In the latest budget some great news for business owners who buy art.
1. The buyer of a new art work may claim a special deduction in calculating their taxable income of 50% of the cost of the new art work where the new art work is used by the owner mainly in carrying on business.
2. For taxation purposes ‘Art Works’ are depreciating assets. An art work could include a painting or sculpture. The Australian Taxation Office in Table B of Taxation Ruling TR 2008/4 states the effective life of art works is 100 years and the depreciation rate is 1% prime cost method and 2% diminishing value method. (This can mean an overall deduction of 150% over time)
3. Professional and business persons who furnish their professional rooms or offices with art works will be entitled to the special deduction. Those persons who order and place the art work in their rooms or offices before 31 Dec 2009 will be entitled to the special deduction at the rate of 50%.
4. For a small business the art work must cost a minimum of $1,000. A small business is broadly a business whose turnover is less than $2,000,000 annually. For other businesses the minimum cost of the art work is $10,000. (For art works under $1000, depending on if you use STS, the whole $1000 can be deducted, otherwise up to $300, check with your accountant which applies to your business).
5. There is no ‘claw back’ of the special deduction on a later sale, disposal or change of use of the art work. There is no minimum holding period for the art work.
6. These notes are a guide and for information only. For more information see your accountant or visit the Australian Taxation Office.