Is it a Hobby or a Business?

Only individual taxpayers can have a hobby. By converting a hobby into a business there is the advantage of having some previously private expenses being made tax deductible.These expenses include car expenses, home office expenses, travel expenses, training expenses, etc.
What is even more advantageous is that if the expenses of the business exceed the income, you have a situation where the taxpayer now has a loss that may be either carried forward to the next year, or potentially be applied to his/her other income.
So when exactly does a hobby become a business? If the hobby possesses the following characteristics, it may very well be a business:

• The activity is planned, organized and operated in a businesslike manner, which can include keeping business records, having a separate business bank account, having a business premise, obtaining licenses or qualifications, or registering a business name.
• The size or scale of the activity is consistent with other businesses in the industry.
• There is intention to make a profit, even if that is not likely in the short term.
• The decision has been made to start a business and an ABN has been obtained or business name registered.

If you are a hobby that supplies goods or services to businesses, they may request your ABN when they pay you. In this instance, the hobby will provide a "statement by supplier" form, to avoid the business withholding an amount from their payment to you.
When in doubt for any of the above, it would be recommended that you enlist the help of a qualified tax accountant, who will be able to assess your specific situation.

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