09: Is Your Side Gig a Hobby or a Business? Tax Facts You Should Know

01/15/24 • 17 min

Smarten Up! The Tax and Business Podcast

Side hustles are more popular than ever. From rideshare driving to selling crafts online, people are finding creative ways to supplement their income. But if your side gig starts generating serious cash, you may suddenly have some not-so-fun tax obligations.
So how do you know if your hobby has crossed into business territory in the eyes of the taxman? What happens if you start racking up losses from your entrepreneurial experiments? Can you reduce the tax on your regular salary?
Finding clarity on these issues is critical. Get it wrong and you could face penalties, interest as well as the tax bill!
In this episode, Sally demystifies the complex issue of hobby vs business taxation. With her tax wisdom and personal experience moonlighting as a gym instructor, Sally provides practical insights for side hustlers.
In this episode of the Smarten Up! The Tax and Business Podcast, you’ll learn:

The difference between a hobby and a business for tax purposes. (00:54)
Factors that determine if an activity is a business or a hobby. (02:34)
Tax treatment and obligations if deemed a hobby vs. a business. (04:21)
Non-commercial loss rules for claiming business losses. (09:20)
Examples of applying the non-commercial loss rules. (13:12)
Key takeaways. (16:58)

Understanding if your side hustle is a hobby or business is crucial for tax compliance and unlocking key deductions. As Sally summarised, you need to evaluate your activities against factors like profit motive, repetition, systems, record keeping and more. CONNECT WITH SALLY PRESTON
Website: http://www.smartsolutionstax.com.au/

Facebook: https://www.facebook.com/SmartSolutionsTax

Instagram: https://www.instagram.com/smartsolutionsau/

Smarten Up - The Tax and Business Podcast Facebook: https://www.facebook.com/profile.php?id=61555018481517

Smarten Up - The Tax and Business Podcast Instagram: https://www.instagram.com/smarten_up_podcast/

LinkedIn: https://www.linkedin.com/company/smart-solutions-tax-and-business-advisory/

The difference between a hobby and a business for tax purposes. (00:54)
Factors that determine if an activity is a business or a hobby. (02:34)
Tax treatment and obligations if deemed a hobby vs. a business. (04:21)
Non-commercial loss rules for claiming business losses. (09:20)
Examples of applying the non-commercial loss rules. (13:12)
Key takeaways. (16:58)

Previous Episode

08: Navigating the Complex Process of Business Succession and Exit with Kylie Wilson

Business succession and exit planning is a complex, multifaceted process filled with potential pitfalls. In this information-packed episode, Sally speaks with lawyer Kylie Wilson, a specialist in business succession, on this crucial topic for business owners.
They explore several common scenarios - selling to a third party, transitioning to key employees, passing down to family members. Kylie brings her extensive experience to outline not only the opportunities in each case but also the disputes, legal consequences, and other complications that frequently arise when succession planning is inadequate.
From the nitty-gritty of structuring share sales to the critical emotional dynamics in family businesses, Sally and Kylie leave no stone unturned. They offer smart strategies and savvy advice to properly plan your own exit, avoid destructive conflicts, maximise sale value, and leave the legacy you envision.
In this episode of the Smarten Up! The Tax and Business Podcast, you’ll learn:

Key considerations when selling a business on the open market (04:23)
Strategies for transitioning a business to key employees (09:29)
Complex dynamics and estate planning challenges with family business succession (11:24)
The importance of proper planning to minimise disputes and costs (19:19)

Whether you intend to sell to a third party or pass down to the next generation, every business owner should listen to understand what lies ahead and how to chart the optimal path forward. CONNECT WITH SALLY PRESTON
Website: http://www.smartsolutionstax.com.au/

Facebook: https://www.facebook.com/SmartSolutionsTax

Instagram: https://www.instagram.com/smartsolutionsau/

Smarten Up - The Tax and Business Podcast Facebook: https://www.facebook.com/profile.php?id=61555018481517

Smarten Up - The Tax and Business Podcast Instagram: https://www.instagram.com/smarten_up_podcast/

LinkedIn: https://www.linkedin.com/company/smart-solutions-tax-and-business-advisory/

Next Episode

10: Expanding Your Business Overseas: Top 5 Tax Questions You Must Ask First

Expanding a business internationally into new markets can be an exciting yet daunting venture. But without asking the right tax and compliance questions upfront, your global growth plans could be stopped in their tracks.In this information-packed episode, Sally breaks down the top 5 tax considerations that every Australian business needs to address before going global.Sally demystifies critical issues around international expansion that many entrepreneurs overlook in their haste to enter new markets. From picking the right overseas entity structure to repatriating profits, she provides clarity on the key tax implications at each stage.In this episode of the Smarten Up! The Tax and Business Podcast, you’ll learn:

What entity structure to operate through overseas (00:54)
How overseas profits will be taxed (02:21)
How to repatriate profits back to Australia (05:54)
How cross-border transactions will be treated (08:21)
Reporting obligations in Australia and overseas (22:21)

Expanding internationally presents huge opportunities for business growth, but the tax implications can trip up even seasoned entrepreneurs. With myriad rules across different countries, tune in to understand the tax lay of the land before leaping into new markets.
CONNECT WITH SALLY PRESTON
Website: http://www.smartsolutionstax.com.au/

Facebook: https://www.facebook.com/SmartSolutionsTax

Instagram: https://www.instagram.com/smartsolutionsau/

Smarten Up - The Tax and Business Podcast Facebook: https://www.facebook.com/profile.php?id=61555018481517

Smarten Up - The Tax and Business Podcast Instagram: https://www.instagram.com/smarten_up_podcast/

LinkedIn: https://www.linkedin.com/company/smart-solutions-tax-and-business-advisory/