Has my Hobby become a Business?

Starting a Business

A hobby is an outside interest that you pursue for fun in your spare time.

Hobbies are fantastic to have because they give you an outlet to do something of interest to you outside of your regular occupation and may even be relaxing or therapeutic. There comes a time however, when your hobby may have in fact turned into a business.

Now you’re probably saying “How will I know when I’ve got a business?”

Don’t fret! We’re going to provide you with some ways that you can quickly assess whether your hobby has morphed into a business and determine if it has all the characteristics of a business.

Step 1

Ask yourself the following 5 questions to get a general idea about whether you may be operating a business:

  1. Do I have a reputation? People in your industry or region may be taking notice of you and your product/service.
  2. Am I getting more orders than I can fill? You get more orders in your down time, that you can schedule in time wise.
  3. Am I making a profit or do I expect to make one in the future?
  4. Do I have a master plan?
  5. You’re thinking beyond individual sales and are considering renting a shop, hiring employees, etc.

Step 2

Know the characteristics of a business.

The following are some factors that can show if your activity is a business (for tax purposes):

  • Your activity has significant commercial character. (activity carried out for commercial reasons/in a commercially viable way. ie advertise your service/product in the paper or online?) 
  • You have more than an intention to engage in business. (Smart use of online social media for advertising may qualify)
  • You have the purpose and prospect of profit. (Goal orientated with getting 4 new clients a month, or 10% more in sales)
  • Your activity is repetitious and regular. 
  • What is the size, scale and permanency of your activity?
  • Is your activity planned, organized and carried out in a businesslike manner? (business records, business premises, business bank account, business name, licenses, trademarks etc) 

Step 3

With your new information from steps 1 & 2, go to the ATO website 

Business or Hobby? Check this link : http://www.ato.gov.au/corporate/content.aspx?doc=/content/00199712.htm

Online Businesses check this link : http://www.ato.gov.au/content/00348320.htm

Step 4

Once you have read the above links, be aware that even if you "think" you are a hobby, you may actually be a small business from a taxation point of view?

It is generally considered that if you "earn" under 20k and do not claim ANY expenses on the income that you are a hobby. 

My advise would be to check with your accountant!

There you have it, a simple 4 step process to help you make a decision.


Amanda Hoffmann - Certified Bookkeeper, BAS Agent

Owner / Manager ★ Certified Bookkeeper ★ BAS Agent at My Office Books - Virtual Bookkeeper & BAS Agent

My Office Books is PASSIONATE about two things BUSINESS nd PEOPLE. Every individual you work within our company is registered with the Tax Practitioner Board. BEHIND IN TAX OBLIGATIONS You need not be concerned if you are receiving text messages or demand letters from the Australian Taxation Office, as we are here to help you and your business. I have a good working relationship with the ATO due to volunteering my time with TPSG and currently work on a consultation basis with the ATO creating content. TRAINING Feed a man a fish, you feed him one meal. Teach him how to fish, he can feed himself for a lifetime. Learn how to be organized, disciplined in our training process. This saves you money and ensures you keep your finger on the cash flow pulse of your business. HELP - MY BOOKS ARE A MESS!!! While I do not take on "regular bookkeeping" duties, I do offer to clean up bookkeeping that does not reconcile and is messy. Let's get you caught up on your tax and BAS returns. RENTAL PROPERTY INVESTORS A successful property investor should always have up to date bookkeeping to understand where they stand financially at any time. It's also important when seeking finance or re-financing with banking institutions. I understand your challenges intimately. I will help you save time, keep your finger on your financial pulse, and train you on how to get it done efficiently. TAX DEBT NEGOTIATION We will help you negotiate a payment plan if required with the Australian Taxation Office. CONSULTATION SERVICES How can you create reports & budgets, negotiate to navigate the difficult recession over the next 18 months? Where do you find the right accountant or BAS agent for your business? What software do you need to automate your bookkeeping, reporting, and administrative duties? What accounting software is right for you and your business? We can help!


Comments (1)
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Phil Khor

Phil Khor, Founder at

Great article, Amanda. What better way to earn a living than doing what we do best? All we need to some critical thinking of breaking down the essentials of what makes a (good) business, and your article has summed it up well. Thanks Amanda, keep them coming!