With the ease of selling things on the internet, it is probably more important now than ever to consider whether what you are doing is a business or a hobby. If you are operating a business the money you earn is assessable income, and many of the expenses related to earning that income will be deductible. If your activity is a hobby you don’t need to pay tax on any earnings.
So, is it a Business or a Hobby?
Each activity will have to be judged on a case by case basis. Following are some of the factors to take into account when determining whether the activity is a business or hobby (taken from the ATO’s website www.ato.gov.au)
- Does your activity have a significant commercial character? (i.e. for commercial reasons and in a commercially viable manner)
- Do you have more than just an intention to be in business? (i.e. have you decided to start and done something about it)
- Is your purpose to make profit?
- Are there repetitive and regular transactions?
- Is your business similar to other businesses in your industry? (i.e. is it consistent with industry norms)
- Is the size, scale or permanency of your activity enough to allow you to make a sustainable profit?
- Is your activity planned, organised and carried on in a businesslike manner such as keeping business records, a separate business bank account, having business premises, a registered business name, licenses?
This information is intended as a general guide only. For clarification on any of these points, please give us a call. You may need to speak to a tax agent for detailed tax advice.
Leesa Dalton – (02) 9532 1302 | firstname.lastname@example.org
Samantha Monahan – (07) 3348 4323 | email@example.com