Be aware of any tax obligations if your side hustle is considered a business earning business income
Work out whether you’re in business and when your business starts for tax purposes.
What is a business?
Generally, a business involves a set of continuous and repeated activities you do for the purpose of making a profit. Profit can be in money, but it can also be made through other means, like being paid with goods or services (such as a barter deal).
A one-off transaction can also be a business if it is either:
- intended to be repeated
- the first step in starting a business.
You can run one business or multiple businesses at the same time.
When you’re not in business
Not everything you do to make money is a business. Your activities are not a business when they are:
- a one-off transaction (unless it is the first step in carrying on a business or intended to be repeated)
- done as an employee
- a hobby or recreation from which you don’t seek to profit
- a simple investment, such as passively holding shares on which you receive dividends or a rental property you let through an agent.
Even if you’re not in business, you may still need to declare certain payments you receive as assessable income in your income tax return.
When a company is not in business
Most companies are in business if they intend to and are likely to make a profit, however some companies are not in business. For example, a company is not in business if it:
- holds assets solely for its shareholders’ private use, and its running costs are funded solely by its shareholders
- provides social and recreational activities for members without seeking to make a profit.
Steps to work out if you are in business
- Identify all relevant, related activities
- Are the activities a business?
When does your business start?
Knowing when will affect the registrations you must have and when you need to apply for them. It may also affect how tax laws apply to your activity, the assets you use, and the tax concessions or deductions available to you.
Have your activities changed?
If your activity changes in a significant way you must reassess whether or not you are in business.