A hobby is a pastime or leisure activity conducted in your spare time for recreation or pleasure.
Benefits of being a hobby
Personal enjoyment and satisfaction.
You can gift or sell your work for the cost of materials.
You can do it in your own time or when people contact you.
You don’t have the reporting obligations of a business.
What is a business?
You’re in business, if your activity, as a whole, is commercial with an aim to make a profit.
Benefits of being in business
You can apply for an Australian Business Number (ABN) to use in your business transactions.
You can register a .com.au website once you have an ABN.
You’ll have access to government information, services and concessions for business.
You can establish a business identity when selling to customers and other businesses.
You can claim tax deductions for business expenses against your taxable income.
It may give you the flexibility to manage your time and work your own hours.
How do I know if it’s a business or a hobby?
It’s important to understand the differences between a hobby and a business for tax, insurance and legal purposes.
Key questions to consider:
Is the activity being undertaken for commercial reasons?
Is your main intention, purpose or prospect to make a profit?
Do you regularly and repeatedly undertake your activity?
Is your activity planned, organised and carried out in a businesslike manner?
If you answered yes to most of these questions, you’re likely to be running a business, although it depends on your individual circumstances.
To get an answer specific to your circumstances contact our team who can help you decide whether you’re running a business or a hobby.
Did you know?
You don’t need to declare the amounts you make from your hobby to the ATO. You can’t claim any losses from your activity if it’s a hobby.
It’s a myth that there is a dollar threshold to be in a business. Some people can have very expensive hobbies! What matters is whether, as a whole, your activity is commercial with an aim to make a profit. If you’re in business, there are dollar thresholds that can affect what you can claim for tax purposes.