Firstly, let me give you a disclaimer, I’m not a registered tax agent, so you should definitely talk over your personal circumstances with your tax professional.
But as a matter of general education, there is a difference between earning money from your hobby and earning money from your employment or business.
If I decided that I wanted to knit scarves and sell them to my friends, I could make money doing that and not pay any tax on it. Woohoo!
Why? It’s because knitting is just a hobby to me. I don’t in any way treat it as a business. It’s never going to be commercially viable for me even if I wanted it to. I don’t have business cards or a knitting blog or a filing system or a marketing plan or an ABN for “Shaz Jones Knitting”. I don’t do it during business hours. If you order it today, it may or may not be delivered in oh about a year…. It’s just a hobby.
So the Australian Taxation Office (ATO) won’t charge me tax on the money I earn from my hobby, like they would if it was a business.
But I also can’t deduct any of my expenses from my tax. So I have to buy all my wool, knitting needles, patterns etc without getting any tax benefits. If I use my car to deliver my knitted goodness to my friends, I can’t claim even a tiny portion of my fuel, registration, insurance etc. And I can’t offset any losses against my other income or even carry them forward to offset against any profits in future years.
What hobbies do you have that might be able to make you a bit of tax-free money? Are there any skills or products you could sell online? There’s no law against starting something as a hobby… and then discovering later that you’ve already put $20,000 into your bank account and are considering turning it into a business.
If you want more general education, you can visit the ATO’s website at hhttps://www.ato.gov.au/Media-centre/Articles/Is-it-a-business-or-a-hobby-/