It's well known that musician's often survive on the smell of an oily rag. This is often the stated (or subconscious) basis of a parent's preference for another career choice at the end of school. The reality of earning a living in any industry seems to be often less about the skill and more about making creative opportunities on the fly and choosing to be savvy in the areas of finances.
(N.B. please note this article is only meant to raise awareness and not provide a comprehensive guide. Please see contacts below for further information.)
You are in Business whether you like it or not.
Choosing to be savvy as a musician is not too complicated and principally involves demystifying the whole area. Your perception needs to shift away from considering yourself a 'hobby-ist' and acknowledging you are in business for a living and hope to profit to a greater or lesser extent from your activities. Given the large investment of time, effort, money and expenses incurred you would hope a living was aimed for.
By this point in a conversation many people have completely turned off and are sceptical of any business approach to their skill. If only they thought a little further and pondered the many deductible expenses enabling them to carry out their business. Take it a step further and a holistic look at their business reveals two things.
1.Their trade may not actually be as profitable as they thought
2.These costs will reveal a truer taxable income.
The only other legal alternative to this is declaring ALL your income, not claiming expenses and overpaying tax ... all because you can't be bothered?
So what are your expenses?
Some of the most common expenses are listed below but it depends a lot on your individual situation. A quick honest look at your expenses and it is usually obvious which are business related and which are personal. When identifying expenses it is important to conceptually and in paperwork separate business and personal. Obviously correct records need to be keep but this is not as hard as it seems.
- Assets - Assets are expensed over a period of time at specific rates. When you do a quick add up of all the money you have invested in musical equipment this can be a substantial portion of what you can claim.
- Insurance - Equipment insurance can all be expensed.
- Research - Course , teaching or independent research costs (such as CD purchases, music books, lessons)
- Repairs - Any instrument repairs, accessories, or ongoing costs can be expensed.
- Office/teaching Space -Whether at home or else where teaching studio, practice or office space can be expensed.
- Admin costs - Business related cell-phone, stationery, and internet costs can be expensed.
- Travel costs - Any business travel can be expensed
- Financial costs - Financial cost related to your business
So Where to from here?
Obviously in getting organised there is a bit to learn. You need to know the rules surrounding what expenses are claimable and how so. You need to know what records need to be kept and get set up with an appropriate paperwork system. This may seem hard to begin with but once you get setup and your head around the change its not un-necessarily difficult. Again, If you intend to derive some sort of Income/living from music you have little option but to bite the bullet as you have to declare the income anyway.
Good business contacts
www.tapestrymusic.biz David Feehan lives locally and is a specialist at the taxation and accounting areas discussed above. He has heaps of experience as a musician and comes at both with the knowledge of the other.
www.ird.govt.nz The IRD also has a wealth of information on the web site and in guide's. Sometimes it feels like you've got to know what you're looking for to find anything which is not so good if you know nothing but still.
www.biz.org.nz This is another Government website to support small business. It has heaps of helpful information on it.
