We were lucky enough to have Lynda Parsons and Jeni Rowney from Entertainment Accounting speak to members at a free online seminar last week, and while we can't possibly capture all the detailed and in-depth information they provided, we do have a few key tips and pieces of advice that we can share here.
The first question you need to ask yourself: are you running a business, or is this a hobby at the moment (and you’re hoping one day it may become a business for you)?
If you’re running a business, good records will always be needed and even if it’s a hobby right now, good records might be useful in the future. There are many ways you could keep track of all your documents but if you're struggling to come up with a system, Xero and MYOB are great tools for record-keeping. See below some key things to remember.
Some key tips:
- Keep your bank statements, and have a separate bank account for your business income and expenses
- Keep receipts for all expenses over $50
- Always supply invoices for all income and keep a copy of these invoices for your own records
- Always ask for an invoice when paying someone for their service.
- Has your gross income been over $60,000 for 2 - 3 years or more? If yes, you will need to register for GST purposes.
- Try not to withdraw cash to pay for business expenses, as you need receipts to show how your money has been spent.
- Request that 20% Withholding Tax is deducted where possible on all performance income, especially if the payer is registered as an Employer.
- Keep a record of kilometers traveled in your car for work – you can claim up to 79 cents per dollar. Or Keep a logbook for your motor vehicle for 12 weeks of the year to establish business use.
- Keep an asset register of musical equipment, studio, and home office equipment. Date purchased, cost of goods, and description of asset.
- With Hire Purchase or Leasing of assets, keep a copy of the contract and signed agreement
- Insure business assets
- Assets under $1000 can be claimed back in full. If over $1000 you can claim depreciation.
- Keep your APRA remittance statements.
- If you sign to a publisher or record company, keep a copy of the contract and, make sure you have a clear understanding of what you have agreed to.
Don’t set up a company until it is necessary, as you can trade as a Sole Trader or Partnership.
Why? A company is more expensive to run, and there are more compliance costs. But they have their place and when set up correctly can be helpful once you have reached a certain point in your career.
If you’re in a band, you made need a partnership agreement that covers issues such as assets, royalty splits, and what happens when someone leaves the band.
Don’t rush into a management agreement – make sure you can work together first! And make sure your lawyer is different from your manager’s lawyer.
Make sure you have an entertainment lawyer check over any publishing and record deals before you sign them.
And when in doubt, consult an accountant.
Want to know about what expenses you can claim?
Want to find out more about registering for GST?
If you would like to speak with Lynda, or have further questions, please head over to www.entertainmentaccounting.co.nz, and make an appointment.