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Investing in our Culture

Support for the arts from government will never meet all its needs. Government policies aim to create an environment where thearts can achieve maximum support.

The Government believes that the private sector - whether individuals or corporations - has an important role to play in this.

Much of Australia's cultural heritage is privately owned - including heritage objects and buildings. The private sector is a majorinvestor in arts infrastructure including film and television facilities, cinemas and commercial galleries. It also invests in artssoftware including film and television programming material, literature, the performing arts and sound recordings; and endows thearts through gifts of items and money.

taxation incentives

Taxation incentives encourage the involvement of the private sector in cultural funding in partnership with the Government.Through tax incentive programs the Government also encourages self-reliance and viability of the cultural sector and funds thisthrough foregone revenue.

These programs do not replace other forms of government funding, which are aimed at specific cultural objectives. They do,however, have an important role in supplementing other government programs and in directly involving the community in culturalendeavours and in a sharing of the cost. In the case of tax incentive schemes, government spending is only activated by privatedonations or investment and is directed by spender preferences.

An area where there is potential for improvement, is corporate sponsorship of the arts through section 51(1) of the Income TaxAssessment Act. In 1993 it was estimated that the proportion of "public benefit" expenditure on the arts under section 51 was onlyseven per cent - the arts coming behind sport (40 per cent), community welfare

(35 per cent) and education (18 per cent). However, the same survey revealed that small to medium size companies have becomethe new patrons of the arts. The Government will assist the cultural sector to tap into this emerging source of corporate support.

A review of corporate and private support of cultural endeavour will examine the results of a comprehensive national survey andanalysis of business sponsorship of culture under section 51(1). This study has just commenced, in partnership with theAustralian Bureau of Statistics. To address the need for stronger corporate sponsorship alliances a joint committee of the AustraliaCouncil and representatives of the business community will investigate and develop mechanisms to enhance opportunities forcorporate and private support of the cultural sector. This will be complemented by a review of donation programs. Education and

information programs will be further developed to help the cultural sector realise its potential in these areas, with an emphasis onattracting corporate sector support.

investment in the cultural sector

Seeing a particular need to boost investment in film and television production, in 1978 the Government introduced tax incentivesfor film production. These incentives played an important role in the resurgence of the Australian film industry. They are set out inDivisions 10B and 10BA of the Tax Act. A change in government policy favouring direct investment in film and television wasannounced in 1988 and as the Australian Film Finance Corporation was established, tax incentives were scaled back. Theycontinue, however, to play a role in attracting investors to this high risk area.

Non-capital expenses incurred in running a business including the film sector are deductible under section 51(1) of the Tax Act.

capital raising under the corporations law

The Government recognises the importance to the cultural industries of raising capital. The Corporations Law provides aframework within which business can raise capital and investors be appropriately protected. It is acknowledged that in manycases, enterprises in the arts seek small amounts of capital compared to other industries and often seek it on an individual projectbasis.

Recent amendments to the Corporations Law reflect this. The Australian Securities Commission also issued a class order in 1992giving relief from certain aspects of the prospectus provisions of the law to film schemes. Recently the Government announced amajor overhaul of collective investment regulation by the Government which will make it easier to seek capital for the arts.

A new regime will apply which will exclude small investment schemes from the operations of the collective investment schemeprovisions in the Corporations Law. It will exclude collective investment arrangements involving not more than 15 persons thatare not making and do not propose to make a public offering. These arrangements will be exempted from compliance with thefundraising requirements of the Corporations Law.

In addition, other changes to the regulation of collective investment schemes, as announced in September 1994 by theAttorney-General, should also assist capital raising for the arts.

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gifts to the cultural sector

Gifts of money to cultural organisations are encouraged through granting tax deductibility status to approved organisations.Included are performing arts, music, literature, design, craft, visual arts, film, community arts, Aboriginal arts, and historicalsocieties. Organisations may apply for eligibility through listing on the Register of Cultural Organisations. Organisations haveattracted over $18 million from individuals and businesses since commencement of the scheme in 1991.

The Taxation Incentives for the Arts Scheme helps preserve our cultural heritage and make it more accessible to the community byoffering a tax incentive for donations of cultural items to public collecting institutions. Since the Scheme's inception in 1978,public art galleries, libraries and museums have been successful in attracting some 16,000 gifts with a total value of $106 million.These incentives are set out in subsection 78(6) of the Income Tax Assessment Act. Measures are being taken to ensure that onlythe most significant gifts are made under this Scheme and it is soon to be supplemented by a Bequests Program for selected majorcultural items and collections.

Deductions for Heritage building preservation were announced inDistinctly Australian. This will encourage private spending onconservation of heritage buildings. The Government recently introduced a new scheme under subdivision 159U of the IncomeTax Assessment Act -Tax Incentives for Heritage Conservation - to assist owners of heritage listed buildings and structures tocarry out approved conservation work. This will operate as a rebate scheme.

New legislation is being introduced to establish a Bequests Program to encourage bequests of major cultural significance to thenation. This will operate as a supplement to the Taxation Incentives for the Arts Scheme and encourage a new influx of culturalgifts of major significance to public collecting institutions under section 78 of the Income Tax Act.

sponsorship

Partnerships with business through sponsorship arrangements (also tax deductible) are a growing source of assistance to manyareas of the arts. The cultural sector competes with other sectors for business sponsorship through section 51(1) of the IncomeTax Assessment Act.

It was estimated that $57.2 million was spent in corporate sponsorships involving the cultural sector in 1993, and through anAustralia Council initiative outlined above the Government will act to increase business sponsorship.

income taxation exemptions

Many cultural organisations are exempt from income tax as section 23(g) of the Tax Act exempts income earned by non-profitsocieties, associations or clubs established in connection with the arts.

sales tax exemptions

Several provisions of the sales tax law provide concessions to artists and art institutions:

Items 115-119, Schedule 1, Sales Tax (Exemptions and Classifications) Act 1992 exempt works of art and exhibits inpublic museums and art galleries. Imported collectors' pieces and antiques are also exempt.Artists who paint or sculpt etc. professionally, and not merely as a hobby, may be entitled to exemption on most materialsand equipment used in the process.Sets constructed or assembled by theatre companies for use in their own productions are sales tax exempt. However, taxhas to be paid on any taxable materials used.Goods for use by many State public libraries, museums and art galleries are exempt.Goods for use by other government authorities concerned with the arts may also be exempt.Some taxpayers connnected with the arts may benefit from the exemption for small business, which applies if their annualtax liability is less than $10,000. However, such taxpayers are required to pay tax on their taxable purchases.

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