When it comes to Australian literary prizes – did you know that the prize money is taxable?
Yes, you read that right.
Next time you win the Miles Franklin, after you’ve sobered up from the after party and cashed your cheque for $60,000, the taxman will insist that you include your literary windfall as ‘income’ on your next tax return.
But don’t despair. Big win at the horse races? All that cash is yours to keep. Take home the grand prize on a TV quiz show? All yours. Place a bet on yourself as the winner of the Miles Franklin? Again, if you guessed right, you keep the cash and dodge the tax.
It’s only if you actually WIN the Miles Franklin that the taxman comes knocking. How good is Australian taxation law!
It’s not just the Miles Franklin, of course. The prize money associated with every literary prize is considered income for taxation purposes. As is the prize money associated with other prizes in the arts sector, such as the Archibald Prize for portraiture. Similarly, artistic grants and fellowships are also subject to income tax.
There are some important exemptions. This is Australia – we love an exemption.
Gambling and lottery winnings are – famously – tax exempt. The Australian government sees gambling winnings as a fortunate windfall, and allows punters to keep the entirety of their winnings. Even gamblers whose winnings are based on skill (such as professional poker players) are not asked by the Australian government to pay taxes on their winnings.
The Stawell Gift, Australia’s oldest and richest short distance running race of 120 metres is awarded each year with complete tax exemption due to its target contestants of young ‘amateur’ sportspeople. And, tellingly, the $100,000 prize money for the annual Prime Minister’s Literary Award is also tax exempt – implying that the people at the top do know there’s a problem.
The logic, if you can call it that, is in the concept that prizes and grants are considered ‘ordinary’ income avenues for writers, even though most writers will never win a large prize. The tax office says if a writer is in the business of writing, then prize money is simply an additional source of income. Because apparently writers are just like professional tennis players… Although, that said, many other sports people are in a similarly unenviable position – this newspaper article about a case that the Australian Olympic Committee took to court demonstrates how ambiguous it all is. To add to the ambiguity, its my understanding that sportspeople who study at the Australian Institute of Sport don’t end up with the same HECS debt that students at every other tertiary institution are saddled with (although perhaps this has changed recently, I don’t know).
The silver lining to all this (albeit perhaps only electroplated) is that for income tax purposes, writers who can demonstrate that they are ‘in business’ as a professional rather than a hobbyist, are able to claim their expenses against all forms of income. Every book they buy, every notepad, every pen; all tax deductible. Writers are also able to average their often very lumpy income over a four-year period – which is where it all gets too complicated for me and I seek the advice of my accountant. You should seek advice too. I am NOT a financial advisor! Add GST into the mix and I simply start sobbing.
The long and the short of it is this: despite the difficulty of earning a meaningful income from a writing career, literary awards, prizes and grants continue to be subject to personal income tax. As a result, the value of these prizes is significantly decreased. What’s your view – is taxing a writer’s prize money the right thing to do?
I believe that industry groups like the Australian Society of Authors (ASA) are lobbying for change. Change that would cost the Australian government very little in real terms. Frankly, in the current political climate, I don’t like the odds of seeing significant change in my lifetime. But if you can manage to find a bookmaker willing to take your bet on it, go right ahead. The winnings will be yours to keep.
For further information, try the Australian Taxation Office, and specifically: