Structure yourself as a sole-trader or partnership when you’re starting out
Be aware of the deductions you can claim at tax time and keep logs
APRA AMCOS Royalties need to be included on your individual tax return
White Sky's Kavisha Kuruk answers five common tax time questions from musicians.
How should I structure my band/solo music business? As a sole trader/ABN or as a company?
It’s best to keep things as simple as possible when you’re starting out. Becoming a sole trader (solo artist) or a partnership of individuals (band) is a great way to set yourself up and might even end up being the correct structure for you long term. They are both cheap and easy to set up and have minimal compliance.
It will make sense to remain in these structures until you get to a certain level of net income. If your individual tax rate jumps to higher than 27.5% (which is the current company tax rate), you might consider moving over to a company structure to cap the tax rate paid.
However, running a company comes with extra set up costs and more compliance so please chat to an accountant to weigh up the cost v benefits.
Are my APRA AMCOS royalties considered taxable income?
Yes, they are considered to be income and will need to be included on your individual tax return. Check your remittances for any NZ withholding tax and ensure those are included on your tax return as tax paid against this income.
Further reading: APRA AMCOS CFO Tim Denny on Witholding taxes and overseas earnings
What are some common deductions that I can claim?
- Travel – eg. flights, accommodation, car hire
- Motor Vehicle expenses – based on kilometres travelled for work, make sure you keep a log book to maximise this!
- Phone and Internet – you will need to pro rata these according to business v personal usage
- Commissions – management commission, booking agent commission
- Gear and equipment purchases – you can claim up to $30k per item at the moment!
What do I need to know about claiming rent and bills if I have a home studio/work from home?
Rent expenses can only be claimed if your home is also your principal place of business and you’ve set aside a dedicated area for the running of your business.
A home studio may qualify depending on how you operate out of it. If you work from home occasionally then you can’t claim rent expenses – even with a dedicated work at home area.
You can however claim a percentage of running expenses such as utilities and depreciation of office equipment if you work from home and have kept record of the number of hours spent working at home.
It’s best to chat to an accountant about this one and make sure you keep a diary of your days working at home!
Can I claim a loss on my ABN on my PAYG tax return?
You will need to make sure you meet the ATO’s requirements to be able to offset ABN losses against PAYG income. Here is a useful link to work this out: www.ato.gov.au/Business/Non-commercial-losses/
You may not be able to claim the loss against PAYG income if it’s considered to be a “non commercial loss” but this doesn’t mean the loss is “lost” completely. You will be able to carry it forward until the ABN activity starts making a profit and offset the loss at that point.