Business or hobby? Tax considerations for your side activity

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There is no single sales figure, ABN or label that decides whether your activity is a business. The ATO considers the activity as a whole. If you sell products online, provide services after hours or turn a creative interest into regular sales, review the facts before deciding how to report the income.

What points towards a business?

The ATO considers your intention and realistic prospect of profit, repetition, scale, commercial character and how you organise the activity. Advertising to customers, pricing for profit, keeping accounts and following a business plan are relevant evidence. One factor alone is not decisive. See ATO: Are you in business?.

An ABN does not prove you are carrying on a business. Equally, a genuine business can make a loss, particularly while establishing itself. Reassess your position when the way you operate changes.

Does “not a business” mean no tax?

No. Even where an activity is not a business, payments may still be assessable—for example, some service income or profits from a commercial one-off transaction. A genuine hobby is generally a recreational activity rather than an enterprise pursued for profit, but calling an activity a hobby does not settle its tax treatment. The ATO explains non-business receipts as well as business indicators.

What changes when you operate a business?

You need appropriate records of income and expenses, and to consider your registrations and obligations. Business expenses are deductible only where the tax rules allow them; private spending is not transformed into a deduction by registering an ABN. See business.gov.au’s business and hobby comparison.

Losses need separate attention. A sole trader or individual partner cannot assume a business loss immediately reduces salary income. The non-commercial loss rules may require deferral. Companies and trusts have different loss rules. See ATO: Business losses.

What should you bring to an accountant?

• What you sell, when the activity began and who your customers are.
• Sales, expenses, pricing and your expected path to profit.
• Records of advertising, repeat orders, equipment and time spent.
• Existing registrations and details of other income.

These records let us discuss your circumstances instead of relying on a label. Our bookkeeping services can help organise business records, while company accounting may be relevant if you already operate through a company.

Discuss your next step

Contact our Perth team to discuss the activity and the accounting support you need. General information only; tax treatment depends on your circumstances.