the significance of the moment. Participants in these events are also your audience, and you are constantly interacting with your audience as you perform. The visual record you have created is retained by those paying for the performance. As your choices in undertaking these performances are based on your individual agency and perspective no two performers in this field will produce identical performances. Your typical engagement begins, where possible, with a discussion on what you intend to do and the timing and development of your performance. As you work through your performance you are monitoring audience reactions and making decisions using your spatial and aesthetic judgement. You remain mindful of the performative nature of the session and are prepared to remain calm and innovate when events do not proceed as planned. You work in analogue, digital, or remote formats depending on your clients' needs and the visual record you create may be analogue or digital. You invoice your clients at rates that are based on the length of the engagement but these rates may be otherwise determined based on the nature and complexity of the engagement. The invoices are for your personal artistic efforts as the value of the materials consumed while you complete your work is negligible. You also undertake studio work and offer workshops. In your studio work you occasionally create further visual records for existing clients that rely on the same visual language and artistic sensitivity developed through your performances. You work alone and have no continuous or long-term employment relationships with your clients. In the relevant financial year you engaged in over X discrete sessions for direct clients and also provided several performances for an agency. Your income in the relevant financial year was over $2,500.

Relevant legislative provisions: Income Tax Assessment Act 1997 (ITAA 1997) Division 405 | Income Tax Assessment Act 1997 (ITAA 1997) sub-section 405-5(1) | Income Tax Assessment Act 1997 (ITAA 1997) section 405-15 | Income Tax Assessment Act 1997 (ITAA 1997) sub-section 405-20(2) | Income Tax Assessment Act 1997 (ITAA 1997) sub-section 405-25(1) | Income Tax Assessment Act 1997 (ITAA 1997) sub-section 405-25(2)

Reasons for decision: Summary: A special concessional rate of income tax is payable on the above average special professional income of authors, inventors, performing artists, production associates and sportspersons under Division 405 of the ITAA 1997. As stated in sub-section 405-1(1) the amount of income tax you pay on the top 4/5 of your above-average special professional income is effectively 4 times what you would pay on the bottom 1/5 of that income at basic rates. Under sub-section 405-20(2) of the ITAA 1997 assessable professional income includes any assessable income derived as a reward for providing services relating to activity as a special professional. As defined in sub-section 405-25(1) the term special professional includes an author of a literary, dramatic, musical or artistic work or a performing artist. The term performing artist is defined in subsection 405-25(2): You are a performing artist if you exercise intellectual, artistic, musical, physical or other personal skills in the presence of an audience by performing or presenting: (a) music, or (b) a play; or (c) dance; or (d) an entertainment, or (e) an address; or (f) a display; or (g)a promotional activity; or (h) an exhibition; or (i) any similar activity Under section 405-15 of the ITAA 1997 your taxable income includes above average special professional income if: (a) you are an individual; and (b) you have been an Australian resident for all or part of the current year; and (c) your taxable professional income for the current year exceeds your average taxable professional income for the current year; and (d) either (i) your taxable professional income for the current year is more than $2,500; or (ii) Your taxable professional income for an earlier income year was more than $2,500 and you were an Australian resident for all or part of that income year. As discussed in Taxation Ruling TR 2022/3 Income tax: personal services income and personal services businesses (TR 2022/3) income that is mainly a reward (or would mainly be such a reward if it was the income of the individual) for an individual's personal efforts or skills is considered to be personal services income (PSI). Only individuals can have PSI and it can be earned directly or indirectly through a company, partnership or trust (personal services entity). Personal services income does not include income generated through a business structure. As stated in paragraph 44 of TR 2022/3: 44. Entities may have regard to the following factors to determine whether their income is mainly a reward for the personal efforts or skills of individuals or is derived from a business structure: • the number of arm's length employees or others engaged by the entity to perform work and their relative contribution to the income earning activities • the existence of goodwill • the extent to which income-producing assets of the business are used to derive the income • the nature of the activities carried out • the size of the operation, and • the extent to which the income is dependent upon a particular individual's own personal skills, efforts or expertise A personal services entity (PSE) is a partnership, company or trust that receives the PSI of one or more individuals and is interposed between the individual(s) providing the work or services and the service acquirer. The phrase 'or would mainly be such a reward if it was the income of the individual' applies to situations where the income is legally derived by a PSE and not the individual. If the PSE fails to meet a personal services business test in respect of a test individual, the PSI is deemed to be the income of the individual who earns the PSI and is attributed to that individual. The use of the word 'mainly' means that the income referred to needs to be 'chiefly', 'principally' or 'primarily' a reward for the provision of the personal efforts of, or for the exercise of the skills of, an individual. That is, more than half (50%) of the ordinary or statutory income received is required to be a reward for the personal efforts and skills of an individual rather than being generated by the use of assets, the sale of goods or by a business structure. Application to your circumstances You are engaged as a sole trader to use your artistic, communication, and personal skills to give live performances at events that include the live creation of a visual record of the event. While you are authoring a deliverable product in the production of this visual record you are principally engaged as a performer engaging with an audience in the context of the live event. The essence of your activity lies in your performance of this recording and your interaction with the audience as you do so. The skills you use in these performances include: • monitoring, synthesising, and interpreting events throughout the event as they transpire • making strategic choices on the development of your performance and the resulting visual representation • making artistic choices in your visual representation of what has transpired • physically creating the visual representation • interacting with the audience. As you are exercising intellectual, artistic, and personal skills in a performance in the presence of an audience at these events you are working as a performing artist as described in sub-section 405-25(1) of the ITAA 1997. You undertake this activity as an individual as you have no employees, use few assets to derive the income, rely on your personal and communication skills to inter-react with the audience, and it is these skills that are essential to the success of the performance. Your income is not produced by a business structure. As it is mainly your skills that are essential to the service you are providing and you are providing these services as an individual the income from your activity will be PSI. You are providing these services as an individual professional performing artist. You are an Australian resident, your taxable professional income in the 2023-24 financial year is more than $2,500. The income averaging rules in Division 405 of the ITAA 1997 can be applied to your income from your performing activity in the relevant financial year.