Business or Hobby?

business bookkeeping tips

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 | leesa@samsabc.com.au

Samantha Monahan – (07) 3348 4323 | samantha@samsabc.com.au

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About advancedbookkeeping

What sets Advanced Bookkeeping and Consulting apart from our competitors is our emphasis on value adding. We take pride in the fact that we do more than just "churn the numbers". As part of our standard service, we provide our clients with helpful insights about how their business is performing, as well as advice on how various aspects could be improved.
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