For years, Australians have used the term “side hustle” to describe everything from selling handmade products online to driving for Uber on weekends or doing a bit of freelance work after hours. It sounds casual, harmless, and perhaps even a little fun. But as cost of living pressures continue to rise, earning extra income outside a regular job has become increasingly common for many Australians.
The problem is that the Australian Taxation Office (ATO) doesn’t care what you call it. To the ATO, your side hustle might actually be a business, and if that’s the case, there are tax obligations that come with it, whether you realise it or not. The phrase “side hustle” has become a convenient way to downplay an income stream, but from a tax perspective, the label means absolutely nothing.
The gig economy continues to grow, with Australians finding more ways than ever to earn additional income outside their regular employment. Etsy stores, Amazon sellers, content creators, influencers, ride-share drivers, food delivery workers, consultants, coaches, online tutors, and freelancers are everywhere. Most people start with the intention of making a little extra money on the side. Then something interesting happens: the occasional sale becomes more regular, the weekend job becomes a weekly income stream, the hobby starts generating meaningful profits.
Before long, what started as a bit of extra spending money has become a genuine commercial activity, and unfortunately, many people fail to recognise when that transition occurs, and that’s where tax problems can begin.
Is it a hobby or a business?
One of the most common questions accountants hear is whether a particular activity needs to be declared to the ATO. The answer depends on whether the activity is considered a hobby or a business. The ATO looks at a range of factors when making this determination, including whether there is an intention to make a profit, whether the activity is conducted in a business-like manner, whether products or services are sold regularly, whether there is advertising or promotion involved, and whether records and systems are maintained.
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No single factor determines the outcome; instead, the ATO looks at the overall picture. Someone who occasionally sells a few handmade items at a local market may genuinely be operating a hobby; however, on the other hand, someone running an Etsy store, purchasing stock, maintaining inventory, marketing on social media, and aiming to generate ongoing profits is likely carrying on a business regardless of whether they still refer to it as a side hustle.
Many people also assume that small amounts of income fly under the radar. That may have been true years ago, but the ATO’s access to data has expanded significantly. Information is collected from a wide range of platforms and providers, including ride-sharing services, food delivery platforms, online marketplaces, and payment processors. This data can be matched against tax returns, making it much easier for the ATO to identify income that hasn’t been reported. The idea that income earned through digital platforms is somehow invisible is increasingly outdated. If you’re earning money through these channels and not declaring it because you assumed it was “just a side hustle”, you may be creating a much bigger problem for yourself later.
ABNs, GST and deductions
Another area where people get caught out is the question of an ABN and GST registration. Many assume they only need an Australian Business Number once they become serious or start earning significant income. In reality, if you’re carrying on a business activity, you may need an ABN from day one.
GST registration is generally required only once annual turnover reaches $75,000. Many growing businesses reach that threshold sooner than expected and may miss the registration point, creating unnecessary complications. That is why understanding your obligations early is so important.
Then there is the deductions conversation, which often reveals a contradiction in how people view their activities. Many individuals are happy to treat their income as a hobby when it comes to reporting earnings to the ATO, but suddenly want to claim deductions when expenses arise.
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Unfortunately, the tax system doesn’t work that way. If you’re operating a business, you may be entitled to claim legitimate business expenses and reduce your taxable income. If the activity is genuinely a hobby, the income may not be taxable, but the expenses generally won’t be deductible either. Understanding which category applies is critical because it affects both sides of the equation.
Know where the line is
The biggest risk isn’t making a mistake.
The biggest risk is assuming there are no obligations at all.
Most people don’t intentionally avoid tax; they simply fail to recognise when their hobby has crossed the line into business territory.
The good news is that getting things right early is usually straightforward; keeping good records, separating business and personal finances, understanding your reporting obligations, and seeking advice when needed can save a lot of headaches later. Because while “side hustle” might be one of the most popular business buzzwords of the past decade, it’s not a tax category.
When it comes to tax, the ATO couldn’t care less what you call it, they only care about what you’re actually doing and getting their cut.
