With the cost of living going up, more Australians are finding creative ways to make extra income on the side – enter the side hustle! Whether you’re decorating cakes in your spare time, selling handmade earrings at the markets, offering freelance design work, or growing a loyal YouTube following, side hustles are more popular than ever.
But at what point do these activities become a business in the eyes of the ATO?
In this article, we explore when it’s time to register your side hustle as a business, what the ATO considers a business, and how setting things up properly can help you avoid tax trouble and make the most of your income.
Hobby or Business? What the ATO Looks For
The Australian Taxation Office doesn’t just consider how much money you make. It looks at the nature of your activity. According to the ATO’s guidance on managing a side hustle, you’re likely running a business if you:
- Intend to make a profit, even if you haven’t yet
- Carry out the activity regularly
- Market your products or services
- Operate in a businesslike manner (such as having a logo, website, or business cards)
- Keep financial records or reinvest in the business
So, if you’re baking cakes for friends each weekend, freelancing for regular clients, or creating content for sponsored posts, there’s a good chance your side hustle qualifies as a business.
When Do You Need To Register?
Once you’re earning income and acting with commercial intent, it’s time to think about registration. Here are some common triggers:
You’ll generally need to register your business when:
- You need to invoice clients. This is where an ABN is usually required
- Your turnover is approaching $75,000 per year (this is when GST registration becomes mandatory)
- You want to claim tax deductions on your expenses
- You’re signing contracts or need business insurance
- You want to open a business bank account
Even if you’re just starting out, applying for an ABN early can give your side hustle credibility and help you stay on top of your tax obligations.
Common Side Hustles That May Require Registration
Not every side hustle needs to be registered right away, but the following often do, especially when income is consistent:
- Selling handmade products on Etsy, at markets, or online
- Freelance services such as photography, web design, or consulting
- Home-based baking or catering businesses
- Content creation, influencing, or affiliate marketing
- Offering tutoring, pet grooming, lawn mowing, or cleaning services
The ATO also offers specific advice for content creators and influencers, noting that income from ads, brand deals, and gifts is taxable. Even if you’re just being sent “freebies,” if it’s in exchange for posts or promotion, it’s counted as assessable income.
If you are a content creator or influencer, or thinking about becoming one, speak with us today. We offer specialised accounting for content creators and influencers to ensure you stay compliant from the start.
Choosing The Right Business Structure
When registering, most side hustlers start as a sole trader. It’s simple, low-cost, and allows you to use your own Tax File Number and an ABN.
You’ll be personally responsible for any debts, but it’s ideal for most solo operators. If your business grows, you may eventually consider setting up a company or trust, but these structures come with extra costs and compliance obligations, so it’s best to seek advice from an accountant first.
Benefits of Registering Early
Registering your business doesn’t just keep the ATO happy; it can also work in your favour. With the right setup, you can:
- Claim legitimate business expenses, such as equipment, subscriptions, home office costs, and travel
- Improve your professionalism, especially if you’re working with clients or brands
- Separate your finances, making it easier to manage cash flow and bookkeeping
- Reduce the risk of fines, especially if you accidentally underreport income
- Access to grants or funding, which often require a registered business
Setting up early creates a solid foundation, even if your side hustle is still small.
What If You’re Not Ready Yet?
If you’re experimenting or only making very occasional income, you may not need to register just yet. However, as soon as your activities become regular, commercial, or income-producing, it’s time to get your paperwork in order.
If you’re unsure, it’s always best to ask an accountant.
Need Help Setting Up?
At Schofields Accountants, we help side hustlers take the next step. From choosing the right structure to registering your ABN and managing your tax, we’ll help you avoid compliance headaches and set your business up for success.
Get in touch today and let’s make that side hustle official.
