It's important to understand whether your activities are classified as a hobby or a business for tax and legal purposes.
What is a hobby?
A hobby is a leisure activity or pastime that you do for reasons such as enjoyment, relaxation or skills development. Your activities may start as a hobby and develop into a business as you grow.
Examples of hobbies that can turn into businesses include:
- art and creative endeavours such as photography or jewellery-making
- repairing and handy services
- creating or designing websites
- blogging or social media influencing.
How to know if you're running a business
Whether your hobby is a business depends on factors such as your purpose and how you operate. It doesn’t matter how much you earn – there's no financial threshold to tell you if your hobby is a business.
As a hobby you:
- can claim the costs of materials when gifting or selling your work
- don't need to declare the income you make from your hobby to the Australian Tax Office (ATO).
You're most likely in business if you:
- intend to make a profit from your activities
- undertake the activity regularly and in a structured and businesslike manner
- have registered a business name or secured an Australian business number (ABN).
If your business is a hobby, you can continue operating as you are.
Benefits of turning your hobby into a business
There are several advantages to having a business. As a business you can:
- apply for an ABN
- register a website that ends in .com.au
- claim tax deductions for business expenses against your taxable income
- access government services and support for businesses.
If your activities constitute a business, find out how to set up and become a business owner.