There are key differences between having a hobby and running a business, and they’re mostly to do with your tax, insurance and legal
It's important to understand the characteristics of businesses and hobbies to ensure you correctly determine your activities.
Are You In Business?
While there is no single, defining factor that determines whetehr or not you are in business, some of the factors that you still need to consider include:
You intend to make a profit – or genuinely believe you will make a profit from the activity – even if you are unlikely to do so in the short term.
You've made a decision to start a business and have done something about it to operate in a businesslike manner, such as:
This may include:
The Benefits Of Running A Business
Is It A Hobby?
What Are The Differences?
As a hobby, you are not eligible for an ABN for a hobby, however if you sell goods or services to businesses, they may ask you for an ABN
when they pay you. You can use a Statement by a supplier form to avoid the business withholding an amount from the payment to you for not
having an ABN. The statement lets the business know that you are selling the goods or services as your hobby.
As a business, it is not compulsory for businesses to register for an ABN, however getting an ABN is free and makes running your
business easier, particularly if you have to register for other taxes like GST. Without an ABN, other businesses must withhold 47% from
payments they make to you for tax purposes.
If you’re selling goods, you’ll need to comply with Australian Consumer Law (ACL). Your customers have automatic rights if they buy a
product that breaks easily, doesn’t work or doesn’t perform as generally expected.
If you are not certain about whether your activity would be classified as a business or hobby, you can seek professional advice from an accountant, legal expert or business adviser, who can help you determine what exactly it is that you’re running.
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