Will the 2018 Federal Budget scrap the art purchases tax break?

Next week’s Federal Budget will be keenly followed by the visual arts to see whether the small business instant asset write-off will continue beyond the legislated expiration date of 30 June, 2018.

For the last 3 years the write-off measures have allowed artworks, costing up to $20,000 each, bought by small business for display in their premises, to be written off as a 100% tax deduction.

From 1 July 2017 the measures widened, with the definition of a small business being recast as one having a turnover of up to $10 million per year rather than the previous upper threshold of $2 million per year.

The so-called art purchases tax break is the only genuine concession remaining for the visual arts industry following the imposition of onerous conditions on super funds wishing to purchase art for investment purposes.

Surprisingly, a recent report by KPMG found that 69% of mid-sized firms had not used the instant asset write-off. And according to IPA general manager of technical policy, Tony Greco, the businesses that have taken advantage of the write-off may be misconstruing the incentive behind the policy and buying assets simply for tax purposes.

Politically, the government is under pressure to deliver a Federal Budget that will return the nation’s finances to surplus. Against that background and with the already announced decision not to increase the medicare levy from 2.0% to 2.5%, the government will need to find savings in its expenditure program.

The instant asset write-off may either become a casualty of these machinations or if it is retained, strict new conditions may apply. This happened several years ago when the Gillard government’s then $6,500 asset write-off was legislated in such a way as to exclude artworks from qualifying for the measures.

Sequel CFO chief executive David Boyar recently questioned the legitimacy of the asset write-off measures, calling it a ‘gadget benefit’. He said:

‘It’s great for retailers. I don’t know how good it is for small business.’

Of course many small businesses are retailers and some of those retailers are involved in the visual arts industry.

If the art purchases tax break is scrapped in next week’s Federal Budget, both major parties should seriously give some consideration as to how to craft a visual arts tax policy. (Just kidding).

In any event all will be revealed on Tuesday, 8 May.

I will be sending out my Overview of the 2018 Federal Budget with an emphasis on its impact on the arts industries the following day, Wednesday, 9 May. Stay tuned!

Featured Artwork:
Nigel Sense, Real man drive Utes – Dazza, 2018, Acrylic on canvas, 110 cm by 155 cm