As we approach yet another ‘end of financial year’, I wonder how many of you are excited about the need to get your tax affairs in order? Maybe not?
If excited seems the wrong concept, how does "resigned-to-the-fact-that-at-some-point-not-too-far-off-I'm-going-to-have-to-think-about-this" sound? The questions of how much income you earnt and which expenses you can claim as relevant deductions will surely have crept into your consciousness, at least. And good thing to, because we're at the pointy end of the financial year.
So first off, a question for you: how has your record keeping been in 2016/2017? Have you kept a copy of all your invoices that you sent out and have you summarised them into a spreadsheet or made a list? If not, abandon this article briefly and make that list. Go on.
Then there are the expenses that you can claim as deductions against your income. If you have had a job working for an employer as well as working via your ABN you may need to determine what expenses relate to which income.
Not sure how to figure out which expenses can be claimed as a business related expense? There are a few lists that will help - the ATO have one that is available here, or you can check the list available in Rehearsal Mag's Music Business Basics eBook. Whichever way you go, make sure you're keeping an expenses spreadsheet for convenience when tax time comes around. Forgot about spreadsheets this time round? Get a jump start on 2017/18 and build your income and expense tracker right now! Take a second break. We'll wait for you.
Built that tracker? Excellent. Due to the inconsistent nature of a musician’s income, the ATO has special rules regarding your ABN business. In the early years of setting up your business, your expenses may have exceeded your income, so you will be able to immediately claim the loss made, if you have less than $40,000 of income from an employer via PAYG payment summaries. It is important to keep a track of all your expenses during the course of the financial year so that they can be taken into account when preparing your tax (so thank goodness you just made that tracker, right?)
For anyone that has not lodged for a few years, it is always recommended to catch up sooner rather than later. While it may seem unimportant, not having lodged your tax may cause you problems when you want to borrow money through a bank for a large purchase such as a car or home. Then, you will find yourself in a huge rush to pull all your information together. The feedback from clients who have taken the plunge and gotten everything ‘sorted’ is always that it feels like a great weight off their minds. Some lucky clients have also found they were entitled to quite healthy refunds, which made the whole experience even more worthwhile! While no promises can be made that a refund will always be the outcome, it is always recommended to catch up and keep up to date. So go and dig out that shoe box of receipts and let's start lodging.
If you decide to lodge your own tax return via the ATO website remember that you have until 31 October 2017. After that date, it will be considered late and the ATO may apply both penalties and interest if there is an amount owing to the ATO. If you choose to lodge through a registered tax agent, you may be entitled to extend your lodgement until 15 May 2018, unless you have multiple outstanding tax returns or you lodged your 2016 income tax return late. It's really important that you check this date with your chosen tax agent, so you don't get caught out with dates!