side hustle

Starting a new business but unsure of where to start? Whether you work a side hustle, have started making some extra income from your hobby or have just crossed over into full-time self-employment, things can be overwhelming to say the least!
We sat down with one of our Directors, Pam Badke, to help wrap your head around your start-up and break through the jargon when it comes to your side hustle tax obligations.

QUESTION:I am employed full time/part time  but also make some income from my side hustle. Do I need to declare those extra earnings come tax time?

PAM: Yes. If you consider your side hustle a business, you’ll need to declare any money you make from it, no matter how big or small the amount. 

QUESTION: How do I determine if what I do is a hobby or a business? 

PAM: There’s no one single contender on determining if you’re a business. However, if you approach you provide services in order to make a profit, advertise your services or have an ABN (Australian Business Number) – you’re likely running a business.

NB: The ATO has a short questionnaire which night help you determine whether you’ve got a business or a hobby.

QUESTION: How much does an ABN cost?

PAM: Registering for an ABN is free through the Australian Government website. Don’t fall prey to the scams where you have to hand over money, as registering for an ABN requires no payment.

QUESTION: What financial benefits are there to turn my hobby into a business? 

PAM: The main benefit is that you can claim tax deductions on business expenses (and therefore potentially pay less tax) even while you have a full time job.

QUESTION: Ok, I’ve taken the test and I’ve ascertained that I am indeed running a business. What do I need to know about tax in conjunction with my fulltime job?

PAM:  This depends on the structure of your business. The four common business structures – sole trader, partnership, company, and trust – all have different tax requirements. Think about what structure suits you, and chat to us at Moore Lewis & Partners from early on in the process. 

If what you do is going to be a side hustle that really only involves you and not any other employees, you would likely start small as a sole trader.

If you’re a sole trader with an ABN, you’ll have to report your business income once a year as part of your individual tax return. The other business structures require an additional tax return, separate to an individual return.

QUESTION: When do I need to pay my taxes? Is this separate to my standard tax return?

PAM: There are different timelines for different kinds of businesses. If you’re a sole trader and are not registered for GST, you’ve got an annual filing date of October 31st. If you lodge that through an accountant, though, you’ve got a bit more time up your sleeve and can lodge until May 15th the following year. If you’re a small business with payroll and are registered for Single Touch Payroll (STP), you have different filing dates throughout the year.

QUESTION: Do I need to worry about charging GST on my services? 

PAM: You only need to register for GST if your business makes $75,000 a year or over gross income. If that’s the case, you’ll need to charge 10 per cent GST on top of what you sell. You’ll also need to lodge a business activity statement (BAS).

QUESTION: What can I expense, claim, and deduct come tax time in my side hustle?

PAM: In a nutshell, claiming expenses can help lower your tax bill. It literally pays to keep a record of all business-related expenses throughout the year. This includes everything you’ve spent on your business, from car expenses to a new computer.  

QUESTION: How do I avoid an unexpected tax bill?

PAM:  To avoid any unexpected surprised come tax time, it’s a good idea to regularly set aside money to pay tax. For our clients, we calculate how much they are estimated to pay and then advise them to put aside that sum each pay cycle. That way there are no rude shocks when lodging your tax return!  

If you’re feeling overwhelmed, we here at Moore Lewis & Partners would be happy to guide you through this exciting time for you and your business! (Our fee is tax deductible!) We ensure you are getting the right advice early on so we can set you up on the right path.  

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