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Re: Do I need to declare income from my hobby on my tax return?

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Most helpful response

ATO Certified Response

Community Manager

Replies 6

Hi @Peridot-dreams, @Wizzzzard and @PeteyP,

Great question, @Peridot-dreams! If you’re running a business, then yes, you’ll need to include that income on your tax return – but if your jewellery-making is just a hobby, then no, you won’t.
It can be tricky sometimes to work out if your hobby is actually a business. There is no one “thing” that decides if you’re running a business – we usually look at a few different factors to help us work it out.

You’re probably in business if:

  • You’ve decided to start a business and you’ve done something about it – like registering a business name or getting an ABN.
  • You honestly think you’ll make a profit – even if that’s not happening right now.
  • You’re doing the same thing all the time – so selling items regularly or ordering items, for example.
  • You’ve built planning or organisation into your activities – that is, you’re keeping business records, have a separate bank account for your business, have a shopfront, have a license or qualifications.

Once you start running a business, you’ll need to make sure you have all your registrations in place. @Wizzzzard's point – that you’re in business if you’re earning more than $75,000 a year – probably relates GST registration rules.

Check out https://www.ato.gov.au/business/starting-your-own-business for more information about business registrations and reporting.

If your jewellery-making is a hobby, then you don’t have to declare any earnings on your tax return or lodge activity statements. However, if you supply items or services to a business as part of your hobby, that business has to ask for an ABN when they pay you and may need to withhold more tax from your payment. Have a look at https://www.ato.gov.au/business/starting-your-own-business/before-you-get-started/are-you-in-busines... to find out more.

 

Hope that helps! BreeH

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Initiate

Replies 5

My friend told me to get an ABN, and I got a separate bank account to make it easier to track my spending and see how much I’m making on Etsy. Does this mean I’m in business?

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Community Manager

Replies 3

Hi @Peridot-dreams,

There’s a few factors to consider here, and we don’t have enough information to say yes or no. We can suggest a few resources for you to check out, though:

Thanks! BreeH

Devotee Registered Tax Practitioner

Replies 2

@ClareH @Peridot-dreams @Wizzzzard @PeteyP

 

To help Wizzzard, the $75,000 threshold is for GST Registration.

A person may well be in business and have turnover less than $75,000.

The $75,000 is forward looking and not be be reviewed at the time of preparing a tax return.

 

Peridot by obtaining a ABN you are stating to the government that you are in business.

There is a Statement by a Supplier where a person in a hobby can give so that money is not withheld for not quoting a ABN.

It would be interesting to know the ATO stance on whether obtaining a ABN requires someone to report Business Income on their Tax Return.

 

Peridot mentions that costs may be higher than revenue.

This leads to the question of Non - Commercial Losses. 

 

An interesting topic and one where Tax Advisers and Business Owners/Hobbyists have sometimes had difficulty in the interpretation.

 

Duncan

 

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I'm new

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Hi Duncan,

 

I thought that an ABN can only be obtained if one is in business, hence the name Australian Business Number. So it is strange that you should question the ATO stance on whether someone is required to report ABN income in their income tax return.

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Devotee Registered Tax Practitioner

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@Kristos0601 @JodieH

 

My understanding is that Assessable Income and Allowable Deductions are reported on a Tax Return.

Assessable Income includes Income earnt from a business activity.

Note there is a distinction between a business activity and a hobby.

 

What I was trying to determine from the ATO is whether they crosscheck holders of a ABN with Business Income in their Tax Return. I do understand that the ATO writes to people with what appears to be a unused ABN and will deregister a ABN unless the ABN holder replies with a reason why the ABN should not be cancelled..

 

Duncan Smith

Business Advice + Tax

 

 

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Community Support

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Hi @DuncanS, @Peridot-dreams, @Wizzzzard, @PeteyP,

 

Great to see you here again @DuncanS

 

There are many factors to consider when lodging an income tax return. What you need to report and how you lodge the annual income tax return depends on the types of activities you are doing.

 

There is some great information about income tax returns and these factors mentioned above to consider over at ato.gov.au.

 

Thanks.