When is a side hustle a business?

Having one or many ‘side hustles’ has become a popular way to make additional income over the last few years.

What is a side hustle?

Basically, it comes down to an activity which you are undertaking which brings in extra cash. It could be a hobby, service or talent.

Examples include (but aren’t limited to):

• renting out your home
• content creators
• influencers
• babysitting
• dog walking
• drop shipping
• baking
• brewing craft beer
• candle making
• jewellery making
• ride sharing

Is my side hustle a business?

The distinction between something you do on the side and carrying on a business can be a fine line and there is no single factor that determines if you are in business.

Here are some of the characteristics of a business:

• You've made a decision to start a business and have done something about it to operate in a business-like manner, such as registering a business name and obtaining an ABN
• You intend to make a profit at some point 
• You repeat similar types of activity
• 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 business-like 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
• You pay for your online-selling presence. If the online space looks like a shop, has a brand name, proper business name or any other signs that people would be likely to expect from a business, you are likely to be carrying on a business - especially if you paid fees for this to occur. 
• You make items to sell online and charge more than they cost you to make. If you charge more for items than they cost you, then you are likely to be carrying on a business.

Is tax due on a side hustle?

If you have made money, then there is a good chance tax will be due. Any extra income you earn, whether cash in hand, or a one off must be reported. The ATO is at this time keeping a very close eye on side hustlers!

If your side hustle (along with the activities from any other businesses you have) has a turnover of $75,000 over the course of the financial year, you will also need to register for GST.

GST is a 10% tax that’s added on to all your taxable sales.

Those providing ride sharing services - no matter what the earnings are, must register for GST.

Claiming for tax concessions, offsets and rebates

Eligible businesses can claim a range of tax concessions, offsets and rebates.

When you declare your second income, you can claim deductions for expenses you incurred while earning it (although this needs to be analysed to see whether amounts can be deducted upfront or over a period of time). You can claim a deduction for the work-related part of your expenses only, you cannot claim for any private use. Make sure you keep all directly relevant receipts.

If your expenses for your side hustle are more than the income generated, you may only be able to claim expenses up to that income amount.

Director ID

If your side hustle has led to you becoming a director of a company, make sure you apply for a director ID. It’s free to apply, and you keep the ID for life.

Here to help

If you’ve taken on a side hustle then TaxAssist Accountants can help you navigate all of your tax obligations ensuring you pay what is due and no more. Call us today for a free initial consultation.

Date published 9 Jun 2023 | Last updated 9 Jun 2023

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.