Side Hustle or Side Business

digital platform


Side hustles are front of mind this tax season


The Australian Taxation Office (ATO) is reminding Australians that it is paying close attention to undeclared income from secondary work, including from the sharing or ‘gig’ economy this tax time.


Generally, when you provide your labour, skills, or goods for a fee, you need to report this income in your tax return. This applies regardless of whether you’re using a digital platform or more traditional means, such as word of mouth.             


A lot of people have picked up a side hustle during the pandemic. This has included a wide range of activities such as freelancing, setting up a local market stall.


It doesn’t matter whether you are an employee, independent contractor, carrying on a business, or none of these. When you receive payment for your services, the income needs to be reported – even if it’s a one-off.


ATO receives income information from a range of providers including financial institutions, online marketplaces, ride-sourcing applications, and short-term rental websites. The data received is growing, which means the places to hide are shrinking.


Don’t rely on what other people claim as a guide to what you can claim. Every job is different, and what is required to earn an income for one occupation may not qualify in another.


Chefs can claim the knives and hairdressers can claim the scissors they use for their job, but a train driver or a salesman would have the same claims get knocked back.


If your side hustle becomes a side business, you may want to get advice from a registered tax agent. You will need to consider your additional tax obligations including the need for an ABN, registering for GST, implementing a record keeping system to track income and expenses. You will also need a plan for paying tax on your business income when you lodge your activity statements and annual tax returns.


Scenario – homemade bags as a side hustle


Taxpayer does not need to declare any income


Connie carries her homemade bag to meet up with a few friends. She offers to make them some pieces, after receiving compliments. Her friends shout her dinner as thanks for the gift.


As she was not paid for the bags, and this was a private arrangement there are no tax consequences for Connie.



Taxpayer needs to declare income


After the positive feedback from her friends, Connie decides to sell bags on a regular basis with the intention of making a profit. She uses an existing online marketplace, pays sales fees, and sets up social media accounts to advertise her products.


Since Connie has increased the scale of her operations and is now making regular sales with the intention of making a profit, she needs to declare this income in her tax return.


While it’s not compulsory at this scale, Amber can choose to apply for an ABN. As her GST turnover is under $75,000, she does not need to register for GST.


Expert Tax can guide you in setting up your side hustle and reporting information correctly on your tax returns. Contact us on 0449 952 855 or 1300 869 829 for further assistance.