Do you have an amazing hobby and somewhere along the way, have managed to sell some of your products or services to family, friends or customers as a result?
In this day and age there are more and more of us who have started to sell some of our handiwork or become independent consultants for businesses such as Arbonne, Stampin’ Up and Tupperware (to only name a few of many).
If this is you, have you ever considered whether the money you earn from these ‘maybe’ hobbies need to be declared in your tax return?
The Australian Taxation Office does not provide a list of rules that allow you to easily determine whether your activity is considered a hobby (and has nothing to do with your income tax return), or a business (where you are obliged to declare the income and expenses).
Here are some indicators that may help you determine whether your activities are hobby or business related:
Intention – Do you intend to start or run a business using your skills? Do you intend to make a profit from this activity?
Registration – you have actively registered for an Australian Business Number (ABN)
Planning/Organisation – your activity is planned, organized and carried out in a business-like manner. This could mean:
> renewing licenses related to your activity
> registering a business name
> keeping relevant documents or records related to your activity
Size – is your activity growing and are you employing staff?
Effort – does your activity involve substantial effort over a regular period of time?
If you answered ‘yes’ to several of those questions or indicators, then you are likely to be operating a business.
If your activity is that of a hobby, then enjoy and take pride in your hobby! Your income and expenses do not need to be declared in your tax return, and unless you’re keeping receipts for warranty or budget purposes, there is no other reason to do so!
In circumstances where you think you may be operating a business, keep your eye out for the next post on what to do next! Read Hobby or Business Pt 2
Written by Mimi Yuen
Mimi Yuen grew up in the ‘Red Centre’, aka Alice Springs, and made the move to Townsville 2.5yrs ago. A very keen
When not at work in her own business or