By Rebecca, Accountant at Moore Lewis & Partners
With the cost of living increasing, I’ve been speaking to more and more clients who are starting side hustles to bring in some extra income. Whether it’s freelancing, selling products online, consulting, driving for rideshare, or turning a hobby into something more regular, side hustles are becoming very common in Australia.
One of the questions I hear a lot is: “Do I need to tell the ATO about this?”
The short answer is, in most cases, yes. But the rules aren’t as complicated as many people think. The key is understanding when a side hustle becomes something the ATO considers a business.
When Does a Side Hustle Become a Business?
A side hustle might start out as a hobby, but over time it can become something more structured. The ATO looks at a few factors to determine whether an activity is considered a business.
For example:
- Are you trying to make a profit?
- Are you selling goods or services regularly?
- Do you advertise or promote what you’re doing?
- Are you running the activity in a business-like way?
If the answer to several of these is yes, the ATO will generally consider the activity to be a business. That means the income needs to be declared in your tax return.
Do You Need an ABN?
If your side hustle involves providing services or selling products, you may need to apply for an Australian Business Number (ABN).
Having an ABN allows you to invoice clients and operate more formally. It also avoids situations where businesses paying you may be required to withhold tax from your payment if an ABN isn’t provided.
Applying for an ABN is usually quite straightforward, but it’s always worth checking that it’s the right step for your situation.
Do You Need to Register for GST?
Another common question I hear is about GST.
Most side hustles don’t need to worry about GST straight away. In Australia, you generally only need to register for GST once your business turnover reaches $75,000 per year.
If your side hustle is still small and below this threshold, you usually don’t need to register. However, if your income starts growing, it’s something to keep an eye on.
What Expenses Can You Claim?
If your side hustle is considered a business, you may also be able to claim tax deductions for expenses directly related to earning that income.
Depending on the type of work you’re doing, this might include things like:
- Equipment used for the activity
- Software or online subscriptions
- Advertising or marketing costs
- A portion of phone or internet usage
- Materials or supplies
The key rule here is that the expense must relate to earning your income, and you should always keep records to support your claim.
Keep Good Records From the Start
One piece of advice I often give clients is to start keeping records as soon as the side hustle begins, even if it’s small.
This might include:
- Keeping invoices for work you complete
- Saving receipts for purchases
- Tracking income received
- Keeping a simple spreadsheet or using accounting software
The ATO generally requires records to be kept for at least five years, so building good habits early makes tax time much easier later.
A Quick Word of Advice
Many people start side hustles informally and only think about the tax side of things once the income grows. That’s completely understandable, but getting some advice early can save a lot of confusion down the track.
Every situation is different, and a quick conversation with an accountant can help clarify things like whether you need an ABN, what you can claim, and how to keep your records organised.
If you’re running a side hustle or thinking about starting one, we’re always happy to help guide you through the tax side of things.
Rebecca
Accountant, Moore Lewis & Partners
