Non Commercial losses: artist exception - whether artist's manager or agent is conducting a 'professional arts business'.

Is the manager or agent of a professional artist carrying on a 'professional arts business' for the purposes of subsection 35-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. A taxpayer conducting a business as a manager or agent of an artist, or artists, is not carrying on a 'professional arts business' for the purposes of subsection 35-10(5) of the ITAA 1997.

An individual taxpayer conducts a business of managing a professional artist.

The manager has no creative input into the artist's activities.

The manager handles the artist's financial affairs and negotiates with promoters for performance engagements.

The exception in subsection 35-10(4) of the ITAA 1997 provides that the loss deferral rule in subsection 35-10(2) of the ITAA 1997 does not apply to defer any loss incurred by the individual from the activity for that income year if: (a) the activity is a 'primary production business', or a 'professional arts business'; and (b) your assessable income for that year (except any net capital gain) from other sources that do not relate to that activity is less than $40,000.

Subsection 35-10(5) of the ITAA 1997 subsequently defines a 'professional arts business' as a business you carry on as: (a) the author of a literary, dramatic, musical or artistic work; or (b) a performing artist; or (c) a production associate.

A note to paragraph 35-10(5)(a) of the ITAA 1997 states: The expression 'author' is a technical term from copyright law. In general, the 'author' of a musical work is its composer and the 'author' of an artistic work is he artist, sculptor or photographer who created it.

The terms 'performing artist' and 'production associate' are defined in section 405-25 of the ITAA 1997.

For a particular business activity to be considered a 'professional arts business' as defined in subsection 35-10(5) of the ITAA 1997, the business activity must be one where the taxpayer is performing one of the activities outlined in subsection 35-10(5) of the ITAA 1997.

In this case, while the taxpayer is carrying on a business of managing a professional artist, they are not the author of the literary, dramatic, musical or artistic work, or a performing artist, or a production associate. Therefore, the taxpayer will not be carrying on a 'professional arts business' within the meaning of that term as defined in subsection 35-10(5) of the ITAA 1997 and as a result the exception in subsection 35-10(4) of the ITAA 1997 cannot apply.