What is a hobby?

A hobby is a pastime or leisure activity conducted in your spare time for recreation or pleasure.

Benefits of being a hobby

• Personal enjoyment and satisfaction.
• You can gift or sell your work for the cost of materials.
• You can do it in your own time or when people contact you.
• You don’t have the reporting obligations of a business.

Find out about running a hobby or watch the Are you in business videos on the Australian Taxation Office (ATO) website.

What is a business?

You’re in business, if your activity, as a whole, is commercial with an aim to make a profit.

Benefits of being in business

• You can apply for an Australian Business Number (ABN) to use in your business transactions. You’ll need to use the ABN entitlement tool to check your entitlement before applying.
• You can register a .com.au website once you have an ABN.
• You’ll have access to government information, services and concessions for business.
• You can establish a business identity when selling to customers and other businesses.
• You can claim tax deductions for business expenses against your taxable income.
• It may give you the flexibility to manage your time and work your own hours.

How do I know if it’s a business or a hobby?

It’s important to understand the differences between a hobby and a business for tax, insurance and legal purposes.

Key questions to consider:

• 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 businesslike manner?

If you answered yes to most of these questions, you’re likely to be running a business, although it depends on your individual circumstances. The ATO website provides further questions, information and examples to help you understand the differences between a hobby and a business.

To get an answer specific to your circumstances, you can:

• talk to a legal, accountant or business adviser in your area who can help you decide whether you’re running a business or a hobby.
• get a private ruling from the ATO, which will provide an answer that protects you from penalties and interest.