Musicians’ Self-employment and Taxes

Running your music career means running a business. How you choose to operate—sole trader, partnership or limited company—affects your tax obligations, liability and cash flow. Below is a concise overview of each structure, with practical steps to stay compliant and optimise your earnings.

Sole Trader

You and your business are one legal entity. All income is personal income.
Key points
Tax treatment | All trading income taxed at your personal rates (10.5%–39% under Income Tax Act 2007 sCG 1).
GST registration | Mandatory if turnover > NZD 60 000 in any 12-month period (GST Act 1985 s51).
Provisional tax | Pay instalments if your residual income tax exceeds NZD 2 000 (ITA 2007 sRD 14).
Best for
Freelance musicians, solo performers, part-timers.
Pros
Simple setup (no registration fee).
Minimal ongoing compliance.
Direct access to all profits.
Cons
Unlimited personal liability for debts.
No tax-planning flexibility (all profit taxed at top personal rate).
Partnership

Two or more people share profits, losses and liabilities. The partnership itself isn’t taxed. Profits flow to partners.
Key points
Partnership agreement | Legally document profit shares, decision-making and exit terms.
Tax filing | Partnership lodges an IR 7 return to report income, then allocations are declared on each partner’s IR 3 (ITA 2007 sLR 1).
GST | Partnership must register separately if turnover > NZD 60 000.
Best for
Bands, ensembles or joint ventures (e.g. teaching schools).
Pros
Shared administrative burden and overhead.
Flexibility to allocate income in tax-efficient ways (where partners have different marginal rates).
Cons
Joint and several liability—each partner can be pursued for full partnership debts.
Potential for disputes without a clear agreement.
Company

Limited Liability Company (Ltd). A distinct legal entity that limits shareholder liability to their share capital.
Key points
Incorporation | Register with Companies Office Minimal fee (~NZD 150).
Tax rate | Company profits taxed at 28% (ITA 2007 sCG 5), often lower than higher personal rates.
Profit extraction | Pay yourself a salary (PAYE deducted) or dividends (attach imputation credits under sLG 1).
Compliance | Annual returns to Companies Office. File IR 4 company tax return.
Best for
Musicians or groups with significant revenue, substantial overheads or higher liability exposure.
Pros
Limited personal liability.
Potential tax savings if profits remain in the company.
Easier to bring in investors or grant equity.
Cons
Greater compliance cost (accounting, audit thresholds).
Less flexibility for small side-projects—more paperwork per gig.

Navigating Self Employment as a Musician

Start simple | Most emerging musicians begin as sole traders.
Plan ahead | As turnover and risk increase, consider incorporating to shield personal assets and access a lower company tax rate (28% vs up to 39%).
Pro Tip | Review your structure and tax strategy annually—what works at $30 000 turnover may not suit you at $150 000.
- Open a dedicated bank account for all music-related income and expenses.
- Simplifies tracking for audits and GST returns, and avoids commingling funds (IRD expects clear records ).
Threshold | $60 000 in annual turnover triggers compulsory GST registration (GST Act 1985 s51).
Obligations | Charge 15% GST on all taxable supplies, file returns (usually quarterly) and remit net GST to IRD.
Penalty risk | Late registration or non-compliance can incur fines and use-of-money interest.
- Log every gig, lesson, session, merch sale and related expense.
- Use cloud accounting (e.g. Xero, Wave) or well-structured spreadsheets to capture date, description, amount and category.
- Good records underpin deductions (e.g. travel, equipment depreciation) and stand up to IRD review.
As your career scales, a specialist accountant can:
- Optimise your entity structure (sole trader vs company) for tax efficiency.
- Identify all allowable deductions (e.g. home studio %, per-diem, training).
- Advise on provisional tax strategies to manage cash flow.
Find qualified advisers via the Music Directory of NZ or Chartered Accountants Australia & NZ.

2.2.

Taxes for Musicians

Taxes can feel overwhelming when your income varies from month to month. The goal is to simplify the rules so you can concentrate on your music while staying fully compliant.

Understanding Income Tax in New Zealand

New Zealand uses a progressive income tax system. You pay different rates on successive “slices” of your annual income, not one flat rate on everything.

2025 Income Tax Brackets

Income Band (NZD) | Marginal Rate

$0 – $15,600 | 10.5%

$15,601 – $53,500 | 17.5%

$53,501 – $78,100 | 30.0%

$78,101 – $180,000 | 33.0%

$180,001+ | 39.0%

How it works

The first $15,600 you earn is taxed at 10.5%.
The next $37,900 (from $15,601 to $53,500) is taxed at 17.5%, and so on.

Worked Example | $81,000 Annual Income

$0 – $15,600 @ 10.5%
→ $15,600 × 10.5% = $1,638
$15,601 – $53,500 @ 17.5%
→ ($53,500 – $15,600 = $37,900) × 17.5% = $6,632.50
$53,501 – $78,100 @ 30%
→ ($78,100 – $53,500 = $24,600) × 30% = $7,380
$78,101 – $81,000 @ 33%
→ ($81,000 – $78,100 = $2,900) × 33% = $957

Total tax liability = $1,638 + $6,632.50 + $7,380 + $957 = $16,607.50

Your effective tax rate on $81,000 is therefore 20.5% (i.e. total tax divided by total income).

CLAIMING TAX DEDUCTIONS FOR MUSICIANS

Taxes can take a big bite out of your earnings—but claiming all allowable deductions is the most effective way to reduce your taxable income. As long as expenses are directly related to your music work, the IRD permits you to deduct them under the Income Tax Act 2007 sEA 1–EA 2.

What is a Tax Deduction?

A tax deduction reduces your taxable income.

If you earn $54,000 and claim $4,500 in valid expenses, your taxable income becomes $49,500—potentially moving you into a lower tax bracket.

A Black man playing a saxophone in a dark setting, captured in black and white. NZ Session Collective Session Musician.

Close-up of a person playing a shiny brass trumpet, focusing on their hand and the instrument. NZ Session Collective Session Musician.

Common Deductible Expenses for Musicians

Category | Examples

Equipment | Instruments, amplifiers, microphones, DAW software, repairs & maintenance

Travel Costs | Fuel (mileage at NZD 1.04/km), public transport, accommodation for overnight gigs

Studio Time | Room hire, engineer fees, mixing & mastering costs

Promotion | Website hosting, graphic design, social-media ads, printing posters

Professional Fees | Accountant, legal advice for contracts or royalties

Education | Courses, workshops, sheet-music, instructional materials

Example

You spend $400 on studio time, $150 on an online production course and 200 km drive ($208 at 2024/25 IRD mileage rate).
Total $758 can be claimed as deductions.

Step-by-Step | Claiming Your Deductions

Save Receipts & Records

Keep every invoice, ticket or receipt for seven years (IRD record-keeping requirement).

Scan or photograph paper receipts; store digital records in a secure folder.

Use Accounting Software

Tools like Xero, MYOB or Excel let you categorise expenses, attach scanned receipts and run summary reports at year-end.

Separate Business Finances

Even as a sole trader, maintain a dedicated bank account or card for all music-related transactions.

This prevents mixing personal and business expenses, simplifying audits and GST reconciliation.

Calculate & File

Total your deductions and subtract from your gross income on your IR 3 return.

If you’re a company, include these expenses in your IR 4 corporate tax return.

Scenario

Income | $54,000. Deductions | $4,500. Taxable income | $49,500 (drops you into the 17.5% bracket for the marginal slice, saving ~$945 in tax versus staying at 30%).

Tax Deductions For Side-gig Musicians

Even if music is a secondary income stream, you can still claim deductions to reduce your overall tax liability. Below are common “non-business” deductions available to part-time or hobby musicians.

What you can claim | Fees paid to an accountant or tax agent for preparing your personal tax return, including reporting any gig income.
Why it matters | Ensures all eligible deductions are claimed and turns the cost of professional tax advice into a deductible expense.
Example | You pay $300 to an accountant to file your IR 3 return. You claim that $300 under professional fees.
What you can claim | Premiums for income protection (loss-of-earnings) policies, provided any benefit paid out under the policy is taxable.
Why it matters | Protects your earnings if illness or injury prevents you from performing, and the premiums reduce your taxable income.
Example | You pay $500 annually for a policy whose payouts would be taxed. That $500 is deductible.
What you can claim | Interest on loans used to acquire income-producing assets (e.g., shares, bonds, rental property).
Why it matters | If you borrow to invest surplus gig income, the interest charged is deductible against the income those assets generate.
Example | You borrow to buy dividend-paying shares and pay $1,000 in interest during the year. You claim that $1,000 against your dividend income.

2.3.

Understanding Contracts For Musicians

Contracts govern virtually every professional interaction—live gigs, recording deals, publishing, management and licensing. Knowing what to look for, the risks of vague clauses, and how to negotiate will protect your rights and income.

Key Agreements

Mastering contract language and negotiation is as vital as your instrument technique—take the time to review, ask questions and secure terms that reflect your value.

Key clauses
Payment terms | Flat fee vs. percentage of ticket sales; schedule for deposit and balance.
Cancellation policy | Your entitlement if client or you cancel.
Technical rider | Your on-site requirements (PA, backline, soundcheck time).
Risk | Vague cancellation terms can leave you unpaid if the event falls through.
Tip | Insist on a minimum guaranteed fee or deposit, even if ticketing fails.
Key clauses
Royalties | Gross vs. net calculation; royalty rate and payment frequency.
Ownership of masters | Who controls master recordings and future licensing.
Recoupment | Advances treated as loans—label recoups costs before paying you.
Risk | Unclear recoupment may mean you never see royalty income.
Tip | Negotiate transparent recoupment schedules and limit label deductions.
Key clauses
Publishing split | Percentage division of songwriting income (standard often 50/50).
Term & territory | Duration and geographic reach of publisher’s control.
Sync rights | Who approves synchronisation deals and at what rates.
Risk | Exclusive, long-term deals can lock you out of lucrative sync opportunities.
Tip | Secure approval rights on sync deals and cap the term (e.g. 3–5 years).
Key clauses
Commission rate | Typically 10–20% of your net earnings.
Scope of work | Clearly define manager duties (booking, negotiations, promotion).
Term & termination | Length of agreement and exit conditions.
Risk | Overbroad scope or lengthy term can trap you in an unproductive relationship.
Tip | Limit initial term to 12–24 months with renewal options and right to audit accounts.
Key clauses
Duration & territory | How long and where your music may be used.
Exclusivity | Exclusive vs. non-exclusive licences.
Fees vs. royalties | One-off licence fee or ongoing royalty percentage.
Risk | Exclusive licences can prevent you from granting other deals on the same work.
Tip | Insist on non-exclusive licences unless the fee justifies sole rights—and set clear reversion dates.
Seek the right advice | Major deals (recording, publishing, management) warrant a lawyer versed in music contracts.
Read every clause | Don’t sign under time pressure. Ask for clarifications on any ambiguous terms.
Negotiate from strength | Propose mutually beneficial changes—e.g. if you grant exclusivity, secure higher fees or shorter terms.
Protect your future income | Ensure all royalty, licence and advance recoupment terms are transparent and capped where possible.
Balance short-term gains and long-term value | Weigh big exposure opportunities against potential restrictions on future earnings.

Chapter Three