Pedley and Commissioner of Taxation
[2006] AATA 108
•9 February 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 108
ADMINISTRATIVE APPEALS TRIBUNAL )
) No NT2004/327
TAXATION APPEALS DIVISION ) Re SUSAN PEDLEY Applicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Julian Block, Deputy President Date9 February 2006
PlaceSydney
Decision The Tribunal determines that the Applicant was during the year ending 30 June 2003, carrying on business as a professional artist.
[Sgd] Mr J Block, Deputy President
CATCHWORDS
Whether Applicant, an artist, was carrying on business during the year ending 30 June 2003 – consideration of the indicators in clause 10 of Ruling 2005/1 – consideration in particular of the profit factor where the Applicant did not derive profits – whether absence of sales or trades precluded a finding that business carried on – finding that the Applicant did carry on business as a professional artist in the relevant year.
Income Tax Assessment Act 1997; s.8-1
Taxation Ruling TR 2005/1- “Income tax: carrying on business as a professional artist”
Tweddle v Commissioner of Taxation (1942) 180 CLR 1
Ferguson v Federal Commissioner of Taxation (1979) 26 ALR 307
Federal Commissioner of Taxation v Walker (1985) 79 FLR
Commissioner of Taxation v Murray (1990) 21 FCR 436
Commissioner of Taxation v Stone [2005] 215 ALR 61
Re VBF and Commissioner of Taxation [2005] AATA 226
Graham v Green [1925] 2 KB 37
Case M67 (1980) 80 ATC 479
REASONS FOR DECISION
9 February 2006 Mr J Block, Deputy President PART A - preliminary and introduction
1. The only decision which the Tribunal is required to make is as to whether or not the Applicant was, in the year ending 30 June 2003 (“the Relevant Year”) carrying on business for the purpose of s.8-1 of the Income Tax Assessment Act 1997 (“the Act”).
2. The Applicant was represented by Ms J Sullivan of Mallesons Stephen Jaques, Solicitors of Canberra (who acted pro bono); the Respondent was represented by Ms J Gleeson of the Australian Government Solicitor.
3. The Tribunal had before it the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 together with and in addition Exhibits as follows:
Exhibit A1:A statement by the Applicant dated 10 April 2005; that statement itself must be considered in conjunction with the Exhibits to it. They are contained in a large volume separated by (lettered) tabs. Although the statement itself refers to them as Exhibits, I propose to refer to them in accordance with their tabbed references; for example, Tab I refers to Exhibit I (contained in Tab I) to Exhibit A1;
Exhibit A2:A statement dated 8 April 2005 by Tamara Winikoff, Executive Director of the National Association of Visual Arts;
Exhibit A3:A statement dated 19 January 2006 by William Wright who was from 1992 to 2004 Curatorial Director for Sherman Galleries;
Exhibit A4:A statement dated 19 January 2006 by Virginia Wilson, an independent fine art consultant; and
Exhibit A5:A statement dated 19 January 2006 by Ben Strout, Executive Director of Arts Development with the Arts Council.
4. On 30 November 2005 when this matter was first heard, the Applicant and Ms Winikoff gave evidence. On 1 December 2005 and at a time when closing submissions were to be heard, Ms Sullivan asked for an adjournment to enable her to call further evidence; that application was granted and two further days (30 January 2006 and 31 January 2006) were scheduled for this purpose. Prior to 30 January 2006, the statements which are Exhibits A3, A4 and A5 were submitted. Ms Gleeson did not require those witnesses for cross-examination and accordingly, and on 30 January 2006, the matter then proceeded directly to closing submissions.
PART B - the evidence of the applicant
5. The Applicant commenced her evidence with the tender of Exhibit A1; save only that $22,000 should be substituted for $24,000 in clause 70 the Applicant affirmed that all of its content is true and correct.
1The statement which is Exhibit A1 is as I have said, lengthy, in particular having regard to the Exhibits to it. However, it is my view that the statement itself (detailed as it is) contains a reasonably complete description of her career both up to and including the Relevant Year and thereafter. The question to be answered by me relates to the Relevant Year only and so that evidence as to subsequent periods is of peripheral relevance, and then only to the extent that it throws light on the events in respect of the Relevant Year. Exhibit A1 constituted in effect a large part of the Applicant’s evidence in chief. I include in these reasons as a starting point clauses 1 to 70 inclusive and clause 83 as follows:My name is Susan Jane Pedley. I reside at 10 Clara Street, Erskineville in New South Wales.
2I am 50 years of age.
QUALIFICATIONS
3I have studied drawing, sculpture, ceramics, photography, painting, print-making, installation, art history and theory at the Tasmanian School of Art, The Stadeschule Art Academy in Frankfurt, Germany, the Sydney College of the Arts and the College of Fine Art, University of New South Wales.
4I hold the following formal qualifications:
(a)1975: Diploma of Early Childhood Education
(b)1985: Bachelor of Fine Arts, University of Tasmania
(c)1989: Postgraduate Diploma of Fine Art, Sydney College of the Arts, University of Sydney
(d)1997: Master of Fine Arts, College of Fine Arts, University of New South Wales.
Copies of my qualifications and transcripts are EXHIBIT A to this statement.
OVERVIEW
5I have been working as a professional artist for more than twenty years.
6I produce my art across a variety of mediums.
7One of those mediums is installations. As an installation artist, I produce site specific artworks. This means I create art to exist in a certain space. The location of the installation usually forms an integral part of my work. Often the materials I use to produce the installation will have come from the space where my art is to be installed. Alternatively, I may deliberately choose to use materials that contradict the space, to create a juxtaposition between the expected and unexpected.
8Other mediums I work in are as follows:
(a)cyanotypes - this is a nineteenth century photo process made by exposing paper treated with light sensitive emulsion directly to sunlight for different durations and on different occasions during the day (in effect, an early monochrome form of photograph);
(b)watercolours - these are a major component in making my art. I use watercolours for capturing and recording things I see during my travels and research; and
(c)drawings - I often prepare drawings of works such as installations, either as a working tool in producing the installation, or as a complementary exhibition piece.
Why I am an artist
9I see art as a strong vehicle for social change. I sometimes make art collaboratively, with people from different disciplines, cultures and communities whereby the process is as important as the final work.
10My inspiration for the creative process comes from an active cultural life in the city. I travel throughout the world on work related projects and spend time in rural environments exploring the natural world. I am drawn to living in the inner city of Sydney because of the cultural diversity. Also there is an educated audience for my work. Many artists work in a similar way and I am able to meet them in their studios and at exhibitions, and many cultural events such as films, lectures, seminars, workshops, conferences (often given by local and international speakers) and performances - to exchange ideas and to stimulate further goals and directions in my work.
11I believe my art can:
(a)help to build close communities with environmental awareness;
(b)help people understand and bridge differences - especially differences routed in race and culture;
(c)challenge people to contemplate the interrelationship between memory and identity; and
(d)encourage people to have an awareness of how different locations have their own story to tell.
BRINGING MY ART TO PUBLIC ATTENTION
12I bring my art to public attention in a variety of ways - including residencies, exhibitions, entering art competitions, self-promotion, media coverage, and through establishing my reputation as an artist.
Residencies, workshops and travel
13Residencies provide positive publicity and exposure of my work. They are also an opportunity to further develop my artistic skills.
14I participate in workshops and residencies that are relevant to my art. As well as exposing me to new forms of artistic expression, attending workshops and residencies enables me to network with artists from around Australia and internationally. The contacts I develop in this way are an important source of information about the arts sector as a whole.
15Artist in residency programs are usually attached to an existing institution. It is a program whereby an artist is provided with space, sometimes an income to work either on their own work or to a prescribed brief relating to the particular institution’s requirements.
16Details of my residencies, workshops and travel are as set out below:
(a)In 1984 after graduating and exhibiting ceramics, drawing and sculpture in Hobart, I worked in France and Germany for two years in two studios with professional visual artists in France and Germany.
(b)During 1986 I was invited to work in the sculpture department of the Stadelschule Art Academy in Frankfurt, Germany.
(c)The following year, I travelled overseas, after receiving funding of $9,600 from the Australia Council and a travel grant from the Tasmanian Arts Advisory Board. I expanded my knowledge of art by experiencing first hand historical and contemporary collections in Europe, Egypt and New York. In Europe, I produced and exhibited a large body of figurative drawings, paintings and sculptural work using plaster, wood, clay and papier mache. Being in Europe and the United States influenced my interest in sculpture and installation, particularly the work and ideas of Joseph Beuys and Louise Bourgeois.
(d)In 1992 I was awarded a three month residency in the painting department of the Canberra School of Art. I was given accommodation on campus and the use of a studio. I taught drawing classes three days per week to painting students and had time for studio work the rest of my stay. I exhibited work at the end of the residency at Photo Space at the Canberra School of Art. I was expected to interact and teach students as well as carry out my own research.
(e)I attended a residency in London from October 1995 to February 1996. During this residency, I researched from a collection of letters held at the Queen Victoria Museum in Launceston (written between 1850 and 1875) from my great-great-great Aunt Eliza (in London) to her niece Emily in Tasmania. They wrote to each other each month, and there are both sets of letters in the Museum collections. I visited the 12 addresses where Eliza lived at this time. This was an excellent documentation of a middle class, single woman in nineteenth century England and a first generation young woman in Tasmania in a rural lifestyle. The work produced was titled “Eliza’s Letters”, and was exhibited at the Experimental Art Foundation in Adelaide in 1996 as part of my installation titled “Under The Pier” which is referred to later in this statement. I also did some geological and historical research into gypsum. This residency was funded by a $12,000 grant from the Australia Council as detailed below in this statement.
(f)In 1995 I attended, and was on the organising committee for, the Bimbi Artists Camp in Central NSW. This was a 5 day artist workshop in the country. The camp involved environmental / site specific sculptures and performance pieces. I did not receive any payment for attending this event.
(g)In 1998/1999 I was funded by the Australia Council to travel to Western NSW to research the geological mining of gypsum and its cultural history. As part of this research trip, I visited the GeoCentre in Broken Hill, for the purpose of consolidating a direction for further research into the aboriginal widows’ caps, desert roses at Broken Hill and seeing gypsum crystal in a variety of forms and landscapes, and developing a working method of making ephemeral works in outdoor locations.
(h)In 1998 I attended the Second International Sculpture Symposium in Hue, Vietnam for 2 months, and made an installation work on site. I received a grant of $2,000 from the NSW Ministry for the Arts for this event, as detailed below in this statement.
(i)In 2000 I was awarded an Asialink Residency in Sri Lanka. This residency was for a period of 4 months and was funded by a $12,000 grant from Asialink. I worked at Lunugunga Gardens, which were designed by prominent architect Geoffrey Bawa. I was given a studio and time to produce work in response to being in that environment. I produced both ephemeral work (wool thread in gardens, sound pieces, radio broadcasts) and photograms from objects in the gardens, and I ran a workshop for artists and students in the garden. I also ran a workshop in Colombo focussing on the project “Shields” - on women and war. I visited many exhibitions and artist’s studios and the two art schools in Colombo. I exhibited the works on paper (blue print / cyanotypes / photograms) at a commercial gallery, the “Paradise Road Gallery”. The works were listed for sale for approximately A$750 per work, although no sales eventuated from that exhibition.
(j)In February 2003 I was artist in residence at the Mangrove Mountain Art Camp for Mt Pymble Ladies College Sydney. I was paid $700 for this residency.
(k)In 2003 I was artist in residence for the Australia Council in Sydney for a period of approximately 2 months.
(l)I was a participating artist for the Burragorang International Artists Workshop in 2003. This was funded by the Australia Council. This workshop was arranged by Triangle Arts Trust, a registered UK charity that had been developing these workshops since 1982. These workshops take place now in 28 countries around the world. The Triangle Arts Trust initiates and facilitates an international network of artists’ workshops, residencies and studio buildings which enable artists to work together in order to exchange ideas and practice. This workshop was held from 12-27 April 2003 at Burragorang Valley in New South Wales. 14 Australian and 9 international artists attended this workshop. There was no fee paid to artists to attend this workshop. Only the cost of food and accommodation were covered. I feel that the artists should have been paid a fee (even nominal) to attend this camp.
(m)Further details relating to my workshops and residencies are provided in EXHIBIT B to this statement.
Exhibitions
17I have exhibited my work consistently over my career. I have regularly exhibited my art in commercial galleries, government funded galleries and artist run spaces, and have show my commissioned art work in public parks and store fronts.
18I regard all my exhibitions as an important part of the commercial exploitation of my artistic skills. This is due to the benefits for me as an artist of having a strong reputation in the particular field of art in which I am exhibiting and raising public awareness of the art I create.
19Some exhibitions require me to pay a fee (eg artist run spaces). Other exhibitions pay an artist fee to me to exhibit (eg publicly funded spaces). I have received a number of grants to permit me to produce works for specific exhibitions, as noted below. In addition, I may receive income through sales of exhibited works.
20My installations are sometimes exhibited on their own, and sometimes in conjunction with other art mediums that I practice. Exhibitions enhance my reputation both within the arts sector and the public generally, which can lead to:
(a)commissions for installation work; and/or
(b)greater interest in my non-installation pieces, which are always for sale to the public.
21Some of the installation work I do is very high profile because of the location that is used for the installation - for example the Botanical Gardens in Sydney. This means that my art is reaching a broader population (and therefore possibly a broader market), than if my work were restricted to galleries.
22With many of my installation pieces I also produce complementary artworks (for example, drawings, cyanotypes etc of parts of the installation). These are available for public purchase.
23Examples of my exhibitions (in chronological order) are set out in the paragraphs below. All works from my exhibitions were available for sale unless they related to site specific installations (or if stated as otherwise below).
24During the period from 1985 to 30 June 2002 I exhibited my works in the following exhibitions:
(a)I exhibited works in 1985 in the Graduate Show from the Tasmanian School of Art in Hobart. In that year, I also exhibited ceramic works at the Crafts Council in Sydney and at Chamelion Inc. in Hobart.
(b)In 1985 I held a solo exhibition at Handmark Gallery in Hobart of ceramics and drawing. All my pieces sold from this exhibition.
(c)In 1986 I held a solo exhibition at Galerie Wasch Salo in Frankfurt, Germany. This was an exhibition of figurative life size sculptures made from found wood, metal and plaster, and papier mache.
(d)In 1986 I held a solo exhibition at Stadelschule in Frankfurt of papier mache sculptures.
(e)Eberlach Kloster 1986 Rheingau, Germany - exhibition included my sculptures.
(f)In 1987 I held a solo exhibition at Cockatoo Gallery in Launceston of small wooden sculptures and framed drawings made during my residences in Germany and since returning to Australia.
(g)Landfall 1988 Chameleon Gallery, Hobart
(h)Miniature Show 1988 Devonport Gallery, Devonport
(i)The Element Orange 1989, The Performance Space, Sydney
Site specific installation comprising wire, fibreglass, cotton gauze, steel, heating elements and paint.
(j)Tasmanian Contemporary Sculpture 1989, Cockatoo Inc, Launceston.
This was a large scale wood and metal sculpture exhibited in the Civic Square in Launceston.
(k)Combing 1990 Tin Sheds Gallery, Sydney
This was an installation comprising felted wool, rabbit skin, sand cast aluminium, steel and rubber tube. This work was funded by a $12,000 grant from the Australia Council, which is described further below in this statement.
(l)Transformation 1990, Bondi Pavilion, Sydney
I exhibited three metal sculptures in this exhibition.
(m)In 1990, I also produced works for the postgraduate exhibition at the Sydney College of the Arts.
(n)reef of the night sky 1991, Performance Space, Sydney
This was an installation in collaboration with Open City’s production, “Museum of Accidents”. I produced an installation of two sculptural works, one related to heat and the other referring to an accident whereby my great Grandfather, Capital Carrington, died at sea. I received an artist fee of around $2,000 for this exhibition. This exhibition also showed at the Theatre Royal in Hobart that same year.
(o)Transformations 1991, Bondi Pavilion Gallery
I was one of 5 artists who exhibited works in this exhibition which ran from 17 to 29 September 1991. My work was titled “Blue Edges”, and was a 1 metre high sculpture made of steel and cloth.
(p)the intertidal zone 1991, 200 Gertrude St, Melbourne and The Performance Space, Sydney
This was an installation which comprised various processes of building, which were all possible on the beach, working in small modules. The ovoids were made of plaster and sand, cast over sand “ribs”; the fleur de lis were made from plaster pourings over clay and sand reliefs; the jetties came from plaster moulds.
This project was supported by the Victorian Ministry for the Arts and the Visual Arts/Craft Board of the Australia Council. I also received reimbursement of costs of travel and freight.
(q)Tide 1992 FirstDraftWest Sydney
This exhibition ran from 2 December until 20 December 1992. 12 plaster, sand and metal beams, and 12 starched calico bags with latex, and a strip of cast latex. I was required to pay a fee to exhibit this work in an artists’ run initiative.
(r)CD Show 1993, Ben Grady Gallery, Canberra
This was a commercial and thematic exhibition of works displayed in CD covers.
(s)14 Nautical Miles 1993, Galerie Constantinople, Queanbeyan
I displayed a small sculpture work in this exhibition, which was held in an artist run space.
(t)Frescoes 111 Assay 1993 aGog, Canberra and Glare Artspace Window, Sydney
This was a wall work using coloured cast plaster objects. I recall that I sold a work in this exhibition through the commercial gallery in Canberra in which the work was displayed.
(u)Artspace Open and ARX Exchange 1994, Artspace, Sydney and the PICCA, Perth.
This was a display of photographic or wallwork pieces. The ARX Exchange exhibition was also shown at the Australian Centre in Manila.
(v)Shifting Air 1994 The Nepean Art House, Penrith
This was a group exhibition by a number of artists. It was an interdisciplinary collaboration of the art, music and dance departments at the University of Western Sydney. [no fees, no income]
(w)Stains. Frescoes 111 Riverbed 1994 Institute of Modern Art, Brisbane
This exhibition was held from 5-28 May 1994. It comprised a figure eight in two shades of bright orange thread. I received an artists’ fee which covered freight and my airfare.
(x)Chamelon a Decade 1995 Long Gallery, Hobart
This was a group exhibition where I exhibited wooden sculptures. This was a publicly funded art space. [All works were available for sale.]
(y)Sands Good 1995, Sydney Fringe Festival
This was a coordinated large sand work. I worked with artist Virginia Hilyard to build a large scale sand sculpture representing the Japanese icon, Mt Fuji. We invited artists and school groups, and the Woollahra Council supplied the bulldozer. Because this work was site specific, it was unavailable to be sold, but it was an interesting profile raising opportunity.
(z)Humidity 1995 Pendulum, Sydney
This exhibition comprised a series of elements (indoor and outdoor), most notably several hundred hand-made plaster bricks harbouring brilliantly coloured dyes which slowly eke to the surface. This work was reviewed in Agenda magazine in October 1995. As this was an artist run space, I paid a fee to exhibit this work.
(aa)First Draft Tenth Year Anniversary 1996, Sydney
I exhibited photographic works at this exhibition. I did not get paid a fee, nor was I required to pay a fee.
(bb)Under the Pier 1996 - Artspace Sydney, and Experimental Art Foundation, Adelaide.
I made this work at Artspace at Woolloomooloo in Sydney. I researched the history of Woolloomooloo Bay since colonisation and its present use as a Naval Base and the Finger Wharf. I was interested in how the edge of the foreshore has been moved over time. I worked with concepts and materials that related to that site such as sand, grass and plaster. Plaster was a favoured material in much of the work, because it has a crystalline structure formed in ancient seabeds. I use this material as a metaphor for memory and transformation.
I was paid a fee by Artspace, and by the Experimental Art Foundation, and also received amounts to cover travel and freight.
(cc)Australian Artists Against Racism 1997, Canberra School of Art
This was a fund raising (and conscious raising) exhibition, where I exhibited photographic works.
(dd)Listening to Clara Ethel and Ada 1997, Perspecta, Erskineville Sydney
This is a good example of my site-specific art. In this work the location for the art was integral to the art - my work was inspired by (and responded to) the history of the site. I used an old shopfront (post office) in Erskineville to create an installation in the environment. My goal was in part to place art in everyday life - to break down the barriers that have art reserved exclusively to the gallery.
I received a $20,000 grant from the Australia Council for this project (as detailed below in this statement). I also received an artist fee of $700 from Perspecta.
(ee)Co-existence Hogarth Gallery, Sydney 1998
This was a fundraising exhibition organised by Artists Against Racism. I sold a piece from this exhibition for approximately $350.
(ff)The Origin of Ideas Gallery South, Sydney 1998
This was an exhibition showing pages of artists’ notebooks and working drawings. It was an artist run initiative.
(gg)Drawing on Rock Vietnam 1998
In Vietnam I was commissioned to create an art work in public at the Second International Sculpture Symposium in Hue. This work still exists in the sculpture park on the Perfume River. I carved geological molecular structures of marble and local Buddhist architectural patterns into three large stones. My aim was to use motifs that related to the place. I created a web of interconnected patterns linking science, spirituality and culture and a place on the river bank for rest and contemplation. I received a grant from the NSW Arts Ministry to travel to Hue.
(hh)Shields 1998 - 1999 Canberra National Sculpture Forum (April 1998), Footscray Community Art Centre (November 1988) and Casula Powerhouse Arts Centre (March 1999)
This was a community project on women, war and peace organised by Women In Action. This project was supported by the Australia Council, which means that the expenses were funded by the Australia Council, although the artists did not receive a fee.
(ii)Spinifex 1999 Alice Springs
This was an installation in the outdoors, produced in collaboration with artist Pamela Lofts. The work was constructed using acrylic thread around a Spinifex plant. My airfare was paid by Watch This Space in Alice Springs.
(jj)Round and Round the Garden 1999 Watch This Space, Alice Springs
This exhibition was associated with the exhibition “Spinifex” noted above.
(kk)The Convict and the Jew 1999 - 2000, 24 Hr Art, Darwin, and the Canberra Contemporary Art Space.
This installation was a collaboration with artist Tess Horwitz. It was themed on our families’ pasts, and comprised installations working with paper and light. I received an artist fee from both galleries.
(ll)Quarrying Memory 2000, Gallery 4a, Sydney
I had to pay a fee to show at this exhibition. This exhibition ran from 2 - 26 August 2000. My work was an installation work which comprised two elements. The first were large cyanotype prints of various intensities of blue; the second was an installation using fine orange wool woven across a matrix of nails. This exhibition was reviewed in the publication Like in 2000.
(mm)Quarrying Memory, 2000 Casula Powerhouse Art Centre
I received a $20,000 grant from the Australia Council to undertake research and make a public sculpture relating to the Casula Powerhouse. Although I spent approximately 12 months working on this project, I did not build the public sculpture due to inadequate project management and problems with development approvals from the local council. Due to these problems, the Australia Council agreed to redirect the grant to allow me to produce the Sound of Bamboo exhibition noted below.
(nn)Techne University of Technology, Sydney
This exhibition was held at the UTS Gallery from 11-28 July 2000. I exhibited installations. One piece was sold, and is held in the UTS collection
(oo)Sounds of Nelum (Lotus) 2001, Paradise Road Gallery and Vibhavi Academy of Fine Art, Colombo Sri Lanka
This was an installation in Lunuganga, Sri Lanka using an eckel broom and acrylic thread. It was reviewed by Alfreda de Silva in the Columbo Sunday Times on 21 January 2001.
(pp)Drawing 2001 Tin Sheds Gallery, Sydney
This exhibition was a series of watercolours and drawings of Sound of Lotus. All works were available for sale for $675 per work. Myself and the other exhibitor received the Pat Corrigan Artists Grant from NAVA to enable us to produce this exhibition.
25EXHIBIT C contains copies of catalogues and reviews relating to the exhibitions referred to in paragraph 24 above.
26During the year of income ended 30 June 2003, I exhibited my work as follows:
(a)Hue 2002 Gallery 4a, Sydney
This exhibition was held in October 2003. The exhibitors were required to pay a total fee of $1,000 to Gallery 4a for this exhibition. The research and production of this work was partly funded by Asialink and the Australia Council. This was a sound installation work produced in collaboration with musician and composer Boyd, which developed into a sound sculpture. I combined rhythms and patterns from everyday activities such as weaving, washing, chopping and sweeping. In Sri Lanka I had been struck by the class divisions within the culture, and in this work I honoured the everyday work of the gardeners and village people.
(b)7 Photographers 2002, Stills Gallery, Sydney
This exhibition ran from 20 November to 21 December 2002. I exhibited seven cyanotypes, each of which were available for sale at a price of $990 each.
(c)Sound of Bamboo Sydney 2002
This was a site-specific installation in Sydney’s Royal Botanic Gardens of felted wool and acrylic thread on bamboo
I consider this to be one of my major exhibitions. The exhibition ran from 31 August until 29 September 2002.
Various smaller sculptures on this same theme were exhibited from 13 - 27 March 2002 at Calibre Art in a store in Elizabeth Street, Sydney. The sculptures were available for sale for prices ranging from $324 each to a set of 16 sculptures for $4,200.
(d)Sounds of Lotus 2002, Mori Gallery Sydney
This exhibition ran from 23 October to 9 November 2002. I exhibited a series of 11 cyanotype prints. The works were all offered for sale for prices between $500 and $900 each. Although I sold a work for $500, the Gallery never paid me for this sale, and I terminated my relationship with them.
(e)First Impressions 2003 National Gallery of Victoria
This exhibition was held from 1 March to 9 June 2003. I exhibited works from the Sound of Lotus series.
27EXHIBIT D contains copies of catalogues and reviews relating to the exhibitions referred to in paragraph 26 above.
28In the period from 1 July 2004, I continued to exhibit works as follows:
(a)Reverb 2003 Mai’s Gallery, Vietnam
This exhibition was a commercial exhibition held in September and October 2003. It featured work by me, Bonita Ely, Glen Clarke, and Gail joy Kenning. Mai’s Gallery represents my work in Saigon, and also represented me during the 2004 year of income at an art fair in New York.
(b)4 windows, Yoshi Jones dress shop, Sydney 2003-2004
This exhibition was held at a prestigious store in Woollahra. I produced window installations titled and maintain window installations titled “4 windows” in late 2003 and early 2004. I was paid $1,000 for 4 windows.
(c)A matter of time Dec 2004 - December 2006 Touring Exhibition
This is a current exhibition associated with the 16th Tamworth Fibre Textile Biennial. It is touring nationally for two years and is supported by the Australia Council, the NSW Ministry for the Arts and Visions of Australia. I was paid $750 by the Tamworth Regional Gallery for this exhibition.
(d)Works from Sri Lanka Feb- March 2005, Helen Maxwell Gallery, Canberra
This exhibition ran from 25 February to 27 March 2005. Judy Watson and I exhibited works made in Sri Lanka. The High Commissioner for Sri Lanka spoke at the opening of this exhibition. I sold two works which were priced at $375 each.
(e)Small Offerings March- April 2005 Sydney
This exhibition ran from 11 March to 2 April 2005. It was an exhibition of works by Sri Lankan and Australian artists for Tsunami Relief in Sri Lanka.
(f)Intray twocubes 2005, Sherman Galleries Sydney
This was an exhibition of small sculpture.
29EXHIBIT E contains copies of catalogues and reviews relating to the exhibitions referred to in paragraph 28 above.
Art competitions
30I enter my artwork in competitions for which my work is suited. Competitions are additional ways to promote your work, as the entered works are exhibited to the public and generally available for sale.
31The primary commercial benefit from arts competitions is the publicity received - especially if the entries in the competition form an exhibition, sometimes travelling around Australia or internationally. Winning a competition is a bonus - often not so much for the prize (which can be of low value), but for the positive publicity received.
32In this regard, I have entered the following competitions:
(a)The 53rd Blake Prize for Religious Art (2004): My entry was titled “In Loving Memory”. It was a cyanotype on stonehenge, and was available for sale (for $900) in the exhibition list for this prize. Although this work did not sell, it is now held in the stock room of Helen Maxwell Gallery in Canberra, and remains available for sale.
(b)The Australian Photographic Portrait Prize.
(c)The National Small Sculpture Prize (2004): I was a finalist for this prize. My piece was titled “INTRAY” and was available for sale for $2,500 although it did not sell. This entry led to an exhibition at twocubes, Sherman Galleries, a well known gallery in Paddington.
(d)I attempted to enter the Alice Prize (a competition for any art medium) but was unsuccessful.
(e)I entered the Australian Photographic Portrait Prize at the Art Gallery of NSW which opens this month;
(f)I attempted to enter the Mornington Works on Paper Prize but was unsuccessful.
EXHIBIT F to this statement provides details of the National Small Sculpture Prize and the Blake Prize for Religious Art.
Seeking a commercial manager
33I have sought commercial representation of my works throughout my career. I want commercial representation or an agent, but it is very difficult for me to find a manager or agent which is suited to my work. Installation work does not have an educated market as yet in Australia, and private patronage and corporate sponsorship is limited. Although it is a growing industry, it is not sufficiently formed as yet to provide sufficient support. Certain types of work have more investment value than installation.
34Commercial representation may be sourced through commercial galleries or agents. These agents may be connected to collectors or curators, and find opportunities for sales, commissions or residencies. Handmark Gallery in Tasmania was my agent early in my career, but I have not had once since. Generally, agents charge a commission of around 40% for the sale of work, but don’t charge exhibition fees to artists. Commercial galleries are now tending to charge artists for promotional expenses such as printing of marketing material and opening expenses. For example, Sherman Gallery in Sydney recently asked me to pay for the cost of promotional material for an exhibition at their gallery.
35Despite this, commercial galleries are very important. Artworks need to be sold through commercial galleries because consumers of artworks want them endorsed as an investment. Consumers need to feel they are getting something of value, with further potential increases in value over time.
36An artist can have a one-off exhibition at a commercial gallery without being represented by them. It takes years to build a relationship with the gallery directors and curators. This is a long process which I am still continuing.
37Commercial galleries I have approached for possible representation in the last five years are as follows, although I have been unable to secure commercial representation to date:
(a)in Sydney - Boutwell Draper, Giette Weiss, Mori Gallery, Stills Gallery, Australian Galleries, Sherman Galleries;
(b)in Melbourne - Span Gallery, Tolarno Gallery
(c)in Canberra - Helen Maxwell Gallery
Self-promotion
38I undertake extensive self-promotion.
39As noted above, I don’t currently have a gallery or commercial agent who promotes me. I have a strong network of art industry contacts, I attend many exhibitions, conferences and seminars.
40I am on the mailing list of many cultural institutions so I can attend relevant events relating to my work as an artist. This puts me in touch with contemporary culture, and also contacts in the arts community. It also provides critical discourse and cultural theory which assists in contextualising and developing my work.
41I actively contact curators and directors to discuss my work and my future exhibition plans.
42On 8 May 2003 I launched my booklet “Sue Pedley” at Artspace in Woolloomooloo in Sydney. This book contained details selected from my works over the previous 12 years, with an emphasis on work made during my recent residencies in Asia. I regarded the works detailed in the booklet to be those which were key to my practice. The book contained accompanying texts which were edited from reviews and catalogue essays written by Jacqueline Millner and published throughout the previous 7 years. The booklet was produced with the assistance of the Commonwealth Government through the Australia Council. (from the Casula grant redirected to Sound of Bamboo.) I am able to use this booklet as a portfolio of my work (primarily my installation work) when I am attempting to receive commissions for further work in this field. I have sent this booklet to curators around Australia and internationally. There is a copy of this booklet on permanent display at Artspace and I have placed copies of these booklets in various libraries in Australia. The booklet was made into a website in 2004. This booklet is also available for sale to the public at a price of $10 per copy. A copy of this book is EXHIBIT G to this statement, together with publicity relating to the launch at Artspace.
43During 2004 I established a website which details my arts practice and works. The address is EXHIBIT H is a printout of information from my website.
Reputation
44I have an established reputation as a professional artist. EXHIBIT I to this statement provides references from the following peers:
(a)Elizabeth Ann Macgregor - Director of the Museum of Contemporary Art;
(b)Anthony Bond, Director Curatorial at the Art Gallery of New South Wales
(c)Joan Grounds, 2004 Visual Arts and Crafts Emeritus Artist
(d)Anna Waldmann, Manager of Visual Arts/Craft at the Australia Council
(e)Terry Hayes, Lecturer in Fine Arts, University of Western Sydney
(f)Libby Knott, Australian Galleries Pty Ltd
(g)Bonita Ely, Senior Lecturer, University of New South Wales College of Fine Arts
Media
45Exhibitions (especially in public areas) often generate media coverage. This is important, because it brings your work to the attention of a wider audience than those people who attend the exhibition. Sometimes, reviews are published in the written material which accompanies an exhibition.
46Examples of media comment on my work can be found in my published book and various reviews of my exhibitions, as noted above.
47I have been interviewed by Geraldine O’Brien and produced a sound work for the Comfort Zone on Radio National.
48I have also produced postcards of my exhibitions.
SOURCES OF INCOME FROM MY ARTS ACTIVITY
49The income I earn from my arts practice is primarily received by way of grants.
50In addition to income from grants, income from my arts practice is generated through:
(a)sales of work;
(b)exhibition fees;
(c)commissions; or
(d)other benefits.
Grants, Scholarships and Awards
51Grants and scholarships from both private and public sources are an important source of income for my arts business.
52I apply for grants as part of my objective to make my arts practice profitable.
53Applications for grants are very time-consuming, and grants are very difficult to obtain due to limited funding.
54The maximum amount for an Australia Council project grant (ie to produce a work or project) is $20,000. If you receive a grant from the Australia Council, you are ineligible to apply for the next three years.
55In the course of my career I have successfully applied for the following grants:
(a)In 1984/85 I received an Australia Council Overseas Study Travel Grant of $9,600 to study and work in ceramics in France and Germany. 11 people received grants from the Australia Council, ranging from $3,200 to $12,000.
(b)In 1986 I received a travel grant from the Tasmanian Arts Advisory Board.
(c)In 1988 I received a grant of $1,400 from the Tasmanian Arts Advisory Board towards the purchase of art materials and tools.
(d)In 1989/90 I received a grant of $7,500 from the Visual Arts/Craft Board of the Australia Council for the Arts. This grant was awarded for professional development for the period November 1989 to March 1990. I used these funds to create the installation piece “Combing” which was exhibited at the Tin Sheds Gallery in 1990.
(e)In 1990 I received the Pat Corrigan Artist’s Grant for NAVA as referred to above.
(f)In 1995 I received a grant of $12,000 from the Visual Arts/Craft Project for New Work from the Australia Council for the Arts. This grant was to allow me to attend the residency in London from October 1995 to February 1996 referred to above.
(g)In 1997/98 I received a New Work Project Grant of $20,000 from the Australia Council. The funds were acquitted on the installation “Listening to Clara Ethel and Ada” referred to above, and a four week field trip to gypsum (plaster) mines in Victoria, South Australia and Western NSW in October 1997 with artist and filmmaker Virginia Hilyard.
(h)In 1998 I was awarded a grant of $2,000 from the NSW Ministry for the Arts to attend the second International Sculpture Symposium in Hue Vietnam.
(i)In 2000 I received a $20,000 grant from the Australia Council. This grant was for the Quarrying Memory Exhibition described above in this statement.
(j)2001 Asialink grant for $12,000. This grant enabled me to travel to Sri Lanka for the Visual Arts/Craft Residencies in Asia program referred to above.
Various documents relating to these successful grant applications are EXHIBIT J to this statement.
56I have also applied for a number of grants without success, including the following:
(a)In 1991, I applied to the Australia Council for a project grant of $7,500 to develop an installation for exhibition at Artspace in 1993;
(b)In 1992, I applied to the Australia Council for a project grant of $7,500 to develop an installation;
(c)In 1994, I applied to the Australia Council for a project grant of $15,000 to develop a project titled “Generations”, a site specific installation to be exhibited at the Museum of Childhood in Sydney; and
(d)I applied for a grant from the National Association for the Visual Arts.
Various documents relating to these unsuccessful grant applications are EXHIBIT K to this statement.
Sales and commissions
57As noted above, my work is always available for sale except where the work is “site-specific” - ie created using materials that will not last or cannot be transported elsewhere. Some of my installation work is intentionally ephemeral, meaning that it will not endure for a lengthy period of time, but is intended to deteriorate within the environment in which it is placed.
58Examples of my work being made available for sale are provided under the list of exhibitions noted above.
59Exhibitions of my work may lead to paid work as an artist in other sectors of the arts industry through commissions. For example, the Sound of Bamboo exhibition led to the commission to produce the work “4 windows” noted above in this statement. The relationship with Yoshi Jones is continuing, and I have agreed to supply her with framed artworks in her new store. These works will be available for sale. She is also assisting me in providing advice for marketing my work.
Other benefits
60I seek sponsorships and assistance in other forms.
61I sometimes use volunteers who assist me in installing exhibits.
62During the Sound of Bamboo exhibition, I arranged with “Avantcarde” to produce a postcard of my work to be distributed free of charge to the public. I understand that Avantcarde makes such offers to artists when they have a spare space in their print run.
63I also approach various suppliers to support my work by donating materials.
MY INTENTION AS AN ARTIST
64My intention is to carry on business as a professional, practising artist.
65I aim to make a profit from my arts activity. I realise that a lot of my income is dependent on markets and grants, but I believe passionately in what I do and strive to put processes in place to bring my work to public attention and maximise all opportunities that come my way.
66I practice my art with the intention of generating sufficient income so that I do not have to engage in other types of work to support myself. As part of this commitment I apply myself across a number of artistic methods in order to enhance the profitability of my business. I have recently branched into photographic work in an effort to generate more mainstream exposure.
67I acknowledge that art is a high-risk activity, where the time taken to generate a profit may be longer than in other industries. I believe that the manner in which I bring my art to public attention will ultimately enable me to support myself financially, although the nature of the arts sector, fluctuations from year to year in available opportunities, and continued pressure on artists in relation to the pricing of their work and the cost of producing and exhibiting their art, makes it difficult to predict when that might occur.
INCOME YEARS PRECEDING THE 2003 YEAR OF INCOME
68Since I began working consistently as an artist in 1986 I have always returned income from my arts practice, although expenses necessarily incurred in carrying on my arts business tend to exceed the income derived.
69For that reason, I have supplemented my income with paid employment income through various lecturing positions.
THE 2003 YEAR OF INCOME
70During the year of income ended 30 June 2003 (“the 2003 year”) I returned $4,810 of income from my arts business. This income was lower than previous years because I did not obtain any grants. In my two previous income tax returns I returned total income of $13,400 (2002 year, including grant income of $10,000) and $22,504 (2001 year, including grant income of $24,000) from my arts business.
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Employment
83During the 2003 year I held three part-time employment positions and received salary and wage income totalling $$38,049:
(a)I was employed as a teacher by the NSW TAFE Commission (Brookvale TAFE) to teach painting;
(b)I was employed as a lecturer in the design faculty of the University of Technology Sydney through Insearch Limited. This position involves variable hours. I worked for 3 semesters per year for an average of 10 hours per week. I have held this position for approximately 6 years.
(c)I was employed by the NSW Department of Education for various art lecturing positions;
(d)I was employed by the University of Sydney for the full year - I worked there for two semesters per year (under separate twelve week contracts) teaching general drawing; and
(e)I was employed as a visitor service officer by the Museum of Contemporary Art during the period from 5 August 2002 to 30 June 2003.
84…
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6. The further evidence of the Applicant and her cross-examination took up a considerable part of the first hearing day. That evidence and cross-examination revealed in the clearest possible terms that although the Applicant has since 1985 produced numerous artworks she has not been successful, at least in commercial terms. An exhibition in 1985 in Tasmania was successful in that all of the works then exhibited were sold. But since then her income from sales has been minimal simply because there have been very few sales. In fact and during the decade preceding the Relevant Year, there were, it would seem, three sales only. The Applicant’s lack of success is graphically (and accurately) set out in clauses 26 to 31 of the Respondent’s submissions dated 30 January 2006 and which read as follows:
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Was the Applicant’s activity of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business?
26.The Applicant’s evidence disclosed minimal sales over the decade before the 2003 income year (see transcript day 1, page 60 line 21 to page 62) :
26.1there was a $350 sale at a fundraising event (transcript day 1, page 60, lines 26 to 36 and Exhibit A para 24(ee));
26.2another piece was sold to the UTS while the Applicant was working at the UTS (page 61, lines 26 to 40 and Exhibit A1 para 24(nn));
26.3a cyanotype print was sold for $500, although the proceeds were not recovered (page 62, lines 1 to 5 and Exhibit A1 para 26(d)).
27.The Applicant generates the majority of her income from grants and residencies. Generally artists generate the majority of their income from sales and commissioned artwork (see ”Don’t give up your day job: an economic study of professional artists in Australia” exhibited to Ms Winikoff’s statement (Exhibt A2) (“the Throsby report”), para 5(c) and pages 48 and 104).
28.For visual artists generally, only an average 10% of their income is derived from grant, prizes and fellowships ( page 104 of the Throsby report referred to above and also paras 7 to 11 of Ms Winikoff’s statement).
29.In the 2003 year, the applicant returned only $4,810 of income from her arts activities. From her evidence to the Tribunal, the source of that income is still not known.
30.The Applicant identified artists fees from publicly funded galleries as an important source of income (transcript day 1, page 44, line 35). However, the evidence suggested that artists fees were very modest (the Applicant received 1 artist fee in 1991 of $2,000 (Exhibit A1 page 7) and a further artists fee in 1997 of $700 (Exhibit A1 page 9); see also transcript, day 1, page 26, line 10; page 91, line 37 to page 92 line 22) and appeared to be insufficient to sustain a business.
31.The evidence was that very few artists secure gallery representation and that artists are more likely to secure commercial gallery representation “because they are actually exploring an art form that is already popular and established” (statement of Mr Wright pars 19 and 20). Ms Pedley has been unable to secure the representation of an agent over the 20 plus years of her career as an artist. The Respondent submits that Ms Pedley’s failure to secure an agent is the consequence of the fact that she has not developed a market for her work. Gallery representation would be a good indicator that Ms Pedley’s activities were carried on in a similar manner to an artist who was carrying on a business (Ms Laurence being an example of an installation artist who is apparently carrying on a business as an installation artist (see Mr Wright’s statement par 22)).
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7. The Applicant has for many years engaged (although not exclusively) in installation art and has endeavoured to establish a career in this field. Much time was taken up by evidence as to the Applicant’s activities in this field. Installation art, as the name suggests, involves the production of an installation at a location (which may be associated with that of a recognised gallery) and which can be inspected for a given period and at the end of which is taken down.
8. The work entitled “Listening to Clara, Ethel and Ada” can serve as an example of a work by the Applicant in the field of installation art. It is described in clauses 24(dd) of Exhibit A1 quoted earlier in these reasons. It is also depicted pictorially in a booklet produced by the Applicant at her own expense as to her work. That booklet is contained in Tab G and the work in question appears at pages 30 to 33 of that booklet. The preparation of the work was preceded by a period of research in London.
9. Although a work of installation art cannot itself be sold, it could if a buyer wished to acquire it, be sold to that buyer on the basis that it will be reinstalled elsewhere and at a location selected by the purchaser. The Applicant hoped that her work would result in just such sales or alternatively in commissions to produce works of installation art; no such sales or commissions have eventuated.
10. The Applicant’s work is not confined to installation art; cyanotypes, sometimes but not invariably, of installation artworks have been produced and offered for sale, though sales have been very few and far between.
11. Exhibit A1 indicates that the Applicant has travelled extensively in connection with her artistic career.
12. Put in general terms and as the Respondent’s written submissions make clear, the Applicant’s activities have been funded in part by her lecturing income and in part by grants received from the Arts Council. The Applicant has over the years successfully applied for a number of grants although not all of her applications were successful. The Respondent has calculated that during the 1996 to 2004 years approximately 78 per cent of the Applicant’s income was derived from grants. It is not unfair to say that, unless sales are achieved, the Applicant would not without grants funding, be able to continue as an artist.
13. The Applicant’s evidence suggests that although she has taken part in many exhibitions (in various places) over the years, the exhibitions in question were generally of works by artists including the Applicant. This is not so in respect of some installations although there were installations in respect of which the Applicant collaborated with others.
14. Although the Applicant did receive some performance or other fees, she also on occasion paid for the exhibition of her work. Clause 21 of Exhibit A3 (Mr Wright’s statement) reads as follows:
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21Sherman Galleries developed two initiatives for displaying work by installation artists not represented by the gallery in the hope of enhancing their profile:
(a)Sherman Artbox is a “mini-exhibition” space particularly suited to site-specific installation work. The artist is not required to pay a fee to exhibit in Sherman Artbox. The exhibitions continue for four to six weeks and Sherman Galleries hosts an opening reception for the artist. Artists are responsible for both the organisation and the cost of printing invitations.
(b)“Two Cubes” (or 23) is a mobile exhibition space which presents an opportunity for emerging and established artists working in the applied arts to exhibit their work within the context of a leading contemporary art gallery. Sherman Galleries developed this initiative in response to the lack of venues available to applied artists in and around Sydney. We hoped that this endeavour would contribute to the recognition and success of these artists. Two Cubes aims to foreground the aesthetic, technical and conceptual nature of objects and to challenge past and present attitudes towards the applied arts. Additionally, Two Cubes strives to offer an insight into the significance of these art forms now and in the future.
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The Applicant did exhibit in “Two Cubes” but an amount was paid by the Applicant to Sherman Galleries for this privilege; she said (TSp38): “I paid for the invitation to promote that exhibition”.
15. Exhibit A1 (clauses 9 to 11 quoted previously in these reasons) establishes that the Applicant’s motives in producing artworks were not entirely commercial. In her oral evidence she spoke also of the production of art for social and related reasons.
16. The Applicant did not and does not have an agent and moreover, she did not and does not enjoy commercial representation by a recognised and established gallery such as Sherman Galleries. Her evidence was that she has consistently sought representation of this nature but without success. Given that an agent or a gallery is paid in general terms on a commission basis, her failure to obtain representation of this nature is not surprising.
17. The evidence indicates in clear terms that the Applicant sees herself as an artist. She has sought to promote herself and her work. Her work as a lecturer is relevant in that it provides a sense of financial support but it is in all respects subsidiary. All of her lecturing posts have been on a part-time basis, to be given up when travel for the purpose of her career as an artist demands it, and naturally enough she has not achieved, or in all probability, sought a tenured or full-time lecturing post. The fact that the Applicant has achieved so little success in commercial terms as an artist has not affected her self-confidence and her belief that she will eventually become successful.
18. I found it odd that the evidence before me in respect of the Applicant (large as it was) did not include any critical reviews of her work. Tab I contains statements by her peer group favourable to her. Leaving aside the fact that critical reviews of specific work may or may not prove to be valid, evidence of this nature (if in fact there is any such evidence) would have been of some assistance.
19. The Applicant maintains a studio and in which she also performs necessary office work and including the preparation of applications for grants.
20. On the face of it installation art must be an artistic area in which it is difficult to achieve commercial success. It would appear then that the Applicant has selected as her field of endeavour or one of her main fields of endeavour an area in which commercial success is difficult, but not impossible, to attain. Buyers will of necessity and for obvious reasons be few. During the course of closing submissions, reference was made to the fact that in 1985 she did achieve a degree of financial success in a rather more conventional field. But as Ms Sullivan pointed out, an artist cannot recreate the same thing and must, or sometimes must, seek new fields.
PART C - the evidence of the other witnesses
21. The relevance of the other evidence, or at least some it, was difficult to comprehend.
22. Ms Winikoff’s statement (Exhibit A2) was caste in the most general of terms and addressed in those general terms the difficulties which artists face in their endeavours to earn a living from their professional careers.
23. Mr Strout’s statement (Exhibit A5) is useful in that it details the process by which Arts Council grants are given. There is, as one might expect, an application procedure which results inter alia in an evaluation of the work to be funded. Clauses 13 to 17 of Exhibit A5 read as follows:
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Applying for a grant
13Individuals can apply to the Australia Council for funding. They must be Australian citizens or have permanent resident status in Australia.
14The Australia Council does not accept grant applications for projects or activities that do not involve practising artists or artworkers, or that do not have a clearly defined arts component. In this regard, “practising artsworkers” are persons who are be identified and recognised by their peers as practising artists. In addition, an application is considered ineligible if the artist has received a grant in the past and that grant was not satisfactorily acquitted within the period stated in the grant funding agreement.
15Grant applications must be submitted either on the standard application form or strictly comply with the style, format and length of the standard forms. The application must be signed by the applicant. Support material comprising evidence of the artist’s work to date must also be submitted with the application.
Determination of the application
16Grant applications are assessed by the Board on their individual merit. Applications for a “New Work” grant from the VACB, including New Work funding through the VAC strategy, are selected that best demonstrate a high degree of artistic merit in the applicant’s work up to the application date, and a potential for innovation in the content and development of the new work.
17There is no guarantee of success for any application. As funding is limited, many applications will be unsuccessful and there are invariably projects which the Board would have liked to support had funds been available. In recognition of the limited funding, the Australia Council has limitations on how often an applicant can apply for funding, and has also developed a “buffer period” rule for certain grants. For example, a recipient of a New Work grant from the Visual Arts Board in 2006 will not be able to apply for a further grant in any Visual Arts Board category until 2008. This rule reflects the limited nature of the available funding, while recognising that artists should be able to continue seeking assistance from the Australia Council throughout their career.
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24. Put in other words an Arts Council grant may or may not in, response to an application, be given. The fact that the Applicant has received a number of grants over the years does suggest that her work has merit.
25. Ms Wilson’s statement (Exhibit A4) speaks of the nature of installation projects. She referred to artists who have been successful in this field; clause 15 of Exhibit A4 reads as follows:
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15There are some very well known and successful installation artists in Australia. For example:
(a)Janet Laurence - who was recently commissioned for the war memorial in London which was opened last year by the Prime Minister, John Howard. She also has received major commissions from the Australian War Memorial, the Sydney International Airport and the Sydney Olympic site.
(b)Fiona Hall - she produces extraordinary installation pieces which are often large, involved and very intricate. However, I understand that her commanding price is very high, and there is a wait of anything up to 5 years to secure a commission from her. She has received commissions from the Sydney Botanic Gardens and the National Gallery of Australia.
(c)Michael Lindeman - who was recently commissioned to do a permanent piece for the offices of Deloitte in Sydney. This piece was based on a temporary exhibition work he had done for a gallery.
(d)Chris Bell - who was recently commissioned by architects Lab Architecture Studio to produce a large installation piece at Federal Square in Melbourne. The budget for him to produce the work was in the order of $140,000, plus architect and engineer fees. The funding was provided jointly by a philanthropic trust and the Victorian State Government.
(e)Fiona Foley - an indigenous artist from Queensland whose work includes installations (often in collaboration with other artists), community-based and studio work; she is represented in all major public collections in Australia.
16…
26. Mr Wright in his statement also referred to successful installation artists; in particular he referred (as did Ms Wilson) to Janet Laurence in clause 22 as follows:
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22Janet Laurence is an example of a very well-known installation artist who has been represented by Sherman Galleries for a number of years. She became, in a sense, “suddenly” successful in her mid-fifties following an exhibition at Sherman Galleries in 2002 titled “Glasshouse”, despite having exhibited consistently for at least 20 years prior to that time. It was a gradual process of familiarisation, the result of many years of exhibiting; also a matter of appeal of the new materials and crossovers between natural (ecological) and technological content and forms. This led to the securing of a number of important commercial commissions, including for the Australian National War Memorial and the Qantas International Terminal at Sydney Airport. A copy of her curriculum vitae is attached as Annexure A to this statement.
As to gallery representation I refer to Mr Wright’s statement (Exhibit A3), clause 19 of which reads as follows:
18...
19Artists generally also seek gallery representation, although this is difficult to achieve. For example, Sherman Galleries represents less than 30 artists to ensure that sufficient time can be devoted to each. Unfortunately, artists often secure commercial gallery representation because they are actually exploring an art form that is already popular and established, and exploited it, rather than doing their own research and coming up with something which evolves over time. As a result, people who have formed very original theories and ideas take rather longer to become known. By way of example, many of the now-recognised great American abstract impressionist artists did not secure a major exhibition until their 40s or 50s.
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27. It is relevant that not one of the Exhibits referred to in this Part C referred to the Applicant or her work in categoric terms.
PART D - the case law
28. Although Ms Gleeson contended that the case law in this area is of limited relevance, the case law does establish some general principles which can with advantage, be cited. I note also in this context that numerous cases were cited and that this Part D contains references to and extracts from some only of them.
29. Tweddle v Commissioner of Taxation (1942) 180 CLR 1 is often referred to in this context; it is authority for the proposition that it is not for the Respondent to instruct a taxpayer as to the nature and extent or manner of conduct of his or her business activities... It is a decision of the High Court; I refer in particular to page 7 in order to include the following extract from the judgment in that case:
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It is not suggested that it is the function of income tax Acts or of those who administer them to dictate to taxpayers in what business they shall engage or how to run their business profitably or economically. The Act must operate upon the result o taxpayer’s activities as it finds them. If a taxpayer is in fact engaged in two businesses, one profitable and the other showing a loss, the Commissioner is not entitled to say he must close down the unprofitable business and cut his losses even if it might be better in his own interests and although it certainly would be better in the interests of the Commissioner if he did so (10). If the appellant succeeds and makes a profit it will plainly be taxable, and it is difficult to see how his activities could at that moment of time be transmogrified from an indulgence in a somewhat unusual form of recreation into the carrying on of a business. I am satisfied that the appellant is seeking to establish himself at Winlaton as a recognized breeder of high class stud stock, and that while he is prepared to make losses to achieve this ambition he has a genuine belief that he will be able eventually to make the business pay. Indeedm, unless he can do so, his experience will hardly be an encouragement to others to emulate his example.
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30. I refer next to Ferguson v Federal Commissioner of Taxation (1979) 26 ALR 307; Ferguson was also concerned with an agricultural venture; it establishes that the size of the undertaking while relevant will not be the determining factor. At page 318 and 319 the Federal Court said:
Finally, the conclusion is open to be drawn that a taxpayer is engaged in business activities notwithstanding the fact that he is operating in a very small way, ie on a few acres, with very few trees or with a very small number of stock. I would be of opinion that the size of the operation could be of significance for the purpose of testing whether a taxpayer is conducting a hobby rather than a business, but that size is certainly not the determining factor. Walsh J gave consideration to this aspect in Thomas v FC of T (1972) 72 ATC 4094 at 4099; 3 ATR 165 at 171 where he said: There is no doubt that the appellant's chief occupation was the practising of his profession and that the tree farming, if it had a business character, was relatively of minor importance both as to the time devoted to it and as to the returns to be expected from it. But a man may carry on a business although he does so in a small way. In my opinion, the appellant's activities in growing the trees ought not to be found to have been carried on merely for recreation or as a hobby. I leave out of account the pine trees, the growing of which did not have, I think, a significant commercial purpose or character. But the appellant, in planting the avocado pear trees and the macadamia nut trees, set out to grow them on a scale that was much greater than was required to satisfy his own domestic needs, and he expected upon reasonable grounds that their produce would have a ready market and would yield, if the trees became established, a financial return which would be of a significant amount with a relatively small outlay of time and money, and that this return would continue for a very long time. In these circumstances I think it is proper to find, and I do find, that he set out to engage in producing the pears and the nuts as a business, and that he was, in the tax year, carrying on that business which was a business of primary production.
The courts have, from time to time, grappled with the question whether the taxpayer is engaged in carrying on a business, and a number of tests have been suggested. Walsh J in Thomas’ case, supra, in the passage above quoted found that a certain activity of the taxpayer, namely the growing of pine trees, did not have “a significant commercial purpose of character” and thus was not a business activity. For the purpose of characterizing an outgoing as part of the cost of “trading” operations (see per Menzies J in Fairfax's case, supra), it is certainly relevant to ascertain if the operations of the taxpayer have a commercial purpose ie pursuit of profit or gain rather than pleasure or recreation. The activity is also reviewed for the purpose of determining whether, in the words of Lord Clyde in IR Comrs v Livingstone (1926) 11 TC 538 at 542: “… the operations involved in it are of the same kind and carried on in the same way as those which are characteristic of ordinary trade in the line of business in which the venture was made.” By the application of this test it may be possible to determine whether the activities have a commercial character.
31. Federal Commissioner of Taxation v Walker (1985) 79 FLR was also concerned with a project (on a small scale) of an agricultural nature. At pages 164 and 165, the Court said:
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In answering that question consideration must be given to the matter set out in the judgment of Bowen CJ and Frank J in that case at 314. I am satisfied that the respondent’s activities had the purpose of profit making. In the years ended 30 June 1980 and 1981 he made a loss but this does not preclude me from accepting his evidence that his purpose was one of making profit. There was also repetition and regularity in his activities. These were directed to the breeding of high quality angora goats by processes involving superovulation and also natural reproduction. For this purpose it was essential to have the breeding programme carried out by an expert veterinarian. The activities of the taxpayer were limited but it was he who paid the fees for the breeding process, he paid for the goat which was used for breeding, he maintained communications with the expert and he tried to make himself informed about market conditions through membership of the Angora Breeder Society and reading publications and it was he who made the decision to sell the goats. He organised his activities in a business-like way through the keeping of books of account at least until March 1981. There is nothing in the evidence to suggest that the taxpayer was merely pursuing a hobby. Rather it indicates that he was interested in the acquisition of an angora goat for breeding purposes and thereby to make a profit. It is true that the volume of his operations was small though the amount of capital he ventured, namely $3,000, was not insignificant. However, it is established both by the remarks of Walsh J in Thomas v Commissioner of Taxation (1972) 46 ALJR 397 at 401 and by the comments thereon by members of the High Court in Hope v Bathurst City Council (1980) 144 CLR 1 at 3 and 10 that a person may carry on a business though he does so in a small way. I do not consider that the scale of his operations was such as to put in question the conclusion I have reached, namely that he was conducting his activities on a commercial basis. There is nothing in the arrangements which suggested that they lacked commercial reality.
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32. In Commissioner of Taxation v Glennan (1999) ATC 4467, the Court was concerned with a substantial amount derived from a taxpayer arising from the harbour tunnel. It is authority for the proposition that the fact that the prospect of profit is remote or slight will not preclude a finding that a business was being conducted The Full Federal Court said at clause 72:
A repeated theme in the taxpayer's submissions was that the prospect of gain from the taxpayer's activities was fanciful, because of the numerous obstacles that had to be overcome before his ideas could be translated into financial rewards. This aspect of the submissions seems to have proceeded on the basis that there is a principle of taxation law denying the character of income to gains that, at the early stages of the commercial venture, are unlikely to eventuate. The fact that the prospects of reward are very slight may be a reason in a particular case to find that the taxpayer did not undertake the activity with the intention of achieving a financial gain. But the AAT found that, from the very beginning of his work, the taxpayer intended to obtain financial rewards. The mere fact that his chances of doing so, viewed perspectively, were extremely slim, did not preclude the AAT from concluding that the taxpayer's undertaking was always intended to yield income.
33. I refer next to Commissioner of Taxation v Murray (1990) 21 FCR 436 (referable to artworks) and in the first instance to page 453 where the Court said:
…
The proper test to determine whether an item is a work of art is both objective and subjective. The item in question must be one which is capable of being a work of art in itself. It will not, merely because it is also utilitarian, for that reason fail to fall within Item 68(2), nor did the Commissioner so submit. In considering the matter objectively it will be relevant to have regard to the person who produced it (was he or did he purport to be an artist?), and the circumstances in which the work was produced (was it a case of mass production, or did the work have originality?). Production of a number of items in a series such as a set of original lithographs in a series would not necessarily be excluded from Item 68(2). Relevant will be whether it is got up and sold as an item of artistic endeavour or whether it is got up and sold for a utilitarian function. Pottery made up for sale as vases per se would not, without more, qualify. In this respect price or value might play a part, although again these matters will not be determinative. The item must also be such as is capable of being seen as produced to gratify the aesthetic emotions.
…
At page 454, the Court said:
In some cases however the application of the objective test may leave a Tribunal in doubt. In part this could come about because the assessment of whether an item is capable of being a work of art might involve the fact finder, no doubt unconsciously, applying his own aesthetic values. Aesthetic judgments are not matters for a court (or indeed for a revenue collector) cf Hensher v Restawile Upholstery (Lancs) Ltd (supra). Such doubts may be resolved by an application of the subjective test referred to by Pape J in Cuisenaire v Reed (supra). But the significance of the subjective test goes beyond the resolution of doubt. An item created without the intention of making an artistic statement would not be a work of art no matter how artistic it might appear to be. The history of art hoaxes is replete with examples of items admired as works of art but which turn out to be other than what they were said to be. For a work to be a work of art therefore it will be necessary that the "artist" bringing it into existence intends thereby to make with it an artistic statement.
And, at page 443 of the judgment the Court referred to an article by Sir Zelman Cowen (then Dean of the Faculty of Law at the University of Melbourne) in the following terms:
…
In a comment on the case, "An Artist in the Courts of Law", published in (1945) 19 ALJ 112, Sir Zelman Cowen (then Dean of the Faculty of Law at the University of Melbourne) referred to the libel action brought by Whistler against Ruskin in 1878. Ruskin had written of a painting by Whistler, "Nocturne in Black and Gold", (at 112): For Mr Whistler's own sake, no less than for the protection of the purchaser, Sir Coutts Lindsay ought not to have admitted works into the gallery in which the ill-educated conceit of the artist so nearly approached the aspect of wilful imposture. I have seen and heard much of cockney impudence before now, but never expected to hear a coxcomb ask two hundred guineas for flinging a pot of paint in the public's face.
Whistler recovered nominal damages of one farthing. Sir Zelman Cowen concluded his comment by saying (at 113): It is often said, with much truth, that a prophet is not without honour save in his own country. This has very often been the fate of artists. Whistler, though subjected to ridicule and attack in his own day, has now achieved well merited recognition. The scorn poured upon the impressionists has now turned to praise. These facts should serve as a warning to those who laugh to scorn contemporary art. (Emphasis added by the Tribunal)
…
34. Commissioner of Taxation v Stone [2005] 215 ALR 61 is a comparatively recent judgment of the High Court in respect of a policewoman who derived substantial sums as a javelin thrower. I include in these reasons clauses 54, 102 and 103 the judgment of the High Court as follows:
…
[54] Taken as a whole, the athletic activities of the taxpayer during the 1998–99 year constituted the conduct of a business. She wanted to compete at the highest level. To do that cost money — for equipment, training, travel, accommodation. She sought sponsorship to help defray those costs. She agreed to accept grants that were made to her and agreed to the commercial inhibitions that came with those grants so that she might meet the costs that she incurred in pursuing her goals. Although she did not seek to maximise her receipts from prize money, preferring to seek out the best rather than the most lucrative competitions, her pursuit of excellence, if successful, necessarily entailed the receipt of prizes, increased grants, and the opportunity to obtain more generous sponsorship arrangements. That other sports and other athletes may have attracted larger rewards is irrelevant.
…
[102] It was no answer to say that the taxpayer was not solely motivated by the objective of economic profit. Motivation for most human activity is complex and multifarious. I would be prepared to accept that the primary motivation of the taxpayer was to pursue her “dream” of excellence in her chosen sport and success on behalf of herself, her state and her country. However, that does not negate the conclusion, which was open to the primary judge, that at a given point, before the year of income, the taxpayer decided to turn her sporting talents also to her economic advantage. In doing so, she followed what many other sporting people in Australia and elsewhere have done. There is no dishonour in it. But it has consequences for the Australian law on income tax.
[103] Doubtless the taxpayer did what she did, in part, to defray the not insubstantial costs associated with her pursuit of international sporting excellence. She did not lessen her zeal for personal excellence nor her desire to bring credit on her state and on Australia. However, once the view of profit became a real feature of the taxpayer’s sporting endeavours it had a dual consequence. It gave a logical and factual unity to most of the receipts connected with her sport and unconnected with her employment as a police officer. Moreover, it warranted the Commissioner’s conclusion that the receipts that individually might not have been regarded as “income” took on that character. They therefore warranted the essential conclusion of the primary judge. There was no error in that conclusion, according to the conventional approach to “business income” under Australian taxation law. The Full Court erred in giving effect to its different conclusion.
…
35. The decision of this Tribunal in ReVBF and Commissioner of Taxation [2005] AATA 226 handed down on 17 March 2005 referred to a taxpayer who engaged in artistic endeavours. Clauses 25, 29 and 30 of that decision read as follows:
…
[25] In Woods v Deputy Commissioner of Taxation 99 ATC 5306 at 5311 his Honour Mr Justice Sackville said:
…The question of whether a particular activity constitutes a business depends upon an assessment of the relevant facts and involves matters of fact and degree: Evans v Federal Commissioner of Taxation (1989) 89 ATC 4540 (Hill J) … No one factor is decisive and many elements may have to be considered: Ferguson v Federal Commissioner of Taxation (1979) 79 ATC 4261 (FC) … per Bowen CJ and Franki J. It is to be borne in mind, however, when weighing the relevant factors, that there is usually a distinction between the pursuit of a pastime, even if the pursuit is vigorous, and the carrying on of a business: Martin v Federal Commissioner of Taxation … (1953) 90 CLR 470, at 479, per curiam.
It was also noted by the Full court of the Federal Court in Stone v Federal Commissioner of Taxation 2003 ATC 4584 that no single factor is determinative, but rather all of the indicators must be considered. Whether a business is being carried on is dependent upon the overall impression gained after looking at the activity as a whole and at the intention of the taxpayer undertaking it. Also, it is possible for a person to carry on a business as a part-time sideline to that person's main activities (Ferguson v Federal Commissioner of Taxation). Therefore, the fact that the applicant was employed by Telstra during the years in question does not necessarily impact on the applicant's claim that he was, at the same time, carrying on a business as a graphic artist. The applicant admitted that he was not carrying on the business of a graphic artist prior to 1997. This is despite the fact that he devoted considerable time to the activity of producing collages and compiling a body of work in preparation for, according to the applicant, the commercialisation of his activities.
…
[29] The intention of the taxpayer must be determined objectively, having regard to all the surrounding circumstances. There is no question that the applicant by 1997 displayed an intention to commercially exploit his works. All of the steps taken by the applicant from 1997 to 2000 are strongly indicative of the applicant's intention to commercially exploit the skills he had developed, particularly after he was able to transfer his artistic works onto his computer. The applicant's activities after 1997 were not merely preliminary, as that preliminary work had already been conducted prior to that date. In my opinion, there is no doubt that the applicant's artistic endeavours, at least since 1997, had a significant commercial purpose or character.
[30] Whether or not the applicant intended to profit by his activities must be determined on an objective basis (Hope v The Council of the City of Bathurst (1980) 144 CLR 1). It is not enough that the applicant asserts that he had a profit motive in conducting his Art activities. The fact that the prospect of turning a profit may be slim does not prevent a finding that the activity constitutes the carrying on of a business (Glennan v Commissioner of Taxation (2003) 53 ATR 101). The fact that a business may not make a profit in the short term does not indicate a lack of a profit motive. Provided the taxpayer has an intention and expectation, on objective grounds, that his or her activities will eventually become profitable, a profit motive will exist. As is stated in Tax Ruling 2005/1, an Arts business is a notoriously high risk commercial activity where there is often a greater discrepancy between the cost of creating the Art and its commercial value, and it is often difficult to assess whether a profit motive exists solely from whether a profit in fact has been made by the activity. The Commissioner goes on to suggest in the Tax Ruling that the following activities are relevant in ascertaining whether the taxpayer has a genuine intention to profit from Arts activities:
·endeavouring to bring the art work or service to relevant markets … ;
·creating or enhancing industry contacts (for example, gallery owners, art dealers, literary performing arts agents, critics);
·offering art work for sale as well as actual sales of art work to the public;
·offering expert services through commission or consultancy;
·related income seeking activities (other than direct sales) including applying for grants, awards, patronage, commissions, and so on;
·making their art work accessible to the public through activities designed to raise the profile of the taxpayer as an artist; for example: publicly exhibiting art works, creating works for public performance, contributing written work for publication;
·entering art competitions, residencies and award events;
·undertaking research into the proposed arts business and consultation of experts (art experts or business advisers) prior to and during the activities; and
·reputation building as part of an overall intention to make a profit.
…
PART E - taxation ruling tr 2005/1 entitled “income tax: carrying on business as a professional artist” (the ruling)
36. The Ruling in its terms applies despite its date of issue to years both before and years after that date. The Ruling is lengthy and comprehensive and includes by way of guide, examples.
37. The Ruling provides in its preamble that although it is not a “public ruling for the purposes of Part IVAAA of the Taxation Administration Act 1953, it is administratively binding on the Respondent”. Clause 10 of the Ruling provides that there are eight indicators as follows:
…
10.The courts have held that the following indicators are relevant to the question of whether a taxpayer's activities amount to the carrying on of a business:
(a)whether the activity has a significant commercial purpose or character; this indicator comprises many aspects of the other indicators;
(b)whether the taxpayer has more than just an intention to engage in business;
(c)whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity;
(d)whether there is repetition and regularity of the activity;
(e)whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business;
(f)whether the activity is planned, organised and carried on in a businesslike manner such that it is directed at making a profit;
(g)the size, scale and permanency of the activity; and
(h)whether the activity is better described as a hobby, a form of recreation or a sporting activity.
…
38. As to the indicator referred to in clause 10(a) of the Ruling, the Ruling itself makes it clear that profit motive is an important factor. Moreover, it must be determined on an objective and not a subjective basis. Clause 21 of the Ruling specifies that the fact that losses are incurred will not negate a finding that the activities constituted the carrying on of a business.
39. Clause 24 of the Ruling refers to an artist’s business as a notoriously high risk commercial activity in the following terms:
…
24.In the case of an arts business, which is a notoriously high risk commercial activity where there is more variability between the cost of creating the art and its commercial value, it may often be difficult to assess whether a profit motive exists solely from whether a profit has in fact been made by the activity. Therefore, whether a taxpayer is engaged in the following kinds of activities will be relevant in ascertaining whether that taxpayer has a genuine intention to profit from their arts activities:
·endeavouring to bring the art work or service to relevant markets (see comments in paragraph 7);
·creating or enhancing industry contacts (for example gallery owners, art dealers, literary or performing arts agents, critics);
·offering art work for sale as well as actual sales of art work to the public;
·offering expert services through commission or consultancy;
·related income seeking activities (other than direct sales) including applying for grants, awards, patronage, commissions, and so on;
·making their art work accessible to the public through activities designed to raise the profile of the taxpayer as an artist; for example: publicly exhibiting art works; creating works for public performance, contributing written work for publication;
·entering art competitions, residencies and award events;
·undertaking research into the proposed arts business and consultation of experts (art experts or business advisers) prior to and during the activity; and
·reputation building as part of an overall intention to make a profit.
…
40. Importantly and in relation to an artist, clause 34 of the Ruling provides:
…
34.This business indicator may be demonstrated in a number of ways, for example:
·industry and peer recognition as an artist;
·qualifications (or equivalent experience as apparent from an artist's portfolio or body of work) typical of those in the relevant industry sector. (In some sectors of the arts industry formal qualifications are the norm. In others, especially in new and emerging types of art, it would be less usual for an artist to have any formal qualifications);
·public recognition as an artist (for example, is the taxpayer described as such in the media? Is their opinion as an artist sought by the public? Is their art work used by others as examples for teaching purposes?);
·meeting the eligibility and selection criteria for grants, awards and professional opportunities (for example, residencies) open to artists in the relevant industry sector (for example, individual applicants for grants from the Australia Council must be able to demonstrate that they are identified and recognised by their peers as a practising artist; in addition, the selection criteria for all grants from the Australia Council requires applicants to provide evidence of detailed planning and ability to execute the proposed project);
·appointment to a position being contingent on the person's status as an artist (for example, being offered a position as a resident artist; where a teaching position is based on the employee's status as a professional writer; being appointed as a member of relevant boards or committees);
·memberships of professional associations, including unions (that is, does the taxpayer's industry sector have any organisations that are dedicated to serving the professional needs and interests of artists? If so, is the taxpayer a member?);
·reputation building in a manner consistent with others in the relevant industry sector;
·methods of application and time commitment to activity consistent with others in the relevant industry sector; and
·obtaining the advice or services of an agent, manager, legal or financial adviser, if it is common in the taxpayer's industry sector.
…
41. The indicators contained in clause 10 are in some respects linked to each other to a greater or lesser extent. It seems clear enough as regards the indicator contained in clause 10(b) that the Applicant had more than merely an intention; as to the indicator contained in clause 10(d), there was undoubtedly repetition as required. A consideration of the indicators contained in clauses 10(e), (f) and (g) all in my view lead to a conclusion in favour of the Applicant. In particular as regards the indicator contained in clause 10(f), it is hard to see what else the Applicant could do to further her artistic career. She has a studio; she employs an accountant; she has a website; she has sought to publicise her work in all the ways open to her and including the publication of the booklet to which I referred earlier in these reasons.
42. As to the indicator contained in clause 10(g), it is clear to me that the Applicant regards her career as an artist is far more than a mere hobby. It is her major occupation and to which her other activities are subordinate. She travels in pursuance of that career; her lecturing activities, all in the field of art are clearly mere adjuncts undertaken for purely financial reasons. As I said previously, they are undertaken on a part-time basis and such that no lecturing position held by her could lead to a full-time position or to tenure.
43. The indicator contained in clause 10(c) constitutes a problem for the Applicant. She has a purpose of profit-making although it is clear that it is not her only purpose; she has motives as to the advancement of the general good as referred to in clauses [9] to [11] of Exhibit A1 quoted earlier in these reasons. Plainly profit is one only of her purposes; it is even conceivable that it is not the dominant purpose, as witness the fact that she has deliberately chosen a field of art in which commercial success is not easy to attain.
44. As to whether there is a realistic prospect of profit is impossible to say. After all these years of failure (at least in commercial terms) there is a real possibility that she will never achieve commercial success. But at the same time as the reference to Whistler and the impressionists by Sir Zelman Cowen in Murray (supra) sets out there are many examples of artists who achieved success very late in their careers.
45. The Ruling contains examples which are designed to serve as a guide. It might be thought that the provisions of the Ruling as regards “Joe” contained in clauses 121 to 127 inclusive could be said to be appropriate in relation to the Applicant in relation to the Relevant Year.
PART F - conclusion
46. In essence the Respondent contends that while the Applicant is indeed an artist and while her peer group (Tab I of Exhibit A1) has regard for her as an artist, this does not lead inevitably to the conclusion that she is carrying on a business. It is this element which is required for the purposes of a deduction pursuant to s.8-1 of the Act which reads as follows:
…
INCOME TAX ASSESSMENT ACT 1997 - SECT 8.1
General deductions
(1)You can deduct from your assessable income any loss or outgoing to the extent that:
(a)it is incurred in gaining or producing your assessable income; or
(b)it is necessarily incurred in carrying on a * business for the purpose of gaining or producing your assessable income.
Note: Division 35 prevents losses from non-commercial business activities that may contribute to a tax loss being offset against other assessable income.
(2)However, you cannot deduct a loss or outgoing under this section to the extent that:
(a)it is a loss or outgoing of capital, or of a capital nature; or
(b)it is a loss or outgoing of a private or domestic nature; or
(c)it is incurred in relation to gaining or producing your * exempt income or your * non-assessable non-exempt income; or
(d)a provision of this Act prevents you from deducting it.
For a summary list of provisions about deductions, see section 12-5.
(3)A loss or outgoing that you can deduct under this section is called a general deduction.
For the effect of the GST in working out deductions, see Division 27.
Note If you receive an amount as insurance, indemnity or other recoupment of a loss or outgoing that you can deduct under this section, the amount may be included in your assessable income: see Subdivision 20-A.
…
Put in other words and by way of example the positive factors in respect of the Applicant relate to her as an artist, so the Respondent contends, but not as a businesswoman.
47. The Respondent contends in essence that the Applicant does not conduct a business simply because she does not achieve any sales or even trades (whether or not those trades result in profit). The Respondent contends that it is this aspect (and in the Respondent’s contention, a vital aspect) which is lacking. Ms Gleeson drew attention to the fact that Stone’s case (supra) is of limited assistance to the Tribunal. In Stone the taxpayer derived considerable amounts but contended that they were not derived in the course of a business. By contrast, the Applicant derived very little income other than grant income (which of its very nature and given the fact that it is discretionary) is hardly business income.
48. In the same way Ms Gleeson contended that VBF (supra) is distinguishable on the basis that the painting of T-shirts is essentially commercial in character in contrast with the activities of the Applicant which may not, as regards installation art, be commercial in the same way. Ms Gleeson referred in particular to Graham v Green [1925] 2 KB 37 and in particular a passage at page 41 reading as follows:
…
A person who buys an object which subsequently turns out to be worth more than he gave for it, and which he sells, does not thereby make a profit or gain for income tax purposes. But he can organize himself to do that in a commercial and mercantile way, and the profits which emerge are taxable profits, not of the transaction, but of the trade. In the same way, he may carry on the trade of selling things which he has not got and buying them when the price has fallen. That is a capital accretion, only the operations are reversed. He sells first and buys afterwards. And in that way he may make losses or he may make profits. It he makes losses, the losses cannot be said to be the results of the individual acts; they are the result of the trade as a whole. Test it in this way. A person may organize an effort to find things. He may start a salvage or exploring undertaking and he may make profits. The profits are not the profits of the findings, they are the profits of the adventure as a whole. Again he may make a loss. One cannot say that the loss was due to the failure to find. The loss is due to the trade. That is a good test, because it shows the difference between the trade as an organism and the individual acts.
49. Ms Gleeson contended that Graham v Green is authority for the proposition that to constitute a business, trades are integral and so that without trades there cannot be a business.
50. I have come to the conclusion that I should answer the question before me in favour of the Applicant and so as to find that she was in the Relevant Year conducting a business. It is my view that the Ruling is couched in terms which favour this view. Although the indicators in the Ruling might be said to be in some respects negative, they are, regarded as a whole, positive. Even the negative factors are such that they are open to differing views. This is so in particular as regards the profit motive indicator referred to in clause 10(c).
51. The Ruling expressly recognises that there are special factors affecting an artist. It does not set out that the existence of a business is conditional upon sales or trades. The Ruling indeed deals quite extensively with the case law; the case law in turn indicates that there is no such fundamental precondition. Cases in which losses have been incurred for years have nevertheless resulted in findings favourable to the taxpayer as regards the conduct of a business, and this is so also in respect of businesses in which there were few transactions and sometimes virtually none; see for example in this context Case M67 (1980) 80 ATC 479 and in particular the passage at page 482 reading as follows:
…
5.Put in a nutshell, this venture foundered because taxpayer’s boat was not equipped to stay at sea long enough to hold enough fish (“$600 odd worth, or somewhere around 1,200 lbs of fish”) to make it commercially viable. With hindsight one might well have predicted that an inadequately equipped boat, manned by an inexperienced skipper and crew was destined never to succeed in a commercial sense. However, we do not believe that to be the test whether a venture is a “business” for tax purposes. Thus in Thomas’ case 72 ATC 4094, the appellant was held to be a primary producer notwithstanding that he “had failed in several respects in achieving a standard of competency and good husbandry that might have been expected of a man setting out to grow trees as a business venture, for example, in failing to provide a fire break or other protection against fire. His irrigation methods and his treatment of the grasses and other growth on the land were open to criticism”. The growing of avocado pears was described as “a very chancy operation”. For good measure, the appellant paid more per acre than that for which farming land in the area could have been obtained. After giving close consideration “to the lack of business efficacy with which the appellant conducted the operations”, Walsh J. found that this should not lead to the conclusion that Thomas’ farming was not a business venture.
…
52. Put in summary form, the Applicant has for many years worked as an artist. She has in commercial terms been unsuccessful; this may always be so but it is not necessarily the case that it will always be so. She has worked tirelessly to promote herself and her work with a view to achieving recognition. Nearly all of the criteria contained in clause 34 of the Ruling and elsewhere in the Ruling apply in her favour. As one exception she has not formulated a business plan; it is not easy to imagine what sort of business plan could be devised which goes further than or otherwise amplifies her attempts to gain recognition.; Another exception arises from the fact that she does not account in accordance with and so as to have regard to the trading stock provisions of the Act. Ms Sullivan informed the Tribunal from the bar table (and I accept that this is so) that very few artists do so, if only because there is a difficulty in valuing stock on hand at the end of a given financial year. This is even more likely to be the case of installation art which of its very nature is likely to be ephemeral.
53. The Tribunal accordingly determines that, the Applicant did carry on business as a professional artist in the Relevant Year.
I certify that the 53 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J Block, Deputy President:
Signed: Associate
Dates of Hearing 30 November 2005,
1 December 2005 and
30 January 2006
Date of Decision 9 February 2006
Representative for the Applicant Ms J Sullivan,
Mallesons Stephen Jacques
Representative for the Respondent Ms J Gleeson,
Australian Government Solicitor
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