Quick answer
In Australia, a side hustle is generally a business when it involves ongoing, repeated activity with the intention of making a profit, according to the ATO. Indicators include registering an ABN, keeping records, having a separate bank account and trading on a businesslike scale. Business income must be declared, GST registration is required at $75,000 turnover, and losses may be limited by non-commercial loss rules.
Key points
- Ongoing, repeated activity with a profit intention usually means a business.
- Businesses declare income and can claim expenses; hobbies generally don't do either.
- Register for GST within 21 days of GST turnover reaching $75,000.
- Platforms report many transactions to the ATO under the sharing economy reporting regime.
- Non-commercial loss rules can limit using side-business losses against salary.
Selling candles on weekends. Reselling sneakers. Editing videos for a few clients after work. Running a small online store alongside a full-time job. At what point does the ATO stop seeing a pastime and start seeing a business? And why does it matter beyond tax? This guide covers the line, what changes when you cross it, and how getting set up properly makes your side hustle easier to grow and fund.
Where is the line between a hobby and a business?
There’s no single test or dollar figure. The ATO describes carrying on a business as generally involving ongoing and repeated activities with the intention of making a profit. It points to signs like keeping records of your work, getting any licences or permits you need, and regularly supplying goods or services.
business.gov.au lists similar indicators. A business typically has:
- An intention to make a profit, even if it isn’t profitable yet.
- Businesslike decisions, such as registering a business name or ABN.
- Repeated, similar activity, rather than one-off sales.
- A scale consistent with the industry, rather than a few items a year.
- Organisation: records, a separate bank account, maybe premises.
A hobby, by contrast, is a pastime done in your spare time for recreation or enjoyment. Selling a few paintings a year to friends is different from listing new stock every week and spending on ads to reach strangers.
What changes when it’s a business?
| Hobby | Business | |
|---|---|---|
| Declare income to the ATO | Generally no | Yes |
| Claim expenses | No | Yes, for business costs |
| Records | Not required | Required |
| ABN | Not entitled | Recommended, free |
| GST | Not applicable | Register at $75,000 GST turnover |
| Losses | Can’t be claimed | Claimable, subject to non-commercial loss rules |
The shift cuts both ways. You pay tax on business income, but you can generally claim business expenses — stock, packaging, software, a share of phone costs and equipment. The $20,000 instant asset write-off for 2025–26 applies to businesses with aggregated turnover under $10 million, for eligible assets first used or installed ready for use by 30 June 2026.
Do I need an ABN?
If you’re carrying on a business, an ABN is the normal step, and it’s free. business.gov.au notes it’s recommended rather than compulsory, but without one, businesses paying you may need to withhold 47% from payments. Hobbyists aren’t entitled to an ABN and can use a Statement by a Supplier form instead where it applies.
An ABN also matters when you want to grow. It’s one of the first things a lender looks for when a side business asks for funding, because it signals that you’re running it as a business. The side hustle business loans page covers what else lenders need.
When do I have to register for GST?
The ATO says you must register for GST when your GST turnover reaches $75,000, or if you expect to reach it in your first year. Once you cross it, you have 21 days to register. The ATO suggests monitoring turnover monthly if you’re getting close.
For side hustles, the threshold is measured on the business’s turnover, not your salary. A fast-growing store can cross it sooner than expected, particularly after a strong Black Friday. The GST milestone page explains how registration changes pricing and margins.
Thinking about growing your side business with some funding? You can check your options here in about a minute — no credit check involved.
Does the ATO know about my platform income?
Increasingly, yes. Under the sharing economy reporting regime, operators of electronic distribution platforms report income earned by suppliers when payments flow through the platform. According to the ATO, reporting started from 1 July 2023 for taxi and ride-sourcing services and short-term accommodation, and expanded from 1 July 2024 to include all other reportable transactions. Operators report twice a year.
The ATO has also been clear that side hustle income isn’t optional to declare. Assuming the ATO won’t notice is a poor strategy, especially with platform data flowing in.
Can I use side-hustle losses to reduce tax on my salary?
This is where many side hustlers get caught. For individuals and sole traders, non-commercial loss rules can stop you offsetting a business loss against other income, such as your salary, in the year it happens. According to the ATO, you generally need to meet an income requirement — the sum of certain income elements under $250,000 — and pass at least one of four tests:
- Assessable income test: at least $20,000 of assessable income from the business activity in the year.
- Profits test: a tax profit in three of the past five years.
- Real property test: at least $500,000 of real property used in the business on a continuing basis.
- Other assets test: at least $100,000 of other assets used in the business on a continuing basis.
If you don’t meet them, the loss may be deferred to a future year when the business earns enough to absorb it, rather than lost entirely. An accountant can check how it applies to you.
How to set up your side hustle properly
A simple checklist that serves tax, growth and funding at the same time:
- Decide honestly whether you’re carrying on a business.
- Register an ABN if you are, and a business name if you trade under one.
- Open a separate business bank account and route every sale and cost through it.
- Use bookkeeping software from day one.
- Keep receipts and records.
- Track GST turnover monthly against the $75,000 threshold.
- Set aside a percentage of income for tax in a separate account.
- Talk to an accountant once income becomes meaningful.
Why getting this right helps when you want funding
Everything that makes a side hustle clearly a business for tax also makes it easier to fund. A lender reading your application wants to see an ABN, a dedicated account with a run of steady income, and records that show what the business earns. Side hustles that blur personal and business money are harder to assess, even when they’re doing well.
Take the full-time readiness check to see how your side business would look to a lender today.
Illustrative example: when a hobby became a business
Illustrative only. A nurse started making beeswax wraps as gifts. For the first year she sold a handful at a school fete and to friends — clearly a hobby. In year two, she built a small online store, bought materials in bulk, started paying for social ads and was shipping a few dozen orders a week.
At that point, her activity had the signs of a business: repeated sales, an intention to profit, spending to grow, and records she kept for her own tracking. She registered an ABN, opened a business account and started using bookkeeping software. Her first year as a business made a small loss, because of equipment and ad spend, and her accountant explained that non-commercial loss rules meant she couldn’t offset it against her nursing salary that year, as she didn’t yet meet any of the four tests. The loss was deferred instead.
By year three, with revenue growing and a clean business account, she was in a position to ask for modest funding for a larger stock run — something that would have been impossible while money was mixed with her personal account.
Ready to grow the side hustle into something bigger?
Once your side business is set up properly and trading steadily, funding for stock, equipment or marketing becomes a realistic conversation. Send us a short enquiry when you’re ready. There’s no credit check to ask, your details go to one real person rather than being hawked around lenders, and we’ll call to talk through what’s possible. Fill in the form carefully — especially how long you’ve been trading and your monthly revenue — so our first suggestion is the right one. For the bigger decision, see side hustle to full-time.
Frequently asked questions
How do I know if my side hustle is a business?
The ATO says carrying on a business generally involves ongoing and repeated activities with the intention of making a profit. business.gov.au adds indicators like registering an ABN or business name, keeping records, having a separate bank account and operating at a scale similar to others in the industry. No single factor decides it.
Do I need an ABN for a side hustle?
If you're carrying on a business, an ABN is recommended and free. business.gov.au notes that without one, businesses paying you may need to withhold 47% from payments. Hobbyists aren't entitled to an ABN.
Do I have to pay tax on hobby income?
Genuine hobby income generally isn't declared, and hobby expenses can't be claimed. But if the activity is really a business, the income is assessable. The distinction depends on the facts, so seek advice if you're unsure.
Does the ATO know about my online sales?
Under the sharing economy reporting regime, electronic distribution platforms report certain transactions to the ATO. Reporting began from 1 July 2023 for ride-sourcing and short-term accommodation, and expanded to other reportable transactions from 1 July 2024.
Can I claim my side hustle's losses against my salary?
Not always. For individuals, non-commercial loss rules apply. You generally need income for those purposes under $250,000 and to pass one of four tests — such as at least $20,000 of assessable business income — to offset a loss in that year. Otherwise it may be deferred.