Professional Artist or Hobbyist?

[Emma Llewelyn]

I was wondering when you should change from being a hobbyist to a professional artist, for taxation purposes. I'm 22 and studying full time, so my art is not my main source of income. I enter a few competitions but I mainly work with portrait commissions, mainly through friends and word of mouth. At the moment I seem to be getting a commission every few months. I'm also working on a book cover for a publishing company, I got that through a friend too. I have a website, www.emmallewelynart.com, and for the sake of getting more commissions I'm trying to make it look as professional as possible.

I'd love to make a career out of being a professional artist, but with my studies I don't yet have the time to actively market myself to get enough work. I've been told I should start using contracts and bills of sale with my commissions, which would work to make myself look more pofessional to the client. But does that mean I need to register as a business and get an ABN? It sound complicated with tax and everything. I just don't want to get into trouble with the tax people for not declaring earnings!

Advice would be greatly appreciated =]

[Horsa]

My advice would be to talk with a tax professional or accountant. They will know what taxes you need to collect and file and when, also they can help you with knowing how to resister as a business if that is needed.

[timelady]

It will depend on the rules in your area (your flag says Australia). So maybe check here to see if you can find information on when you need to register as a business or self-employed:
http://www.business.gov.au/Pages/default.aspx
http://australia.gov.au/topics/busin...small-business

It really varies. In the USA there is a 'hobby' definition but not in the UK where we have to register self-employed as soon as we start selling. You might also have local/city regulations. I know very little about Australian self-employment, sorry!

[Greg Long]

I am not sure about Australia either but my advice is to register immediately, and if no tax is due you won't pay it anyway. For the small amount of work this involves it will give you peace of mind.
The biggest risk is that if you don't report all earnings or declare fully, the tax-man will assume you are earning a certain amount (usually based on similar full-time enterprises) and hit you with the bill, and penalties/fines. This bill will have to be paid in full before you can appeal the amount, and even then, the penalties/fines will still need to be paid. The likelihood is also that the revenue will do a full audit on all your tax affairs.

[Diane Cutter]

Yes, all good advice. The value of talking to a tax person is they can help you understand itemization. I assume Australia is similar but here in the US you can deduct costs of your art (supplies, fees, etc) and that can significantly reduce the taxable amount of art earnings. They can help you set up categories and such. If not making anything, you can only do it for 5 years here... so a good sit-down with an expert is well worth it (and, if it's like here, the fees from that consultation can be deducted from next year's taxes as a business expense).

I would say you have probably moved into the 'pro' category just from the way you are conducting the business side of your art.

Diane