You’ve now published a book -- traditionally or self-published -- so the first question for taxation purposes that you need to ask yourself is, are you a hobby or are you a business? It’s important to establish whether you’re approaching publishing as a business or a hobby early on as it will affect your tax and deductions.
When running a business, you pay tax on the money you earn, can claim for deductions on your expenses and generally need an Australian Business Number (ABN). These do not apply if your activity is a hobby. Read the Australian Taxation Office (ATO)’s Are you in business? page to help you decide whether you’re running a business or a hobby.
Once you’ve decided that you’re a business, how do you go about setting it up? While the specifics can change from state to state in Australia, the information below will give you a rough guide to go by. You can of course be in a partnership, company or trust, but this article deals with the author as sole trader.
As a sole trader, you are your publishing business. Many author-publishers choose this option for its convenience and simplicity. This is a simple and straightforward process and is completed by the author-publisher through the Australian Business Register. Essentially, to conduct a publishing business in Australia, you’ll need an Australian Business Number (ABN). Applying for an ABN is free.
The next step is to give your Australian Business Number a name. A good idea is simply to use your published name (mine is Dianne Bates). When creating a publishing business name (other than your own legal name), check that no one else has the name you want using the ABN Lookup or ASIC Online Services, and creatively explore.
The Australian Tax Office (ATO) offers a business assistance program for small businesses. Learn more on the ATO Business Assistance Program page.
As a newly formed publishing business, there’s a checklist of things you may want to consider and register for. The list is quite extensive and can be overwhelming, but it is better to know your legal responsibilities upfront and then adjust if need be. For instance, an internet publishing business has fewer regulations than a publishing business with commercial premises. You might like to check out the Australian Business Licence and Information Service (ABLIS) website. It is important that you understand your taxation obligations, record keeping requirements, and any additional taxes you may need to pay (such as GST). Will you trade as a home-based business, an online business, or will you lease a business premise? Whichever option you select, you need to ensure it is properly insured and registered accordingly. Once again check the ABLIS website if you are home-based as local councils have rules in place.
For more information, watch the tax basics for small business videos at ATO or phone the ATO business tax enquiries line on 13 28 66.
As a traditionally based sole trading author, I have an ABN (which is very helpful when claiming money from school visits, festival speaking, etc). For tax-keeping purposes, I use e-records, provided by the ATO (not sure if it is still available), and record all income from writing and writing-related activities (such as my online writing for children courses).
As for tax deductions, there are quite a few ranging from stationery, postage, computer repairs, capital expenditure (a new printer, for example). Some of my deductions, such as use of home office, cleaning office, cinema and theatre attendance, electricity and phone are made on a percentage basis (worked out by my accountant, whose bill is also tax deductible).
As for my Buzz Words business, I make deduction claims when paying contributors and prize winners when they receive cash awards.
You might like to check out a series of free webinars on a variety of taxation topics. You’ll need to register online on the ATO webinars page.
If you have any tax questions, check with your accountant. I have been working as a writer/author/magazine producer/manuscript assessor for many years, always listing all my income (including Lending Rights, Copyright Agency Limited monies` and prize-monies) -- and claiming as many deductions as I can -- without any problems. I’ve had one tax audit in 30 years+ and there were no problems there, either. According to the ATO, you are legally advised to keep your tax receipts, cheque books, bank statements and so on for a minimum of seven years.
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© Dianne Bates
Dianne (Di) Bates has published 130+ books over the past 35 years. She is compiler/founder Buzz Words and operates a handful of online businesses connected with writing. Please note that Di is not a taxation consultant, so you should always contact either the ATO or your taxation accountant for specific queries.
This article first appeared in Buzz Words magazine. If you’d like a free copy of this twice monthly magazine, go to www.buzzwordsmagazine.com
Here’s another article by children’s author Sandy Fussell you are sure to find helpful with your writing finances: http://www.sandyfussell.com/four-simple-ways-tech-can-help-writers-with-financial-stuff