Is it a hobby or a business?

Sometimes it’s difficult to know whether your activity should be defined as a hobby or a business.

This is especially true in the start-up phase, when you are testing a new idea to see if it works.

It’s important to be able to recognise the difference between a hobby and a business, because there are various tax, insurance and legal implications. Keep in mind that hobbies producing an income can sometimes grow into businesses. It’s therefore essential to regularly monitor the situation and avoid complications down the track.

How do I tell if my activity is a hobby or a business?

According to the Australian Taxation Office (ATO) “a hobby is a pastime or leisure activity conducted in your spare time for recreation or pleasure” and does not have the reporting obligations of a business. While there is no single factor that determines if your activity is a business, there are various things that could indicate that it is a business for tax purposes.

Know More: https://www.smallbusiness.wa.gov.au/blog/it-hobby-or-business