How tax applies to Indigenous
artwork
About this guide
This guide explains how pay as you go (PAYG) withholding, the goods and services
tax (GST) and the Australian business number (ABN) apply to Indigenous artworks
sold at art centres.
Indigenous artwork sold at art centres
We have identified two ways Indigenous artworks are sold at art centres.
1. The buy and sell arrangement – you (the art centre operator) buy the artwork
from the artist and then sell the artwork to a buyer.
2. Acting as an agent arrangement – you (the art centre operator) acts as an agent
for the artist and sells the artwork on behalf of the artist.
Depending on how your art centre is set up, artwork can be sold using only one
arrangement or both arrangements.
The buy and sell arrangement
There are two ways the buy and sell arrangement arises.
You can buy artwork either:
■ immediately on delivery from an artist
■ from an artist later, at the time of sale to an art centre buyer.
In a buy and sell arrangement, there are two supplies.
3. A supply between an artist and an art centre.
4. A supply between the art centre and the buyer.
The GST implications are the same for both supply situations.
Does an artist charge GST?
If an artist is not registered for GST, they will not include GST in the price when
selling an artwork to you the art centre operator.
If an artist is registered for GST, they will include GST in the price when selling an
artwork to you the art centre operator.
Do you charge GST when you sell an artwork?
If you are registered for GST, you must include GST on the full sale price of an
artwork.
When are you required to withhold amounts from an
artist?
Explanations
Special or Ordinary Zone A includes most of the Northern Territory (including
Darwin and Alice Springs), northern Western Australia and far west and far north
Queensland.
Artistic works includes graphic works, painting, sculpture, collage, craftsmanship
and some performance art. For example, an artistic work would include handcrafting
a traditional spear.
According to the PAYG withholding system, you must withhold 46.5% of the payment
for an artwork if all of the following apply:
■ an artist does not quote an ABN
■ that artist is in business.
You must send the amount withheld to us.
When are you not required to withhold amounts
from an artist?
You are not required to withhold amounts in the following two circumstances.
1: Artist works or lives in Special or Ordinary Zone A
We have varied to nil the amount to be withheld from a payment to an Indigenous
artist for
artistic works if an Indigenous artist works or lives in
Special or
Ordinary Zone A and does not quote an ABN.
The variation applies to payments made from 1 July 2004.
In summary, where an art centre makes a payment to an Indigenous artist for
artistic works, the art centre is not required to withhold amounts where that artist
works or lives in Special or Ordinary Zone A.
Although this variation will reduce the amount to be withheld to nil in some
circumstances where artists are in business, if their turnover exceeds $75,000 the
artist will be required to register for GST.
2: Statement by a supplier
Often it is difficult to work out if an artist is in business or just creating artworks as
a hobby or recreational activity. However, where an artist does not live in
Special
or Ordinary Zone A, an art centre may seek a
Statement by a supplier from
the artist. This indicates that an artist is creating artwork as a hobby or
recreational activity and is not in business.
Art centres do not need to seek a new statement for each supply. We
recommend that the details be confirmed with the artist every 6-12 months.
Buy and sell arrangement process
The acting as an agent arrangement
When you act as an agent for an artist, you essentially take the role of the artist.
There are two separate supplies made, one from the artist to the buyer for the sale of
the artwork, and the second from the art centre to the artist for agency services.
5. The transactions between the artist, the buyer and you for the sale of artwork.
6. The transaction between you and the artist for agency services.
In practice, the commission will generally be deducted from the sale proceeds due to
the artist.
Does the artist (you acting as an agent) charge
GST on the sale price of the artwork?
If an artist is not required to be registered for GST, the artist will not include GST in
the sale price of the artwork.
If the artist is registered, the artist will include GST in the sale price.
Do you charge GST on your commission?
If you are registered for GST, you include GST in the commission fee. The artist can
claim a GST credit if they are registered for GST.
If you are providing a service to the artist, you agree to sell the artwork and pay the
proceeds to the artist in return for a fee (usually deducted from the sale proceeds).
Find out more
■ GST definitions: GST credits.
■ GSTR 2000/37
Goods and services tax: agency relationships and the application
of the law.
When is a buyer required to withhold amounts from
an artist?
According to the PAYG withholding system, the buyer must withhold 46.5% of the
payment for the artwork if the following apply:
■ an artist fails to quote an ABN
■ an artist is in business and the buyer purchases their artwork in the course of
their business (for example, a purchase made by a commercial gallery).
The buyer must send the withheld amount to us.
When is a buyer not required to withhold amounts
from an artist?
A buyer is not required to withhold in the three circumstances below.
1: Agent may quote its ABN instead of the artist's ABN
There is a specific exception in the law enabling the agent of a supplier to quote
their ABN instead of the ABN of the supplier. If an art centre has quoted its ABN
on an invoice or some other document relating to the supply there is no need for
the buyer to withhold.
2: Artist resides in Special or Ordinary Zone A
3: Statement by a supplier
Acting as an agent arrangement process
Statement by a supplier
A payer must withhold an amount from a payment it makes to another entity if the
payment is for a supply that the other entity has made, or proposes to make, to the
payer in the course or furtherance of an enterprise carried on in Australia.
The primary exception is that the supplier has quoted an ABN on an invoice or some
other document relating to the supply.
Where payers are unsure if the supplier is carrying on an enterprise they may want to
make a further inquiry with the supplier. The payer may ask the supplier to provide a
Statement by a supplier (NAT 3346).
The supplier can either use the form Statement by a supplier (NAT 3346) or they can
create their own form.
If a supplier chooses to create their own 'Statement by a supplier' it should contain
the following:
■ the supplier's name and address
■ why it was not necessary to withhold (for example, the supply is part of a hobby
or private recreational pursuit)
■ the supplier's signature.
GST credits
If an artist is required to be registered for GST and has issued a tax invoice, you can
claim a GST credit.
If an artist is registered for GST, they can claim a GST credit where you include GST
in the commission fee and issues a tax invoice to the artist.
You claim your GST credits when you lodge your activity statement.
There is a four-year time limit in claiming GST credits.
Find out more
Time limits on GST refunds
Keeping records
You should keep records relating to when an artwork was purchased from an artist.
This should include the following:
■ the date of purchase
■ the name and address of the artist
■ the purchase price.
You can also include this information in your cash payment book.
Summary
If the artist is not registered for GST, do not include the GST on the sale price of the
work.
If the artist is registered for GST, include the GST on the sale price of the work. You
issue a tax invoice showing the artist's ABN on behalf of the artist to the buyer. The
artist will need to send any GST collected to us.
If you are registered for GST, you include GST in the commission fee and issue a tax
invoice to the artist. You send the collected GST to us. Where the artist is registered
for GST they can claim a GST credit.
A buyer, who is making a purchase in the course of their own business, is not
required to withhold where:
■ you have quoted your ABN on an invoice or some other document relating to the
supply
■ the artist works or lives in special or ordinary zone A and does not quote an
ABN
■ the artist has provided a
Statement by a supplier (you can also include this
information in your cash payment book).
More information
Find out more
■ Statement by a supplier (NAT 3346)
■ PAYG withholding (NAT 8075)
■ GST
■ ABN registration for individuals (sole traders) (NAT 2938)
■ ABN registration for companies, partnerships, trusts and other organisations
(NAT 2939)
■ For further assistance, find out How we can help
■ Alternatively, phone ATO Indigenous Helpline
13 10 30 for individual income tax
and general personal enquiries.
Copies of this publication
Get it done
You can download a printable version of How tax applies to Indigenous artwork
(NAT 12066, 424KB) in Portable Document Format (PDF).
You can order a printed copy by noting the
full title of the publication and either:
■ visit our Online publications ordering service
■ phone the Publications Distribution Service (which operates from 8.00am to
6.00pm, Monday to Friday) on
1300 720 092.
Abstract: Explains how pay as you go (PAYG) withholding, the goods and services tax (GST)
and the Australian business number (ABN) apply to Indigenous artworks sold at art centres.
