Side hustle tax in Australia: what to declare, claim and set aside

Is it a business or a hobby?

The first question decides everything else. If you sell a few things you made for fun, with no plan to profit, it may be a hobby: the income is not taxed and the costs are not deductible. If you do it regularly, charge a proper price, promote it and intend to make money, it is a business, however small. The ATO looks at the whole picture, not a dollar figure; see hobby vs business. Most side hustles that involve a website, a platform account or repeat customers are businesses.

How the income is taxed

Business profit (income minus deductible expenses) is added to your wages and any other income, and the total is taxed at the resident rates. Because your job already uses up the $18,200 tax-free threshold and probably the 16% bracket, side-hustle profit is taxed at your marginal rate from the first dollar. For 2025-26 that is 30% between $45,000 and $135,000, 37% to $190,000 and 45% above, plus the 2% Medicare levy. The 16% rate is legislated to fall from 1 July 2026; confirm the current year’s rates on the ATO site.

So a $10,000 profit for someone on a $70,000 salary costs about $3,200 in tax and levy. The sole trader tax calculator does this sum for your numbers, wages included. If you have a HELP debt, side income also raises your repayment income, so the repayment goes up as well.

ABN, GST and invoices

Get an ABN as soon as the side hustle is a business: it is free, it lets you invoice businesses without them withholding 47%, and it is the ATO’s signal that you are trading. See do I need an ABN.

GST is separate. Register only when your GST turnover (business sales, not wages) reaches $75,000 in a rolling 12 months, or when you expect it to, or from the first dollar if you drive rideshare. Most side hustles are nowhere near it. Until you register you do not charge GST, you do not lodge a BAS, and your invoices are plain invoices rather than tax invoices.

What you can claim

The business share of anything you spend to earn the income: materials, stock, tools, software, platform fees, marketing, a share of your phone and internet, working-from-home hours at the fixed rate, travel between jobs, insurance, and the bookkeeping software you use to track it. Equipment under the instant asset write-off threshold is deducted in the year; over it, depreciated.

The watch-outs are private use and things you would have bought anyway. A laptop used half for Netflix is a 50% claim. See sole trader tax deductions for the full list and private use and business percentage for the apportioning.

If the side hustle makes a loss

Early years often lose money. The non-commercial loss rules decide whether that loss can reduce the tax on your wages this year or must be carried forward against future profits from the same activity. Broadly, if your adjusted taxable income is under $250,000, you can offset the loss immediately if the business passes one of four tests: assessable income of at least $20,000 for the year, a profit in three of the last five years, real property of at least $500,000 used in the business, or other assets of at least $100,000. Otherwise the loss is deferred, not lost. The tests have detail; check the ATO or ask your accountant before relying on a loss.

Setting aside and PAYG instalments

Your employer withholds tax on wages. Nobody withholds tax on the side hustle, so the bill arrives with your return, and after that first return the ATO will usually enter you into PAYG instalments to collect the next year’s tax quarterly. The first-year effect is a full year’s tax plus the first instalment within a few months.

The fix is to set aside a share of every payment from day one. For someone in the 30% bracket, a third of profit covers tax and Medicare. Put it in a separate account and forget it is there. See setting aside money for tax.

Records and the return

Keep the side hustle in its own bank account, keep receipts, and record income as it arrives. In your tax return the business goes in the business and professional items schedule, with income and expenses by category, and the profit flows into your taxable income. Upload the statement to FlowFi monthly and the schedule figures are ready at 30 June, whether you lodge yourself or hand the summary to an accountant. See what to give your accountant.