Private ruling: Assessability of professional income
Date of advice: 4 May 2016
Published: June 2016
Ruling period: Year ended 30 June 20XX.
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the income earned in your roles as a location sound recordist and audio post-production engineer eligible for special professional income averaging? | A1: Yes.

Relevant facts and circumstances: You are a location sound recordist and sound post-production engineer for film and television. In your roles, you are responsible for making decisions on the style of dialogue recording and how to do this in order to match the overall artistic direction of the production - but also for building a sound library of sound effects for each production that greatly assists the artistic process and possibilities. When you are on location as a sound recordist you make decisions on what other sounds heard on location should or should not be recorded as part of the final creative sound track to any production. You record dialogue and you determine and record other sounds that will provide artistic support to the final product. You provide artistic support during production. You carry on work post-productions as an audio post production engineer. It is your continued profession as a freelance worker and is the focus of your doctorate studies.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 405 | 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 Income Tax Assessment Act 1997 (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. 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). As you are a location sound recordist and sound post-production engineer utilising your artistic skills in the making of sound for film and television broadcast, you are considered a special professional for the purposes of the concessional tax treatment under Division 405 of the ITAA 1997.