Special Professional Income Averaging (SPIA) allows individuals in certain professions to average their income over a four-year rolling period.
SPIA is likely to result in lower tax rates for special professionals whose income tends to rise and fall. This concessionary tax treatment ensures an individual is not paying additional tax due to the irregular nature of their work or income.
Professionals who may qualify for SPIA include:
- artists,
- authors,
- composers,
- inventors,
- performing artists,
- production associates who contribute to artistic support, and
- sportspeople.
Qualifying criteria apply and there are some similar professionals who are excluded from using SPIA such as:
- journalists,
- draughtspersons,
- graphic artists,
- production associates who use technical rather than artistic skills,
- sports coaches,
- umpires or referees,
- trainers of animals,
- sports administrators.
The tax concession can allow a special professional to apply lower tax rates to their income, using a formula determined by the ATO, therefore lowering their overall tax liability. Generally, taxable professional income in a given year is calculated as the average of the preceding four years.
Income arising directly from the activities of a special professional are averaged including rewards and prizes, income from endorsements, advertisements and interviews, royalites from copyright of a work, and income from a patent.
When to Commence SPIA
The tax benefits over many years may be optimised if individuals commence using SPIA as early as possible in their special professional career, even if their income is initially low. With proper planning, significant tax can be saved in the future as their income increases.
If you are one of these special professionals, we encourage you to seek taxation advice. If you have any queries, please contact us on (02) 9908 9888.