Have you heard before a hobby income can be deductible as tax? Then here you go with some important information you didn’t know. Hobby is an extra activity done in the spare time for pleasure or entertaining yourself. But it’s important to know whether you are doing business or it’s a hobby.
Business or Hobby?
Anything done which generates income and the income which goes to some limit or in some criteria then the person doing such activity is required to pay tax. There is a difference that divides hobby or business.
If the ATO finds and assesses your activities to be a business, then you can claim expenses as tax deductions and on other side you also have to pay tax as you showing income out of your activities.
If you are categorized as hobby player where your activities are simply to take pleasure in your free time that you can not claim anything as tax deductions. Either one is possible out of your work you are doing. It may be a hobby or Business. When it comes to business then tax comes into picture and when it’s hobby then no tax paying and no expense deduction.
Here it’s Hobby!
Well, let’s say there is a rich businessman who loves to drive expensive and fastest cars in weekends and free time. If he participate in a contest of racing sports cars in weekends and earn a big bulk price then that is hobby money and cannot be included in tax deductions nor do have to pay taxes. But only thing to which level of contest he played and how much he earned that is considered.
Is it Business:Criterias for Business
1. If you planning to start a business and must have done process of registration of a name or having an ABN.
2. You may believe to make a profit or you feel you will make a profit from the activities done by you.
3. Constant repetition of same activities.
4. The size matters here, where in which scale the activity is carried and how consistently with other business level in the same industry.
5. If your activities are carried on a business terms and a like business manner like keeping records and account book, bank account, having a premises for your activities, licenses, registered business name.
All the above criteria show that it’s a business if you following on any of this things. No matter it’s a hobby or business, we are expert accountants in Melbourne and we give correct business advice for your tax returns done for companies( business or hobby). Feel free to contact us for more information, we will help you identify your deductibles.
