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Taxable Consequences For Grants, Payments And Loans Made To Creative Industries Organisations

The creative arts industry has been one of those affected over the past two years by COVID-19, with countless cancellations, uncertainty and threats to the continued viability of the businesses and individuals involved within.With more than 600,000 Australians within the industry, the government aimed to ease the burden of the countless employers within.

The COVID-19 Creative Economy Support Package provides last resort funding assistance to significant Australian Government-funded performing arts and culture organisations to remain solvent, provide employment and deliver high-quality cultural and creative activities and experiences for audiences.

This support aims to ensure that the arts and entertainment sector can continue its activities by providing the necessary finance to plan a pathway for recovery from the effects of COVID-19. This funding will support employment, contribute to rebuilding Australia’s economy, and enhance community well-being and access to cultural experiences across Australia.

Have you been the beneficiary of any of the grants and payments that are within this package? You may have additional tax obligations that need to be met.

If you applied for and received a grant to support the creative economy, you must include it in the assessable income for your tax return.

Example

If you were involved in event management and had to cancel a music festival due to COVID-19 in 2020 and are looking to run it instead in 2021, you can apply for a grant through the Restart Investment to Sustain and Expand (RISE) fund. The RISE program provides finance to assist the presentation of new or re-shaped cultural and creative activities and events. To be eligible for this, you need to:

  • Provide a co-contribution for the activity
  • Have an Australian Business Number (ABN)
  • Be registered for GST

You do not enter into an agreement with the government to provide the festival, but if you choose not to hold the festival:

  • You are not under a binding legal obligation to go ahead with the festival
  • You are required to repay the funding that was received from the government

You must include the payment as assessable income and claim a deduction for the costs involved in the running of the festival, including venue and equipment hire, performers and staff.

If instead, you received a concessional loan to support your organisation within the creative economy, you do not need to include the loan as assessable income in your tax return.

Example

As the owner of a small theatre with no full-time staff and which ran few productions throughout the year, you may be able to apply through your bank for a concessional Show Starter loan.

These loans are designed to assist creative economy businesses to fund new productions and events that stimulate job creation and economic activity. A 100% Commonwealth guarantee backs the loans.

Although any income you make from the theatre productions you hold is to be included in your income tax return, the concessional loan is not included in the assessable income. Instead, you can claim a deduction for the interest payments on the loan and the costs of the theatre productions (in the usual manner).

GST does not have to be paid on the loan received.

Are you involved in the creative industries and want to know more about your potential taxable consequences, or what support might be available to you? Start a conversation with us.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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John Briggs

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