At what point does the ATO consider a hobby to be a business and start including that income in your personal tax assessments?
If you are selling products via the internet, you also need to understand whether you are still classified as a hobbyist, it doesn’t just relate to selling at markets or working from a home office.
A business is generally classified as requiring some form of capital injection (personal investment) to commence trading and acquiring a customer base to sell its good and services to with the intention of generating a profit.
Some of the following points are taken into consideration in determining if you are operating a business or a hobby:
- Are you trading for commercial reasons?
- Is your main intention to make a profit from your trading?
- Do you make repeated or regular sales?
- If you make the items you sell, do you charge more than they cost you to make?
- Do you carry on your activities in a planned, organised and business-like manner?
If any of the above points ring true, chances are you ARE in fact operating a business and not a hobby. This means you will have some significant tax issues to take into consideration.
The Australian Tax Office have fantastic resources available for Small Businesses, whether starting up or just reviewing regulations, they are well worth a read:
Needs some guidance in this area? Please don’t hesitate to get in touch if you’d like to have a chat about your queries!