How Taxable Is That Side Hustle?
As Australians grapple with the high cost of living and persistent interest rates, many are turning to side hustles to bring in additional income. But it’s important to be aware of the tax requirements associated with earning extra money on the side.
What Is a Side Hustle?
A side hustle is any income-generating activity in addition to your primary job. Examples include social media content creation, freelance services, casual work on gig platforms like Airtasker, pet sitting, or even creating and selling art.
Business or Hobby?
Whether income from a side hustle is taxable depends on whether it’s classified as a business. This distinction can sometimes be unclear, so here are a few key questions to consider:
In general, side hustles intended to make extra income are more likely to be classified as a business and therefore taxable. For instance, casual work through Airtasker or garden maintenance jobs would usually be done with profit in mind. On the other hand, hobbies like gold fossicking, which people may do for fun, would not typically be taxable unless they yield significant or regular profits.
Activities with potential for monetisation—such as a pet’s viral social media account—may or may not be taxable, depending on the amount and nature of revenue. Each situation is unique, and the tax treatment depends on the facts.
Tax Compliance for Side Hustles
If your side hustle is classified as a business, the income is taxable and must be reported. Track all income and allowable expenses, as taxes will be due on the net profit. If your turnover exceeds $75,000 annually, you will need to register for Goods and Services Tax (GST) and obtain an Australian Business Number (ABN). An ABN can also be obtained before reaching this threshold and needs to be kept up-to-date, including cancellation if you close the business.
Your side hustle income, once added to your primary job income, may result in a higher tax bill. To manage this, consider setting aside a portion of your profit for taxes. You can also request that your primary employer increase your PAYG deductions.
If the business incurs a loss, non-commercial loss rules may apply. This means that you may need to wait until your business generates a profit before offsetting losses against your primary income.
Deductible Expenses
Deductible expenses depend on the nature of the side hustle. Costs must be directly related to the business, and personal expenses cannot be deducted from business income. For example, car expenses used partially for business may require you to keep a logbook for accurate tracking of business versus private use. Home expenses like mortgage interest are only deductible if part of the home is used solely for business purposes; using your dining table occasionally for business doesn’t qualify.
