Hobby vs business: how the ATO decides, and why it matters

The indicators the ATO uses

No single factor decides it. The ATO weighs all of these:

• Intention to make a profit, even if you have not made one yet.
• Repetition and regularity. Selling every week looks like a business; selling once looks like a hobby.
• Size and scale. Stock levels, turnover, number of customers.
• Business-like manner. Records, a business name, a website, advertising, insurance, separate bank account, pricing to cover costs.
• Commercial purpose. You do it to earn income, not mainly for pleasure.
• Similar to other businesses in the same field.

A person who makes candles for friends at cost is a hobbyist. A person who buys wax in bulk, sells through a website and a market stall, prices to make a margin and keeps a spreadsheet is running a business, even if it lost money this year.

What a hobby means for tax

Hobby income is not assessable, so you do not declare it. The flip side is that hobby expenses are not deductible and hobby losses cannot reduce the tax on your wages. You are not entitled to an ABN for a hobby, and you cannot register for GST.

If a business pays you for something you made or did as a hobby and asks for an ABN, you can give them a Statement by a supplier form instead, stating the payment is for a hobby. That stops them having to withhold 47% for no ABN. Keep a copy.

What a business means for tax

All income is assessable and goes in your tax return in the business schedule, on top of any wages. All expenses incurred to earn it are deductible at the business share. You are entitled to, and should get, an ABN. GST registration becomes compulsory at $75,000 turnover. You keep records for five years. Losses may be deductible against other income if you pass the non-commercial loss tests. And you can register a business name and open a business bank account.

Common cases

Makers and market sellers. Regular stalls, online shop, buying materials in bulk: business. See market stall and food vendors.

Reselling online. Selling your own used possessions on Marketplace or eBay is not a business and not taxable. Buying items to resell at a profit, regularly, is a business.

Content creators. A YouTube channel or podcast becomes a business once it is monetised and run with the intention of earning: ad revenue, sponsorships, affiliate income and gifted products are all income.

Musicians and performers. Occasional paid gigs alongside a day job can be either; a regular gig calendar, agent, promotion and equipment investment point to business. See musicians and performers.

Weekend platform work. Regular tasks on Airtasker or deliveries on a platform are a business from early on: repeat, paid, priced. See Airtasker and hipages tax.

The moment it changes

Nothing arrives in the post to tell you a hobby has become a business. Watch for the signs: you start pricing to profit, you start promoting, you take on a regular customer or a platform account, you buy equipment you would not have bought for fun. When you see them, act as a business from that point: get an ABN, open a separate account, start recording income and expenses, and declare the income from then on.

The ATO can look back. If a business has been running as a hobby for two years, the income for those years was assessable, and platform data since 2023 and 2024 makes that visible. It is better to declare late than to be found.

Keeping records either way

Even for a hobby, keep a simple record of what you sold and spent. If the activity grows, that record shows when it changed and supports the position you take. If the ATO ever asks, the record answers the question. For a business, record keeping is compulsory: see record keeping requirements. Uploading the bank statement to FlowFi is the least-effort version: it categorises income and expenses, and the running totals tell you if the $75,000 GST threshold is coming.