Sunday, 31 August 2008


IMPORTANT NOTE SO THAT I DON'T GET IN TROUBLE - I am not a financial advisor and this is NOT financial advice. You need to go and see your accountant about this stuff. The following is provided to provoke discussion on the topic only!

Would you like to offset your writing expenses against your primary income and reduce your tax bill?

It sounds great in theory and the good news is that there is case law which shows that being a full time employee in an unrelated field does not prevent you from doing this.

For any international readers, I apologise in advance, this Blog will be very Australian-centric.

So what can you potentially claim? Anything which contributes towards you producing a writing income. This could include:
  • Internet costs (ADSL fees, hosting and domain name fees, virius software, etc.)
  • Marketing and advertising costs.
  • Related travel costs - may be tricky.
  • Depreciation on your computer, printer, router, NAS, etc.
  • Other software costs like OS, and word processor.
  • Any accounting fees (you should have these - go and see an accountant, if they are any good you will recover their fees many times over!)
  • Depreciation of your home office furniture (assuming you do this from home)
  • Membership fees for relevant organisations (AHWA anyone?)
  • A proportion of home office expenses like: utilities (electricity, gas, phone, water); and depreciation on fittings (curtains, carpets and lights).
Note that you CAN NOT claim things like rent, mortgage interest, insurance and rates. Also note that if you do claim the office expenses detailed above, this may have capital gains tax implications when it comes time for you to sell your property. You need to weigh up the costs and benefits of this strategy.

How do you convince the ATO that these are legitimate tax deductions? Well this is what they look at:
  1. Is the purpose of the writing activity to make a profit? You need to intend to make a profit at some point (and hence pay tax) otherwise it is just another loss making hobby - anyone want to buy a vineyard? A business plan helps demonstrate your intentions here. If you send all of your pieces to magazines that don't pay - you may have a problem.
  2. The volume and regularity of the activities, particularly as it compares to similar businesses. Writing one short story a month is probably not going to cut the mustard.
  3. Running a P&L and balance sheet, having business premises, an agent, licences or qualifications, a registered business name and an ABN all helps.
  4. The level of annual turnover. If your revenue is $20 per annum it is difficult to argue that you are running a business.
  5. The amount of capital employed. You are unlikely to get the tick on this one as writing is not a capital intensive business. The ATO are looking for around $1M of capital invested. Please let me know if anyone has done this - I will be VERY impressed.
Another area that you need to consider is what sort of legal entity is the best for your arrangement (i.e. sole trader, partnership or company). This is another large subject which deserves a Blog of its own.

Want to know more? For anything that you will ever need to know about the business of writing go and check out the article by Ian Irvine on:

The Truth about Publishing at

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