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Side Hustle Taxes in Australia: What You Need to Know

So, you’ve decided to join the ranks of enterprising Aussies and dive headfirst into the world of side hustles! Great! It’s a neat way to flex your entrepreneurial muscles and earn some extra cash on the side.

But before you start counting those dollars, there’s one thing you need to consider: taxes. Even your side hustle isn’t safe from the taxman’s clutches. 

First, what is a “side hustle”?

Side hustles are entrepreneurial ventures or efforts outside your regular (day) job. It is simply a means to earn money from your hobby, skill, or talent!

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Side hustles in Australia

The side hustle scene in Australia is buzzing with energy and creativity today. Aussies are renowned for their resourcefulness and ability to juggle multiple tasks like a plate-spinner at the circus. Nearly 48% of Australians have a side hustle or are planning one. In the financial year 2022-23, there was an increase of 7% in new businesses created, of which almost 80% were side hustles. 

With digital platforms, technological advancements, and a growing entrepreneurial spirit, more and more Australians are exploring side hustles to pursue their passions, supplement their income, and create flexible work arrangements. 

However, while the side hustle scene in Australia is thriving, it’s not without its challenges. Competition, time management, and balancing multiple responsibilities are the major factors impacting the launch and management of a successful side hustle.

But with the right mindset, determination, and support, Australians are embracing the side hustle culture and carving their paths to success.

But before panicking, let’s break it down so it won’t send you running for the hills. Sleek answers some of the most pressing questions about handling the tax issues on your side hustle. Here you go: 

Should I report the additional income from my side hustle while having a day job?

You’ve landed yourself a sweet side hustle, and you’re raking in the dollars. But here’s the million-dollar question: Do you have to pay taxes on that hard-earned cash? Unfortunately, the short answer is yes. The Australian Taxation Office (ATO) considers all income, whether from your full-time job or your side hustle, fair game for taxation.

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What criteria distinguish a hobby from a business in terms of taxation?

In Australia, distinguishing a hobby from a business for taxation purposes is important because the tax treatment differs for each category. 

Here are the main criteria  that the ATO considers when distinguishing a hobby from a business:

  1. Intention to make a profit
  2. Size and scale
  3. Repetition and regularity of activities
  4. Commercial intent
  5. Knowledge and expertise

Are there financial advantages to transforming my hobby into a formal business?

The biggest benefit of turning your hobby into a business is that you can claim tax deductions on all your business expenses and possibly pay less tax. By turning your hobby into a business, you can also register for a website domain, giving you access to government benefits and concessions available for businesses.

Now that I’ve determined my side hustle is a business, what tax obligations do I need to fulfil?

It is easy to navigate the tax requirements for your side hustle without losing your sanity! The ATO loves its acronyms, so get ready to meet your new best friends: IT, ABN, GST, TFN & CGT.

  • IT (Income Tax): When it comes to side hustles, any income you earn is considered assessable income and is subject to income tax.
  • ABN (Australian Business Number): If you’re serious about your side hustle and want to make it official, getting an ABN is like giving your business a fancy birth certificate. It’s free to obtain and helps you separate your income from your side gig’s earnings. With an ABN, you can get certain tax concessions and claim business-related deductions.
  • TFN (Tax File Number): You probably already have a TFN from your day job, but it’s important to remember that any income you earn from your side hustle needs to be declared on your tax return using the same TFN.
  • Capital Gains Tax (CGT): If your side hustle involves buying and selling assets, such as stocks or property, you may be liable for Capital Gains Tax (CGT) when you profit from the sale.

When are the deadlines for paying taxes on my side business?

In Australia, the deadlines for paying taxes on your business side can vary depending on the specific taxes and reporting requirements applicable to your business structure. Here are some important deadlines to keep in mind:

  1. Income Tax: Generally 31st October for partnerships and sole traders
  2. Business Activity Statements: Monthly or quarterly, depending on your side business
  3. Goods & Services Tax: As per BAS reporting stated in point 2
  4. PAYG Withholding: Monthly or quarterly, depending on your side business

Want to know more about the sole trader tax rate in Australia? Click to find out more.

Do I need to be concerned about Goods and Services Tax (GST) for my side hustle?

The Goods and Services Tax (GST)  is a value-added tax imposed on the supply of goods and services in Australia. If your side hustle involves providing goods or services and your annual turnover exceeds $75,000, you must register for GST. 

Registering for GST means you’ll need to charge an extra 10% on your sales and file a business activity statement. The upside? You get to claim back the GST you paid on your business expenses. It’s like a little tax refund cherry on your business sundae. 

How do expense claims and deductions work about my side business?

As a side hustler, you can claim deductions for expenses incurred in running your business. This includes supplies, equipment, marketing costs, travel expenses related to your side hustle, and even a portion of your home office expenses if you have a dedicated workspace. 

Just remember to keep detailed records and retain receipts to substantiate your claims. 

How can I avoid unexpected tax bills for my side hustle?

  1. Understand Your Tax Obligations
  2. Keep Accurate Records
  3. Separate Business and Personal Finances
  4. Budget for Taxes
  5. Regularly Monitor and Review Financials
  6. Consider Seeking Professional Advice
  7. Stay Updated with Tax Changes
  8. Plan and Forecast

Can you explain PAYG (Pay As You Go) instalments and how they affect my side business?

Taxes may not be everyone’s cup of tea! PAYG is the Australian tax system’s way of ensuring you don’t have a huge liability at the end of the year. You may need to pay estimated yearly taxes if you’re earning income through your side hustle. 

What strategies can I implement to make tax time less stressful for my side hustle?

  1. It is important to make sure everything is as streamlined as possible
  2. Use technology and software to track and file your expenses
  3. Use the services of a tax agent who can help you throughout the process. Besides, their fee is tax-deductible

Use comprehensive digital platforms such as www.sleek.com/au to register your company and manage your governance, accounting and tax compliance online.

Conclusion

Congratulations! You’ve made it through the tax maze and now better understand the tax obligations that come with your side hustle in Australia.

While taxes might not be the most exciting part of your side gig, understanding the rules can save you from a financial snag later.

Looking for tax and accounting services in Australia? Well look no further, Sleek has got your back! We provide all-inclusive pricing, so there’s no need to pay extra for tax and bookkeeping.

 Visit www.sleek.com to understand how to navigate through the complex and perplexing journey of taxes on a side hustle in Australia.

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FAQs

A side hustle refers to any additional income-earning activity that you engage in apart from your primary source of income.

Yes, generally speaking, any income you earn from a side hustle is subject to taxation in Australia.

Yes, there are certain tax exemptions and deductions available for side hustles in Australia.

You must register for an Australian Business Number (ABN) if required, keep detailed records of your income and expenses, and include the income earned from your side hustle on your tax return.

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Disclaimer

This article is meant to provide general information. Tax regulations can be complex and subject to change, so it’s always best to consult a qualified tax professional or the Australian Tax Office (ATO) for specific advice tailored to your situation.

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Disclaimer: The information on this website is intended for general informational purposes only and may not be specifically relevant to everyone’s personal situation. It should not be considered financial advice or a substitute for professional tax or accounting advice. Each individual’s circumstances are unique, and laws can vary. For tailored advice, please consult a qualified professional. Contact Sleek for further information on how we can help you.

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