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Music & Money (part 1 of 4) - 3 Benefits Of Running Your Music Career As A Business

money music business Sep 01, 2021

Welcome to part 1 of this part of this 4 part  YouTube Series "Music & Money."

*This information is based on my own personal experiences and research and is in no way professional advice. Before you make any kind of decision, financial or otherwise, you should get advice from a licensed professional.

In this 4 part music & money free YouTube series, I will cover the following:

Part 1: 3 Benefits Of Running Your Music Career As A Business (including how to maximise your profit at tax time)
Part 2: What Business Records To Keep & How
Part 3: The 3 Business Bank Accounts You Should Have 
Part 4: How To Create A Monthly Budget As A Musician

As I mentioned, the information that I will give you throughout this 4 part YouTube series, "Music & Money," is based on my own experience with my own business. I have spent a lot of time reading about and researching finance. If you would like to learn more, then the best 3 that I can suggest for you are:

1: The Barefoot Investor - Scott Pape
2: Total Money Makeover - Dave Ramsey
3: I Will Teach You To Be Rich - Ramit Sethi

The information in this 4 part series is a collection of financial tips, tricks and guidance that I have learnt from my experience. 

Let's get into part 1:

Do I Have A Business For Tax Purposes?

The first question you need to ask yourself is, is my music career a hobby or a business? 

Although no one thing classifies you as a business, below are some things that you should consider.

- If you are making or planning to profit from your business, you are running a business. 
- If you are approaching your career as a business, for example, you register a business name or an Australian Business Number, then you are running a business.
- If you are similarly repeating an activity and being paid for it, then you are running a business.

Now there are tons of benefits when you are running a business. In this video, I will go through 3 of those.

1. Extra income: If you already have a job, as many musicians do, this can be an excellent boost to your income. There are many tax advantages that will allow you to run your business to keep your profits and not pay tax on your music business income (this is why a great accountant is so important).

When you keep all of your invoices for everything that you can claim, these are then deducted from your taxable income, which allows you to retain the income from your career, rather than losing it all in tax (especially if it's a second income.) 

Here is an example: 
You make $20,000 income from your music this year.
Here are some expenses you can claim:
$5000 = PA system
$2500 = Music lessons to improve your craft
$2000 = iPad to have your lyrics on 
 $2500 = New guitar
$1440 = Phone use for business (($200 per month x 12) (60% business use))
$300 = Advertising for your gigs
 $2000 = Merchandise
$1500 = Fuel 

TOTAL: $17,240 

= $20,000 MINUS $17,240 = $2760

*This means your total taxable income = $2760

2. Freedom and Flexibility:
 You have more freedom and flexibility when you run your own business. You can choose your work hours, and you can say yes or no to the jobs you like or don't like. You can go on holiday whenever you choose. Overall, having this kind of flexibility improves the quality of life! 

3. Increased Earning Potential: When you are employed to work for someone else, there is generally a cap on how much income you can produce. Of course, you can climb the ladder within the company, but that has a limit, and many factors contribute to job promotions. When you work for yourself,  you don't have that cap; your promotion and income increase don't depend on your boss; it depends on how hard and smart you want to work. Therefore, your income earning potential is far higher.  

There are so many benefits of running a business correctly and effectively. However, to ensure that you are working within the law, it's important to get advice from a professional. Chances are, your music career isn't a hobby, and if you're even a little bit serious and want to make money from it, then you need to make sure that you are fulfilling your legal obligations as a business.

Watch out for part 2 next week = What Business Records To Keep & How

*For more information on this topic, visit: 
https://business.gov.au/

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