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Is Your Hobby a Business?

For many of us, a side project or hobby earning a few extra dollars outside of our regular jobs can be the difference between an annual holiday overseas to Disneyland with the kids or to the rundown local caravan park. But when does this ‘side-project’ or ‘hobby’ become a business, and then be required to be reported in your annual Income Tax Return?

Our tax system is self-assessing, so it is up to you to determine whether you are running a business or just carrying on a hobby. To help this decision along, the Australian Taxation Office (ATO) have prepared the following guidelines to assist you in this process.

  • Did you make a decision to start a business and operate in a businesslike manner such as obtaining an Australian Business Number (ABN) or registering a business name?
  • Is your intention to make a profit?
  • Do you repeat similar types of activities?
  • Is the scale of your business and how you run it consistent with other businesses in the industry?
  • Are your activities planned, organised and carried out in a businesslike manner? Such activities may include:
    • Keeping business records
    • Setting up a bank account
    • Operating from business premises
    • Having licences or qualifications for the activity
    • Having a registered business name

If you are running a business, then ensure you have registered for an ABN. If you are earning over $75,000 per year you must also register for Goods & Services Tax (GST) and lodge quarterly Business Activity statements (BAS). Also ensure you have good record keeping in place to keep track of all income and expenses related to your business activity.

If, however, you decide your project is just a hobby, then congratulations! There is no need to declare any income in your Tax Return. But beware! The ATO is always watching and has the power to revise your Income Tax Return and include any income it believes to be related to a business activity.

The important thing to remember is that if you have any doubts about whether you are carrying on a business or a hobby, then you should discuss your situation with us.

Written for you by Stephen Imms

 

 

 

The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Published on April 2, 2019 by Progue

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