How To Know If You Have A Business Or A Hobby

It’s not uncommon for businesses to start out as a side project or hobby. In fact, many people turn their hobbies into a business because it is something they are passionate and knowledgeable about. Take Haley Birtles-Eades for example, who turned over $300,000 in December last year from her hobby-turned-business. It is important to establish the difference between a hobby and a business, as there could be implications if you start to earn money from your activities.

What is a hobby?

According to the ATO, a hobby is a “pastime or leisure activity conducted in your spare time for recreation of pleasure.” Pretty simple explanation, right? Here’s where it gets complicated. Lets say your hobby is candle making. Your friends really like them and you start to realise that you can make some extra cash by selling them. You continue to sell your candles and soon enough, your hobby moves from a spare-time recreation activity to a business with the intent of making a profit.

The business or hobby test

If you answer yes to most of these questions, you will most likely be running a business.

  • Is the activity being undertaken for commercial reasons?
  • Is your main intention, purpose or prospect to make a profit?
  • Do you regularly and repeatedly undertake your activity?
  • Is your activity planned, organised and carried out in a business-like manner?

So I guess I’m running a business, now what?

If you are indeed running a business, you will need to apply for an ABN. You may also need to register for GST if you are planning to earn over $75,000 in revenue. Additionally, you will need to consider your business structure and may need to register a business name.

Many successful businesses have started out as just a hobby. You can start yours today with Honcho. Get registered, set up a bank account, emails address and web page all in one place!

Shaun Meltzer