When the Government started planning to change its law in April, it was a controversial idea.
Its aim was to reduce the cost of doing business, by making it easier for Australians to hire copywriters.
The Government had already taken steps to help make that happen, by establishing a “Copywrite” Tax-Free Service to help people get around the copywriting rules.
As part of the scheme, businesses will pay the GST on the cost to create and produce their own copy for a limited number of business purposes, with a small levy of 0.5 per cent applied at the end of each year.
But the Government’s plan also faced serious legal challenges.
What are the copywriter tax implications?
The Government’s new law is a significant change in the law, and is likely to lead to legal challenges from the industry.
Before it was introduced, the law only applied to copying on behalf of a small number of businesses, and the Government estimated that it would cost the industry about $5 million a year.
But as part of its overhaul, the Government has set a maximum number of companies that can claim GST of up to $5,000.
If a business is in breach of the new rule, it could be hit with a $50,000 penalty.
Under the new law, a business can claim up to three copies for each employee, but it can only be claimed on behalf in certain circumstances.
For example, if a copy of a document is being copied by someone who is not the person signing the document, the copy is still a copy, and it is not a “copywriter”.
The Government is also looking to exempt the “copywriting services” of other businesses, like marketing agencies.
That means that businesses that are also “copywriters” would be exempt from the new rules.
What are businesses to do?
Businesses that are “copywriters” can still claim the GST.
“If you write a story for the Government and it’s being produced by a copywriting service, then you’re still a writer,” says Simon Jones, an independent tax and financial planning expert.
And businesses are still allowed to claim the levy if they are producing the copy for another purpose.
For instance, if an advertising agency produces a copy for an organisation to promote, it’s still a “write-off” for the GST, even if the copy itself is a copy.
If a company wants to use a “free copywriter” service like the copywriters, they will have to pay a penalty, which can range from 0.2 per cent to 5 per cent.
But the copy writers will also be able to claim a small penalty of 0 (or 0.001) per cent on each additional copy.
That means a company that hires a copy writer could potentially pay $10,000 a year in GST, depending on the services provided.
However, that’s just one example.
“If a service is provided for a third-party business, that business will have an opportunity to claim up a minimum of $5 per copy for every copywriter it employs, with the same GST rates applied,” says Mr Jones.
Even if a company is able to hire a copy writing service, it will still be exempt if it’s a “producer”, a person who makes copies of the documents produced.
The Government’s aim is to ensure that businesses are not paying more than they need to.
There’s also a provision for a “contingent” deduction, which is available for small businesses that need to cover the costs of writing a particular story.
But those deductions are only available for a maximum of $50 a year for a small business, and $250 a year or less for a medium-sized business.
If the business isn’t a “writer”, it can claim a full refund of the GST and the surcharge.
Businesses that use a copywriters service are also exempt from paying the GST if they’re producing the document for a purpose other than to promote their business.
That could mean that a company could pay the full amount of GST they paid in the first place, as long as they were a “Producer”.
“That’s one of the benefits of this,” Mr Jones says.
You can still use a free copywriter service for a business that is actually making copies, and if you’re producing a document for your own purposes, you’ll still have to cover those costs yourself.
If you’re unsure whether a copy-writer service is appropriate, you can ask the person you hire to contact the service.
You can also contact the copy writing services’ local office for advice.
If your business is a “small business”, the tax can be avoided by making a declaration.
For more information, see the Department of Finance’s advice on how to write a letter.