Many people start out making a few things such as children’s clothes etc and then others want them made for them and before you know it, you’re in business – or are you? That’s the question a lot of people ask themselves.
Determining whether you are running a business or it’s just a hobby will impact on the legal obligations, insurance requirements and taxation responsibilities that each incur. To decide between business and hobby can be difficult. Here are some guidelines to help you decide.
Ask yourself these questions:
- Are you working for commercial reasons – to make money?
- Will you be making a profit?
- Is the activity similar to other businesses?
- Are you regularly undertaking the activity?
Answering ‘yes’ to two or more of these questions probably means you are running a business and not a hobby. If that is the case then you may need to register your business name, apply for an ABN and possibly register for GST. The business structure will then need to be considered, whether you want to trade as a sole trader, partnership or company and you should also consider any insurances at this stage.
Australian Securities and Investment Commission
ASIC is Australia’s corporate, markets and financial services regulator. Here you can register your business name and find out a lot more interesting information.
Registration and Licences
When you’re starting up a new business it’s important to find out what registration and licences apply to you. This can be complex as local, state, territory and federal governments all handle registration and licensing for various aspects of your business.
Income generated by your business adds to your assessable income and therefore may incur tax. Expenses incurred in earning this taxable income are deductible, and losses can be offset against other income.