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Re: My hobby has become a business, help please.

Newbie

Views 809

Replies 7

Hello ATO Community,
I have been faceting and designing gemstone cuts for roughly the last 10years. Last year I published two books of my faceting designs and created a website to showcase my designs as a sales portal to direct customers to Amazon(print on demand) and paypal for Australian sales.
This is largely a labour of love, with revenue from book sales first occurring in the 2019-2020 financial year, with total revenue only about $6000 for the year. To create the gemstone designs uses computer modelling and test cutting the designs in synthetic gem materials, so I have considerable costs that have occurred before the 2019-2020 financial year and considerable assets use to creating/test/photograph the designs. Including purchasing books(stock?) and packaging materials in June 2019 before the 2019-2020 financial year.
Is there anyway to be able to claim costs from before the current financial year? Help would be greatly appreciated as I have made a very modest profit from this and it would be sad to have to get a tax agent to do my return at considerable cost given the 1000's of hours I have spent creating these books.
I do not have an ABN and am not register for GST. I have registered with my TFN via Amazon/US tax treaty and all Amazon sales are being paid into a Payoneer account in USD. There is no way I can class this as a hobby as sales with continue indefinitely through Amazon.
I would greatly appreciate any advice that would set me in a direction to be able to complete my tax return myself.
Kind regards
AndrewIB

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 6

Hello @AndrewIB

 

The first thing you may want to double check is whether your activity is indeed a hobby or business. There is a hobby or business tool that may help determine if you need to register for an ABN or any other business registrations.

 

If your activity is considered a business, you may be able to claim deductions for some of your expenses.

 

You can still claim deductions for the 2019 financial year provided you have records to support your claims. If you have already lodged your 2019 tax return, you can lodge an amendment.

 

Hope this helps. Have a great day Smiley Happy

7 REPLIES 7

Most helpful response

ATO Community Support

Replies 6

Hello @AndrewIB

 

The first thing you may want to double check is whether your activity is indeed a hobby or business. There is a hobby or business tool that may help determine if you need to register for an ABN or any other business registrations.

 

If your activity is considered a business, you may be able to claim deductions for some of your expenses.

 

You can still claim deductions for the 2019 financial year provided you have records to support your claims. If you have already lodged your 2019 tax return, you can lodge an amendment.

 

Hope this helps. Have a great day Smiley Happy

Newbie

Replies 5

Hello Tony,

Thank you for your reply.

I tried the tool and got this response.

"We are sorry but based on your answers it is still unclear if your creative work is a hobby or not"

There is even grey area regarding the possible answers and interpretation.

If I was to be able to write of all cost incurred in the designs/book creation, I would be unsure if it was profitable. I certainly would not do it as a job and only do it as I enjoy it. That said it is generating regular revenue and will continue to do so even if I stop designing due to revenue from print on demand books on Amazon. But it will never be a large amount of money due to the books only appealing to members of a very small specialized hobby market.

Is it possible to get a judgement from the ATO regarding if my faceting designing/book sales are a hobby or a business. I do not charge to do design work for others and I do not sell cut stones. My only revenue in the gem faceting space is coming from the book sales.

I don’t think there would be anyone else doing exactly what I am so hard to make a conclusion/comparison.  I would lean towards it being a business that will never make much money.

If classed as a business hopefully the reporting requirement are not too arduous or I might have to stop doing what I love, stop sharing my designs with others via my books.

Kind regards

AndrewIB

 

 

ATO Community Support

Replies 4

Hi @AndrewIB,

 

 

If you want our help to make a decision, you'll need to apply for a private ruling. This is the only way we can give you the sort of binding advice you're seeking.

 

Don't worry - if we do decide it's more of a business, we're here to help with any lodgment questions you might have. Smiley Happy

 

Newbie

Replies 3

Thank you for your reply Blake. The more I think about it is a hobby and I'll have to get a private ruling. Even though I am generating revenue through book sales, I could easily use any profits to purchase new equipment, materials and assist with costs of visiting National and International Gem Shows. Though, I haven’t been unable to visit gem shows recently due to covid.
I had a look at the form and I am going to struggle to figure out how to fill it out correctly. Can you help with filling out the form (not presenting the case but the other information at the start of it) or do I have to get professional advice?
Kind regards
Andrew

Former Community Support

Replies 2

Hi @AndrewIB

 

We are only able to provide general information within this forum. If you are having trouble we suggest you read carefully all our information on applying for a private ruling. If you are still unsure you may speak with a tax agent as they are able to lodge this form on your behalf.

 

All the best!

Newbie

Replies 1

Hi all,

 

If i was to do my return as a business how do I realize the huge amount of assets used to produce the designs/books, and costs assiocted with creating the faceting designs over the last decade?

 

Is there anyone at the ato who I can call to clarify what costs I can claim?

 

Kind regards

Andrew

 

 

ATO Community Support

Replies 0

Hi @AndrewIB

 

You can claim business deductions for your business, but only in the financial year they were incurred. So any allowable expenses laid out since becoming a business would be deductible. There is more information available on our website about what you can and can't claim.

 

Business deductions.