Business versus hobby

According to the ATO, one of the most common questions it gets asked by taxpayers is whether they are conducting a business or on the other hand a hobby. This matters because it may impact your taxation, insurance and legal obligations.

There is no single factor that determines if you are in business, but some of the factors you need to consider include:

– You intend to make a profit – or genuinely believe you will make a profit from the activity – even if you are unlikely to do so in the short term.

– You’ve made a decision to start a business and have done something about it to operate in a businesslike manner, such as:

– registered a business name

– obtained an ABN.

You repeat similar types of activities.

– The size or scale of your activity is consistent with other businesses in your industry.

– Your activity is planned, organised and carried out in a businesslike manner. This may include:

– keeping business records and account books

– having a separate business bank account

– operating from business premises

– having licenses or qualifications

– having a registered business name.

DISCLAIMER: This information is general in nature. It has been prepared without taking into account your objectives, personal or business circumstances, financial situation or needs. Because of this, you should, before acting on this information, consider in consultation with your adviser, its appropriateness, having regard to your objectives, personal or business circumstances, financial situation and needs.