There could be implications if you start to earn money from your activities.
It’s not uncommon for businesses to start out as a side project or hobby. In fact, many people turn their hobbies into a business because it is something they are passionate and knowledgeable about. Take Haley Birtles-Eades for example, who made over $300,000 in one year from her hobby-turned-business. It is important to establish the difference between a hobby and a business, as there could be implications if you start to earn money from your activities.
What is a hobby?
According to the ATO, a hobby is a “pastime or leisure activity conducted in your spare time for recreation of pleasure.” Pretty simple explanation, right? Here’s where it gets complicated. Lets say your hobby is candle making. Your friends really like them and you start to realise that you can make some extra cash by selling them. You continue to sell your candles and soon enough, your hobby moves from a spare-time recreation activity to a business with the intent of making a profit.
The business or hobby test
If you answer yes to most of these questions, you will most likely be running a business.
• 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 business-like manner?
So I guess I’m running a business, now what?
If you are indeed running a business, you will need to consider the business structure that best suits your needs and apply for an ABN. You also have the option of registering a business name to trade under a name other than your own (e.g. Sydney Pies). It’s important to note, if you are planning to earn over $75,000 in revenue you will also need to register for GST.
Many successful businesses have started out as just a hobby, if you think your hobby might be classified as a business speak with one of our specialists today!
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