Tax tips for musicians

Naamloos1by Chantall Grobler
Musicians spend a lot of money to entice audiences around the world with their amazing talent. This includes paying for instruments, marketing material, rehearsal space, transport, merchandise… and the list goes on. Wouldn't it be nice to deduct some of those expenses on income taxes?

First you need to figure out if making music is your hobby or your business. That is, do you do it for pleasure or to make a living? If it's a business then you may be liable to pay tax and to benefit from deductions.

Navigating your way through the world of tax can be a daunting task for inexperienced music business owners. Standard Bank’s BizConnect guide provides a comprehensive overview of small business tax. We’ve included a few tips from the guide below… Good Luck with your taxes Muso’s!!

1.    Decide on your business entity

Once you have decided to start a business, you must also decide what type of business entity to use. There are legal, tax and other considerations that can influence this decision. There are several different types of business entities in South Africa – sole proprietorship, partnership, close corporation and a private company. Each of these has tax responsibilities.

2.     Provisional tax

As soon as you commence business, you will become a provisional taxpayer and will be required to register with your local SARS office as a provisional taxpayer within 30 days after the date upon which you become a provisional taxpayer. Companies are automatically regarded, and often automatically registered as provisional taxpayers. The payment of provisional tax is intended to assist taxpayers in meeting their normal tax liabilities. This occurs by the payment of two instalments in respect of estimated taxable income that will be received or accrued during the relevant tax year and an optional third payment after the end of the tax year, thus obviating, as far as possible, the need to make provision for a single substantial normal tax payment on assessment after the end of the tax year. The first provisional tax payment must be made within six months after the commencement of the tax year and the second payment not later than the last day of the tax year. The optional third payment is voluntary and may be made within six months after the end of the tax year if your accounts close on a date other than the last day of February. For a tax year ending on the last day of February, the optional third payment must be made within seven months after the end of the tax year.
Click here for more information on provisional tax.

3.     Record-keeping

You must keep records that will enable you to prepare complete and accurate tax returns if you are involved in a business. You may choose a system of record-keeping that is suited to the purpose and nature of your business. These records must clearly reflect your income and expenditure. This means that, in addition to your permanent books of account or records, you must maintain all other information that may be required to support the entries in your records and tax returns. Paid accounts, cancelled cheques and other source documents that support entries in your records should be filed in an orderly manner and stored in a safe place. For most small businesses, the business chequebook is the prime source for entries in the business records.
It is advisable to open a separate bank account for your business so that you do not mix your private and business expenses, and is one of the minimum requirements if you trade as a company, or as a close corporation, especially if your company needs to be audited.
The records should include:
•    Records showing the assets, liabilities, undrawn profits, revaluation of fixed  
•    assets and various loans
•    A register of fixed assets
•    Detailed daily records of cash receipts and payments reflecting the nature of  
•    the transactions and the names of the parties to the transactions (except for 
•    cash sales)
•    Detailed records of credit purchases (goods and services) and sales reflecting 
•    the nature of the transactions and the names of the parties to the transactions
•    Statements of annual stocktaking
•    Supporting vouchers
Please note that different documents have varying periods for which they have to be retained, ranging from 5 years, to 15 years, to indefinitely – the list is obtainable from as a downloaded PDF.



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