Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Tax Laws Amendment (resale royalty RIGHT for visual artists) bill 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Resale royalty right for visual artists 5
Index 13
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|ITAA 1936 |Income Tax Assessment Act |
| |1936 |
|ITAA 1997 |Income Tax Assessment Act |
| |1997 |
General outline and financial impact
Resale royalty right for visual artists
This Bill amends the Income Tax Assessment Act 1997 to provide a
streamlined tax treatment for payments made in relation to resale
royalty rights for visual artists. This Bill also makes several
minor amendments to simplify the tax treatment for payments made by
copyright collecting societies.
Date of effect: These amendments apply to the 2009-10 income year
and later income years.
Proposal announced: These amendments were included in the
Updated Economic and Fiscal Outlook 2008-09, released by the
Treasurer and the Minister for Finance and Deregulation on
9 February 2009.
Financial impact: The revenue impact of this measure is
unquantifiable.
Compliance cost impact: Low.
Chapter 1
Resale royalty right for visual artists
Outline of chapter
1. This Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to
provide a streamlined tax treatment for payments made in relation
to the resale royalty right for visual artists. This Bill also
makes several minor amendments to simplify the tax treatment for
payments made by copyright collecting societies.
Context of amendments
2. The Resale Royalty Right for Visual Artists Bill 2008 establishes a
resale royalty right for visual artists and provides an
accompanying statutory scheme.
3. The resale royalty right entitles eligible visual artists to a
royalty payment on the sale price of any commercial resale of their
original works of art over $1,000 for works acquired after the
legislation takes effect. This allows visual artists to share in
the commercialisation of their work in the secondary art market.
The resale royalty payable is 5 per cent of the sale price.
4. The responsible Minister may appoint a body as the resale royalty
collecting society. The collecting society is responsible for
collecting resale royalty payments and distributing these amounts
(minus an administration fee) to the respective resale royalty
right holders.
5. The tax law currently provides for a streamlined approach to
payments held by copyright collecting societies. In most
circumstances this approach does not tax copyright payments in the
hands of the collecting society. The final recipient is taxed on
the payments when received.
6. These amendments extend analogous treatment to the resale royalty
collecting society. They apply to resale royalty payments in place
of the trust tax rules in Division 6 of Part III of the Income Tax
Assessment Act 1936 (ITAA 1936). This ensures that the resale
royalty collecting society is not taxed on payments received and
held on behalf of the resale royalty right holder.
Summary of new law
7. The amendments ensure that the resale royalty collecting society is
not taxed on amounts it collects on behalf of resale royalty right
owners and holds pending allocation to them.
8. Nor is the resale royalty right collecting society taxed on other
income it derives, provided that the amount of this other income
falls within certain limits.
9. Amounts received by resale royalty right holders from the resale
royalty collecting society are included in their assessable income,
to the extent these amounts are not subject to income tax in the
hands of the collecting society.
Comparison of key features of new law and current law
|New law |Current law |
|Resale royalties, and |The income of a resale |
|interest on resale |royalty collecting |
|royalties, collected or |society is subject to the|
|derived by the resale |trust tax rules in |
|royalty collecting |Division 6 of Part III of|
|society are exempt from |the ITAA 1936. |
|income tax in the hands | |
|of the society. Payments| |
|to resale royalty right | |
|holders are taxable when | |
|received. | |
|Other income derived by |Income unrelated to |
|the resale royalty |resale royalty rights is |
|collecting society not |ordinarily treated as |
|directly relating to |assessable income in the |
|resale royalty rights is |hands of the society. |
|exempt from income tax, | |
|to the extent that such | |
|income does not exceed | |
|either $5 million or 5 | |
|per cent of its total | |
|income in the income | |
|year. | |
|When making a resale |No equivalent. |
|royalty payment to a | |
|resale royalty right | |
|holder, the resale | |
|royalty collecting | |
|society must notify the | |
|recipient. If this does | |
|not occur, the collecting| |
|society is liable to an | |
|administrative penalty of| |
|20 penalty units | |
|(currently $2,200). | |
Detailed explanation of new law
Streamlined tax treatment for resale royalty payments
10. The Resale Royalty Right for Visual Artists Bill 2008 establishes a
resale royalty right for visual artists. The resale royalty right
entitles eligible visual artists to a royalty payment on the sale
price of any commercial resale of their original works of art over
$1,000 for works acquired after the commencement of the resale
royalty right scheme. This allows visual artists to share in the
commercialisation of their work in the secondary art market. The
resale royalty payable is 5 per cent of the sale price.
11. The responsible Minister may appoint a body as the resale royalty
collecting society. The collecting society is responsible for
collecting resale royalty payments and distributing these amounts
(minus an administration fee) to the respective resale royalty
right holders.
Resale royalty collecting society
12. The amendments apply a streamlined tax treatment to resale royalty
payments received by resale royalty right holders from a resale
royalty collecting society in place of the trust taxation rules in
Division 6 of Part III of the ITAA 1936. [Schedule 1, item 8,
subsection 51-45(1)]
13. This is achieved by exempting from income tax in the hands of the
society resale royalties, and interest on resale royalties,
collected or derived by the resale royalty collecting society.
[Schedule 1, item 8, paragraph 51-45(2)(a)]
14. The resale royalty collecting society may derive other income not
directly relating to resale royalty rights. Such income is also
made exempt from income tax in the hands of the society, to the
extent that it does not exceed either $5 million or 5 per cent of
its total income in the income year. This income could comprise,
for example, consulting fees, fees received for the provision of
administrative services and grant income. [Schedule 1, item 8,
paragraph 51-45(2)(c)]
15. The amendments also allow for regulations to make exempt from
income tax additional amounts of income derived by the resale
royalty collecting society. [Schedule 1, item 8, paragraph 51-
45(2)(b)]
16. The body appointed to be the resale royalty collecting society may
also be a copyright collecting society, as defined by section 995-1
of the ITAA 1997. [Schedule 1, item 11]
1. : Resale royalty collecting society is also a copyright collecting
society
CollectTrust is the body appointed by the Minister for the
Arts as the resale royalty collecting society. It is also a
copyright collecting society as defined by section 995-1 of
the ITAA 1997. CollectTrust's 2009-10 income is $1.6
million, comprising:
. $1 million in royalties, interest on royalties and other
amounts relating to copyright as defined by paragraph 51-
43(2)(b);
. $500,000 in resale royalties, interest on resale royalties
and other amounts relating to resale royalties as defined by
paragraph 51-45(2)(b); and
. $100,000 in other income, including from government grants.
The first two amounts are made exempt from income tax by
paragraphs 51-43(2)(a) and (b), and paragraphs 51-45(2)(a)
and (b) respectively.
CollectTrust's other income is also exempt from income tax,
to the extent it does not exceed the lesser of 5 per cent of
its total ordinary and statutory income and $5 million. In
this case $80,000 (5 per cent of $1.6 million) is exempt
from income tax. The remaining $20,000 constitutes
CollectTrust's taxable income for 2009-10.
Resale royalty right holder
17. When an artist (or any other owner of a resale royalty right)
receives a resale royalty payment from the collecting society, the
amount of this payment will generally be included in their
assessable income.
18. However if, for any reason, any part of this amount is or has been
taxable in the hands of the collecting society, the amount to be
included in the artist's assessable income is reduced to reflect
this. [Schedule 1, item 7, section 15-23]
19. This treatment is analogous to the tax treatment afforded to
payments made to members of copyright collecting societies.
1. : Streamlined tax treatment for resale royalty right amounts
David produces an artwork which is resold commercially,
triggering a resale royalty under the Resale Royalty Right
for Visual Artists Bill 2008. The resale price of the
artwork is $20,000, so the resale royalty amount is 5 per
cent of this, $1,000.
The reseller of the artwork pays the $1,000 to the resale
royalty collecting society. It takes the collecting society
several months to contact David, who has been travelling
overseas. The collecting society then makes a payment to
David, adjusted for interest and administration costs.
The $1,000 resale royalty amount received by the collecting
society, along with any interest earned in the period prior
to making a payment to David is exempt from income tax. The
payment received by David is included in his assessable
income in the income year he receives it.
Notice requirements
20. The existing provisions requiring a copyright collecting society to
give notice when it makes a payment to a member are generalised to
include the resale royalty collecting society. [Schedule 1, item
10]
21. The resale royalty collecting society must notify the resale
royalty right holder whenever it makes a resale royalty payment to
them. [Schedule 1, item 10, subsection 410-50(1)]
22. This notice must be given at the time of the payment and must be in
the approved form, as determined by the Commissioner of Taxation.
[Schedule 1, item 10, subsections 410-50(2) and (3)]
23. If these requirements are not met, the resale royalty collecting
society is liable to an administrative penalty of 20 penalty units.
[Schedule 1, item 19]
Copyright collecting societies amendments
24. The tax law currently provides that copyright income and a limited
amount of non-copyright income is exempt from income tax when
collected or derived by a copyright collecting society.
25. Copyright income and non-copyright income are currently defined
terms in section 995-1 of the ITAA 1997. However, these
definitions are not necessary to achieve the desired outcome.
Accordingly, the amendments repeal these definitions. This is
consistent with the general policy of removing unnecessary
definitions, whenever possible, to reduce the complexity of the tax
law. [Schedule 1, items 13 and 14]
26. The treatment of income collected or derived by a copyright
collecting society is governed by section 51-43 of the ITAA 1997.
The amendments rewrite this section, without altering its effect,
by replacing the references to copyright income and non-copyright
income with more general terms. [Schedule 1, item 8, section 51-
43]
27. Specifically, the amendments maintain the existing exemption from
income tax for royalties, interest on royalties and other amounts
relating to copyright prescribed by regulation that are collected
or derived by the copyright collecting society. [Schedule 1, item
8, paragraphs 51-43(2)(a) and (b)]
28. The amendments also exempt from income tax other ordinary and
statutory income, unrelated to copyright, derived by the copyright
collecting society, to the extent that such income does not exceed
either $5 million or 5 per cent of its total income in the income
year. [Schedule 1, item 8, paragraph 51-43(2)(c)]
Application and transitional provisions
29. The measure applies in relation to the 2009-10 and later income
years. [Schedule 1, item 20]
30. A transitional amendment ensures that existing regulations which
further define copyright income as it is collected or derived by a
copyright collecting society continue to operate, notwithstanding
the removal of the definition of non-copyright income. [Schedule
1, item 9]
Consequential amendments
31. 'Resale royalty', 'resale royalty collecting society' and 'resale
royalty right' are added as defined terms in subsection 995-1(1) of
the ITAA 1997. Each term has the meaning given to it by the Resale
Royalty Right for Visual Artists Bill 2008. [Schedule 1, items 15
to 17]
32. Section 10-5 of the ITAA 1997 includes a list of provisions about
assessable income. The reference to 'payments to members of
copyright collecting societies' is replaced by the broader term
'collecting societies'. References to the provisions dealing with
payments of royalties by copyright collecting societies and by the
resale royalty collecting society are included as sub-items under
this new item. [Schedule 1, items 1 and 2]
33. Section 11-15 of the ITAA 1997 includes a list of those provisions
dealing with the exemption of income if it is derived by certain
entities. The reference to copyright collecting societies is
amended to reflect the removal of the concept of non-copyright
income, and a cross-reference to the resale royalty collecting
society provisions is added to this list. [Schedule 1, items 3 and
4]
34. A taxpayer's assessable income ordinarily includes any amounts
received as a royalty (section 15-20 of the ITAA 1997). This
section is amended to exclude resale royalty payments, to clarify
that these payments are instead subject to the new dedicated
provisions. [Schedule 1, item 5]
35. The definition of 'copyright collecting society' in subsection 995-
1(1) of the ITAA 1997 is amended to replace the reference to
copyright income with the more general 'income of a kind mentioned
in paragraph 51-43(2)(a) or (b)' of the ITAA 1997. [Schedule 1,
item 12]
36. The reference to 'copyright, and non-copyright' income in
subsection 410-1(1) of the Income Tax (Transitional Provisions) Act
1997 is replaced by 'ordinary income, and statutory income'.
[Schedule 1, item 18]
Index
Schedule 1: Resale royalty right for visual artists
|Bill reference |Paragraph |
| |number |
|Items 1 and 2 |1.32 |
|Items 3 and 4 |1.33 |
|Item 5 |1.34 |
|Item 7, section 15-23 |1.18 |
|Item 8, section 51-43 |1.26 |
|Item 8, paragraphs 51-43(2)(a) and (b) |1.27 |
|Item 8, paragraph 51-43(2)(c) |1.28 |
|Item 8, subsection 51-45(1) |1.12 |
|Item 8, paragraph 51-45(2)(a) |1.13 |
|Item 8, paragraph 51-45(2)(b) |1.15 |
|Item 8, paragraph 51-45(2)(c) |1.14 |
|Item 9 |1.30 |
|Item 10 |1.20 |
|Item 10, subsection 410-50(1) |1.21 |
|Item 10, subsections 410-50(2) and (3) |1.22 |
|Item 11 |1.16 |
|Item 12 |1.35 |
|Items 13 and 14 |1.25 |
|Items 15 to 17 |1.31 |
|Item 18 |1.36 |
|Item 19 |1.23 |