• Working Smarter Guide: Staying Financial

Disclaimer : The information given here is a simple guide. Specific advice regarding your finances, taxes, insurances and superannuation must be given to you by a certified professional only.

Your Business Structure

You are an artist and a business. Set your design business up properly so you can take control of your income, manage your finances and secure your future. 

There are four ways of structuring your design business: as a sole trader, or as a partnership, company or trust. Each structure has its pros and cons, and you should consult with your accountant before deciding which structure suits your individual circumstances.

Live performance designers earning a high income or working more in the commercial sector, and many film designers choose to set up their own company as a tax-effective business strategy. You should seek professional advice before considering forming a company, trust or partnership. 

Personal Services Income (PSI)

If you are working as a company, trust or partnership PSI rules may apply. Personal Services Income is income produced mainly from your personal skills or efforts as an individual. Income is classified as PSI when more than 50% of the amount you received for a contract was for your labour, skills or expertise.

Under this ruling, you are unable to claim certain expenses as a trading entity would. If you believe you fall into this category, speak with your accountant regarding what you can and cannot claim. The rules are very specific.

Working as a Sole Trader

Most (72%) live performance designers work as sole traders.

APDG survey 2018

When you are working as a ‘sole trader’ you are running your own business and are responsible for understanding your own tax, insurance and superannuation obligations. All records that relate to your work need to be kept by you. To help keep these records in a professional manner you need an ABN (Australian Business Number) and you pay tax using your tax file number (TFN). 

Working as a sole trader is flexible; you may be working as an employee or contractor, or at times you may choose to work for an employer full-time, part time or as a casual employee, earning income in the form of a salary or as a fee. 

NOTE: As a sole trader, you cannot work as an employee, only contractor. An individual works as an employee and can also be a sole trader. Using terminology correctly will hopefully stop people getting confused.

Advantages of being a sole trader:

  • This is the way most live performance designers work, as it is the simplest, cheapest and most flexible business structure.
  • It offers the flexibility to engage with the employer/company on your own terms, negotiated by contract.
  • The employer/company pays the employer superannuation contribution (Superannuation Guarantee – SG contribution into your nominated superannuation account.
  • The company provides workers compensation and public liability insurances when you are at work on their premises. (NOTE: some companies are attempting to avoid this obligation).
  • Depending on your contract:
    • You can work on various projects with multiple employers at the same time.
    • You can work when and where you like (eg to take Mondays off to do a training course)
    • You can find your own clients, and approach other creatives as yourself

Disadvantages of being a sole trader: 

  • In most cases, you must manage your own tax and financial record-keeping.
  • You will need to sign a new contract for each work project.
  • You need to manage cash flow carefully to ensure you have available funds to pay tax.
  • You might need to provide a Fee Proposal as part of your contract for the design work you are undertaking.
  • You need to invoice, and may be required to provide a timesheet.
  • Your income will be variable, compared with being on a part-time or full-time salary.

Sole Traders and your TFN

You use your individual Tax File Number to lodge your tax return. If you have worked both as an employee and as a sole trader, there will be two sections of the tax return that will need to be filled in.

You can use this ATO calculator to estimate your tax obligations:

Employment Status: Employee or Contractor?

As an individual sole trader you can be employed as either an ‘employee’ or as a ‘contractor’. By using the ATO’s ‘Difference between Employees and Contractors’ tool, the APDG advises that Live Performance designers are typically determined to be Employees rather than Contractors under Australian law. There could be a time in your career where you decide it is more appropriate to define yourself as Contractor.

As an ‘employee’ you may be paid by a regular weekly or fortnightly salary with tax deducted, or paid by fee installments where you pay your own tax. You may be employed full time, part time or as a casual employee.  This is becoming less of a choice over time and the ATO ‘Difference between Employees and Contractors’  tool is  a good method to determine where you sit in your situation.

As a contractor you are essentially working completely independently of any client/company. The term ‘contractor’ is a defined term in tax and superannuation law. Even if you have your own ABN and are working under a contract or agreement – as most designers do – that doesn’t mean you are technically a ‘contractor’. 

Designers need to be aware that tax and superannuation law changes may affect how you work.  For example some companies are now attempting to define designers as ‘contractors’ and are arguing that they are therefore not obligated to pay superannuation or cover the designer’s insurances. The APDG does not believe this is a legitimate action. If in doubt of your situation, speak to your accountant and they can determine which area you fall into and suggest ways to negotiate with the employer/business you’re contracted to. Some great accountants will even discuss it with the employer/business on your behalf to get the desired outcome. 

  • It is illegal for an employer to incorrectly treat their employee as a contractor and to withhold worker entitlements and employer super contributions.
  • The APDG  recommends that designers (other than those who are registered as a Company for tax purposes) should refer to themselves as independent design professionals and not refer to themselves as ‘contractors’, to avoid confusion about employer obligations.
  • The APDG recommends that all designers should consult with an accountant and familiarise themselves with the ATO definitions of contractor and employee, as your circumstances and the law can change. 

“To know whether a worker is an employee or contractor, you need to look at the whole working arrangement and examine the specific terms and conditions.

Businesses and workers will sometimes include specific words in a written contract to say that the working arrangement is contracting in the mistaken belief that this will make the worker a contractor at law.

If a worker is legally an employee, a contract specifying the worker is a contractor makes no difference and will not:

1. override the employment relationship or change the worker into a contractor

2. change the PAYG withholding and super obligations a business is required to meet.

Whether a worker is an employee or contractor is not a matter of choice, but depends entirely on the working arrangement and the specific terms and conditions.”

ATO source: Myths and Facts

Working as an Employee

While resident company designers would most likely be employed by the company full time, most live performance designers working as an employee would be employed technically as a casual employee. (NOTE: The legal definition of casual employment may change in 2021). 

Whether your employment is full time, part time or casual, your contract should be negotiated to agree all the terms of your employment before you commence work.

You might be working simultaneously under a number of contracts at any time.

Your contract should define your employee working conditions, wages/fee, tax contributions and expense claims.The company will stipulate deadlines and specific dates and hours to be worked, and can direct the tasks and projects you need to complete and how you should work. They will also stipulate company policies and procedures with which you need to comply. Employment and financial records relating to your work within the company may be administered by them, but should be managed and records kept by you.

Advantages of being an employee:

  • You may have the opportunity to contribute to company meetings, and to company decisions and future projects.
  • If the employer is making tax contributions on your behalf, with tax deducted from your pay, they will provide a financial record electronically through Single Touch Payroll (STP) finalisation. This report goes directly to the ATO. With this system you will need to log in to your MyGov account to see what used to be called your ‘payment summary’.
  • The employer procedurally pays the employee superannuation contribution (Superannuation Guarantee Contribution – SGC) into your nominated superannuation fund.
  • As negotiated in your contract or workplace agreement, and if you are employed as a part time or full time employee, the employer must accrue annual leave and sick leave on your behalf.  As a casual employee annual leave and sick leave do not accrue.
  • As a casual employee, after 12 months of consistent hours the employer must offer you a permanent position. You can refuse this offer and remain casual. If you are fortunate enough to keep your casual position for 7 years, you are entitled to receive long service leave calculated at a pro rata rate.
  • The employer procedurally covers the employee under the company’s Workers Compensation and Public Liability insurance policies.
  • Expenses such as parking, cab charges etc can be negotiated to be covered by the employer.
  • You will be able to access company resources, for example suppliers will come to the company to demonstrate or show samples – take advantage of this opportunity 
  • You may be given a place to work, with access to company computers, printers and networks.
  • As a casual employee you are still able to find your own clients, and approach other creatives independent from the company or companies employing you, however, check your contract for any constraints your employer may have put in your contract in regard to this.

Disadvantages of being an employee: 

  • It may be less flexible – the company potentially has more say in how you work. Required hours of attendance, compliance with company policies and other employer stipulations should be agreed in your contract before work commences, regardless of your employment status.
  • If the employer makes tax contributions on your behalf, the contribution rate will not take into account personal business deductions for which you may qualify however this can be addressed at the end of the financial year when you complete your tax return. 
  • Depending on your salary or fee payment schedule you may have limited opportunities to negotiate payments to suit your cash flow. 

Working as a Contractor

As a ‘contractor’ you are a much more independent worker – you quote on the job, you can subcontract the work to another person, you can do the work any way you like as long as the work is completed to an agreed standard or contract terms, and you are free to accept or refuse extra work. You are responsible for completing the work within the set time and for fixing any mistakes at your own expense. 

In practice live performance designers’ contracts stipulate much more employer control over the way we work than would apply to other contractors, which is why the APDG argues that live performance designers are unlikely to be classified as contractors. 

Advantages of working as a Contractor:

  • More flexibility – you can take on clients and contracts and arrange work schedules to suit you.
  • You can subcontract the work to another person.
  • You can work according to your own preferences.

Disadvantages of working as a Contractor:

  • You pay your own super. 
  • You cover all your own insurances
  • You are responsible for fixing any mistakes at your own expense
  • You cover all work expenses yourself 
  • You provide all your own tools and equipment

Tips & Tricks

  • ‘I look out for training opportunities within the company employing me – eg courses in 3D CAD, diversity training, project management, OH&S training, etc…’
  • ‘I learn from the company contacts and systems, such as useful apps, spreadsheets and budget breakdowns for future work”.
  • ‘Turn all your admin into a ‘system of working’ – when you invoice make sure that all the details of the invoice are turned into tasks you need to complete.’
  • ‘Sole traders within a company are not part of the hierarchy so you are more free to talk to whoever you want.’
  • ‘I make sure that all my hours are included on the timesheet and invoices so the company knows how many hours designing really takes’.
  • ‘I have a personal bank account and a business account – at tax time this makes it so much easier’  
  • ‘Even when I agree to a set fee at the start, I include all my hours on the invoice. If I end up doing unpaid hours I then add a line at the end with the “discount”. I think it’s best to inform others of how long tasks take and it’s also good for my records so I can charge the appropriate amount next time’

Registering as a Business

When you register as a business you formalise your design business, and identify that it is a serious undertaking and not a hobby. In a simple online process you register a business name and are given a unique 11 digit Australian Business Number (ABN). You keep financial records, and account books, and keep a separate account for your income which can be a business account. It is recommended that this is a separate business account. An ABN identifies your business to the community and to the government. It also identifies your business to the ATO (Australian Tax Office) when dealing with your tax obligations, such as claiming deductions for business expenses. If you are registered for GST, you will pay GST by completing a quarterly Business Activity Statement or BAS.

After your first tax return, if you have a tax debt, you will likely go into the PAYGI scheme. The ATO developed this scheme to assist businesses to pay their tax. The ATO calculates an installment amount that you need to pay through your quarterly BAS (if registered), or they will send you a form with the instalment amount filled in. It catches a lot of businesses by surprise and cash flow can be really tight that first year, as not only do they have the tax debt from the tax return but they will also have the instalment amount payable very quickly for the following year tax return. If you know that you will end up with a tax debt at the end of the financial year, ensure you save extra for the following year instalment as well. This is where a great accountant can assist with your planning.

APDG Recommendation

Whether you refer to yourself as a ‘freelance designer’ or ‘sole trader’, whether you work as an employee or as a contractor, work full time, casual, paid by fortnightly salary or fee installments, we believe it is best to consider yourself as an independent design professional, and develop good business habits and systems that help you take responsibility for your professional life. Treat your design work as a business.

In the early stages of your career this approach can seem daunting however in the long-term you will benefit from developing a ‘sole trader business mindset’. The APDG is here to offer support during your professional development.


Design Income:
How you are paid and invoicing

A Fair Income

Don’t undervalue your skills. Benchmark yourself early in your career – by establishing a useful point of comparison as a reference point (a performance benchmark) you will have a fair idea of the value of your work in relation to other professionals. 

If for any reason you agree to work for less than the industry minimum, be very careful to not make this a precedent for either yourself or your employer, as this may negatively affect you and your peers.

In an APDG survey 70% of Live Performance set, costume and lighting designers stated that designers designing both set and costumes would need to design more than 6 productions a year to gain a fair income. Specialist set, costume, lighting or video designers may need to design up to double this number of productions to gain a fair income.

Minimum wage

The Australian national minimum wage is $772.60 per week, or $20.33 per hour (1 July 2021 figures). Read more on fairwork.gov.au.

The MEAA minimum wage for theatre actors (2020 figure) is $1145.70 per week and can be used as a benchmark for live performance designers. Read more from MEAA.

You might prefer to benchmark yourself against other design industries. APDG Guidelines provides useful wage benchmarking guidelines and minimum wage calculations. You can also benchmark yourself against others working in similar roles on the same project, for example your director or co-designers.

Hourly Rates

However you are paid, you are being paid for your talent, skills and for your time. Establish an hourly and/or weekly rate that feels fair to you, and calculate how many hours of work at that rate your fee or salary equates to. See the time management section.

Your hourly rate should increase with your level of experience. You might have different hourly or weekly rates for other design roles you work in, such as when you work as a scenic artist or buyer, or when you work in film versus working in live performance.

If you are working as a sole trader or other entity, you also need to take into account your business running costs, superannuation and any other costs, and add these costs to your hourly rate to ensure you don’t fall below the minimum wage. If you are a contractor, the business you are contracting to has an obligation to ensure that you don’t fall below the minimum wage.

How you are paid

There are 5 ways you can receive income as an independent design professional:

  1. as a fee
  2. as a salary
  3. as a royalty
  4. by profit share
  5. in kind (as a service in lieu of payment)

Different employers have preferences about how they will pay you, and you will have your own preferences too. From one project to the next you might be paid as a profit-share, or as a salary for full time, part time or casual work, or as a fee for work as a casual employee or as a contractor, with a royalty payment from time to time added on to any of these.

1. Fee 

This is the negotiated payment you receive for an individual project. This is how most live performance designers are paid. 

  • Your fee and fee installment schedule is negotiated and stipulated in your contract.
  • You (or your agent) provide an invoice for the next fee installment due.
  • Companies vary widely on fee levels for comparative work – from sector to sector, between design roles (eg set versus costume design) and even vary from state to state. 
  • An employee or a contractor may receive payment by fee. 
  • For a scale of indicative fees appropriate to your level of experience and the complexity of the project see APDG Guidelines for more detail.

2. Salary 

This is a negotiated and contracted payment received as a regular (weekly, fortnightly or monthly) payment.  Normally this is under an employment arrangement and tax (PAYG) is deducted with each payment. 

  • You technically become an employee of the company for a specified period of time when you are on salary – either full-time, part time or casual,.
  • Smaller companies may prefer to contract you this way (and you may prefer to be contracted this way) as it makes the employment relationship, superannuation and insurance obligations very straightforward.

3. Royalties 

This is the negotiated percentage of the ongoing box office income from a production paid to you. Royalties need to be negotiated at the time of contracting. Royalties will be on top of any other payment for the job, and are a payment for your contribution to the ongoing profit of the production.

  • The current industry standard percentage for set, costume and lighting designers is 0.5% (for each discipline), but be prepared to negotiate on this. See Section 4 of the APDG Guidelines for more detail. 
  • It is common for royalty payments to commence after the initial presentation of a production eg. if a production is remounted or goes on tour.
  • When your contract stipulates a royalty pool this means that a number of the royalty participants (for example all the designers) are grouped together and paid in specified proportions instead of the full royalty. This might make the difference between the project being financially viable or not, but could mean you will receive a smaller royalty overall. 

4. Profit Share/Co-op

When working on a profit share production you should consider yourself an investor in the production with payment as a percentage of the overall profits made by the production, negotiated within a written or verbal agreement (preferably written). There are various structures for this: 

  • All creatives and performers involved receive an equal share; or, 
  • Different people receive different percentages of profit. This often depends on the level of commitment and time spent working on the production.

Important: A profit share situation doesn’t guarantee an income. The risk of the production making a loss may also rest with you.

5. Payment in kind 

Ask for an in-kind/donation tax receipt for services provided without any money changing hands, for example, when providing a drawing for a charity auction, or set dressing for a fundraiser. You can then claim this as a tax deduction. With payment in kind you are essentially donating your time.

Invoicing

  • To be a valid financial document tax invoices must include at least seven pieces of information – The Australian Tax Office lists what information must be included in your invoices.
  • Invoices for more than $1000 also need to include the ABN of the person/company you are invoicing.
  • Set up your invoice template early in your career. If you don’t have an agent to invoice for you link the template to an app that keeps track of your hours and issues scheduled invoices for you. 
  • Auspicious Arts provides invoice templates in their client resources 
  • Time keeping apps may help, some used by designers include:
    • Toggl
    • Time by Quickbooks (can also integrate with your invoicing system)
    • There are many others. Find one that works for you.

Tips & Tricks

  • ‘As soon as I stopped accepting unpaid work, I started to be offered paid work’
  • ‘Have the money conversation first’
  • ‘Be OK when it is just a ‘money job’, and adjust your expectations’
  • ‘I have several income streams. I keep a lot of pots on the boil, so I am not relying on any one.’
  • ‘Recognise that flexibility and diversity in your career is constructive, positive and healthy.’
  • ‘Benchmark your fee. What are your director and co-designers being paid? A daily rate for a designer should be no less than a daily rate for an actor’ 
  • ‘Work out how many weeks of work your fee or salary corresponds to, and plan your time for the number of paid weeks’
  • ‘Have a look at the APDG Live Performance Guidelines table of fees before you negotiate your contract. 
  • ‘Talk to other designers for advice before you negotiate your fee, especially with an employer you haven’t worked with before’ 
  • ‘Work out how many instalments you want your fee to be paid over, and negotiate the timing of these to suit your cash flow. I want more of my payment up front so I negotiate this’
  • ‘Specify that you want to be paid within two weeks, but understand that in the commercial world it might be as much as 90 day terms’ 
  • ‘I prefer 4 fee instalments, with more of the fee paid early’
  • ‘Invoicing – use accounting software that will send clients/companies automated reminders to pay invoices. This takes the personal (emotion) out of it when trying to chase up payment. Find the one that’s right for you: see the link.’  

Other Income

Self-Generated Projects

Think about other ways how you can generate your own income as a designer – the projects you want to initiate, or the skills you want to exercise. It takes a long time and a lot of effort to set up independent projects – they often have complex artistic and administration requirements, but can be very creatively rewarding.

Helpful resources for planning:

Grants

Self-generated projects may be supported by a grant. Many of the grant bodies have seminars and workshops to assist with the grant application process. Consider employing a grant-writer to assist your application.

Tips & Tricks

  • ‘If you apply for six grants, you may get one of them.’
  • ‘Consider the time you might spend applying for a grant, and how those hours could have been spent creating your project.’
  • ‘Consider the time you might spend applying for a grant, and factor that into your project timeline.’

Other ‘Non-Design’ Income Sources

The APDG 2018 survey found that most designers (78%) have other sources of income other than their professional theatre work, with 24% earning up to a third of their income in this way. Like any artist there are times when you might need to supplement your income from outside your field. 

Design skills are very broad, and are very transferable. Alternate income can come from working as: a design assistant, draftsperson, modelmaker, props maker, teacher, graphic designer, arts tutor, event designer, buyer, costume-maker, art-finisher, scenic artist and on-set crew for film. As a lighting or video designer you may be able to work as a technician, programmer, or other crew member. 

Tips & Tricks

  • ‘Working outside of your primary skill-set is a valuable way of maintaining a sustainable career. Be comfortable with it – very few designers make their total income from their design practice’ 
  • ‘If you work in a casual job outside of live performance, discuss your need for flexibility with your employer. This will help maintain a good relationship so you can go back to that employment when you need it’
  • ‘I look for ‘second’ jobs that give me a degree of flexibility, so they don’t interfere with my design work’
  • ‘I have put together a ‘one-pager’ for clients that outlines my rates for all of the different kinds of work that I do. Having it as a formal document makes it more business-like and less personal’
  • ‘I consider that my “second job” helps me gain skills to develop my main career path.’
  • ‘Think outside the square when choosing a “second job”’
  • ‘Where possible, I use my second job to practice and develop skills to support my design practice. Sometimes that means adapting the job you find yourself in – trying to value-add to it of course!’

Tenders 

You may occasionally see a local, state or federal government agency advertisement calling for tenders on a significant arts project. Each tender will set quite specific rules that regulate how the tender document must be drawn up, and rules for the tendering process itself.  

If you are planning on submitting a tender you are advised to familiarise yourself with the terms and conditions that are standard for a tender agreement. The Standards Australia website links you to the purchase of standard agreements. The tender advertisement will also link you to relevant documents and regulations.

  • Tenders are competitive, and big companies do better at them
  • Look for opportunities with people you associate with, and in related disciplines such as architecture or exhibition design. 
  • You are more likely to succeed when you are invited to tender, or are tendering as part of a larger team or organisation.

Scholarships, Grants and Residencies 

There are a small number of specialised scholarships for live performance designers. Grants and residencies are also an option for funding the development of new work. 

Tips & Tricks

  • Keep your eye open for special grants, for example in response to COVID.

Superannuation

Superannuation is how we save for our retirement. Our employers pay into our nominated fund at a rate set by the government, and we can pay in extra amounts up to limits set by the government. Read more about how it works.

Unless you are earning enough to set up your own self-managed fund, choose a fund that suits you. Before you decide which fund, compare the performance of funds.

Industry funds perform well and are not-for-profit. It is worth comparing the performance of your fund with others regularly to check you are getting the best return for your Super investment.

Unless you are working as a contractor or your own registered company, your employer is obligated by law to pay you the employer superannuation contribution (Superannuation Guarantee Contribution – SGC) into your nominated Superannuation account. This should be at the rate of 10% (increasing to 10.5% after 30 June 2022, and increasing .5% each year until the rate reaches 12.5%). Superannuation should be paid in addition to your fee, not taken out of your fee. If you are not sure of your Superannuation rights, or the company employing you is not sure, read more on the ATO website

Superannuation contributions depend to some degree on your negotiations with your employer. If they offer you a salary rather than an hourly rate, some employers try to package salary and super together, which is allowable. If you opt for this arrangement, be aware that your salary package may not go up in alignment with future super rate increase – the super contribution will increase and the salary component will decrease. This isn’t illegal, but you need to be aware when negotiating.

You can also pay into your own Super fund as an Employee Contribution, either as Salary Sacrifice or as a direct contribution, up to a total of $25,000 per year. This can be an effective way of tax planning to reduce your taxable income when you have a ‘windfall year’, as well as bolstering your Super account. The allowable direct contribution rates change each year, so check on the ATO website or with your accountant before paying a large amount into super.

The employer should contribute to your Super when:

  • You’re a full time, part time or casual employee under PAYG; or
  • You invoice the employer as a sole trader (specific conditions apply); or
  • You are hired principally for your personal labour or skills

The employer is not required to contribute to your Super when you invoice the employer as company, trust, or partnership. 

You need to pay Super for anyone you employ. If you are employing someone for more than $450 over a month you need to contribute SC to their nominated Super fund at the legal rate.

Tips & Tricks

  • ‘Make sure your Superannuation is on top of your design fee, not included in it’
  • ‘I wish I had put money into Super!’ (a senior designer looking back with regret)
  • ‘I add Super onto my hourly rate when I am working as an assistant, and itemise it on my invoice so it is “Superclear”’ 
  • ‘I add the ATO superannuation link to my invoice if I suspect that my employer does not know they need to pay me super’
  • ‘I have changed my Super fund four times over the last twenty years to get a better deal. I look for the best performance and new initiatives – like high-performing ethical portfolios’
  • “Remember – companies need to pay into the fund you nominate, not into one they nominate’
  • ‘Most Super funds will have a way to get a pre-populated ‘choice of fund form’ from their website. This makes it much easier to get Super paid into the fund of your choice.’
  • ‘By allowing a company to NOT pay your Super, you disadvantage the next designer!’
  • 350.org provides comparisons of Superannuation providers’ environmental performance’
  • ‘You can add additional amounts into your super if you choose. I try to do this when I am on a longer term contract. Same goes for paying off a debt such as HEX’

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