At what point does a hobby become a business? It’s important to understand whether your activities are classified as a hobby or a business for tax and legal purposes.
What is a hobby?
A hobby is activity or pastime you do for reasons enjoyment, relaxation or to develop skills. Your activities may start as a hobby and develop into a business as you grow.
Examples of hobbies that can become businesses include:
- arts and crafts such as photography, art or jewellery-making
- repairing and handy services
- creating or designing websites
Does your hobby take up most of your time? Does it support you financially? If so, it’s probably a business.
Am I running a hobby or a business?
Whether your hobby is a business depends on factors such as your purpose and how you operate. It doesn’t matter how much you earn – there’s no financial threshold to tell you if your hobby is a business.
As a hobby you:
- can claim the costs of materials when gifting or selling your work
- don’t need to declare the income you make from your hobby to the Australian Tax Office (ATO)
You’re most likely in business if you:
- intend to make a profit from your activities
- do the activity regularly and in a structured and businesslike manner
- have registered a business name or secured an Australian Business Number (ABN)
If your business is a hobby, you can continue operating as you are.
Need more information?
- If you’re still unsure, read Are you ready to start a business? on business.gov.au.
- Go to the ATO website to work out whether you’re in business and when your business starts for tax purposes.