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Thinking of Starting a Side Hustle? Here’s What You Need to Know About Tax

With the rising cost of living and a growing trend toward flexibility, more Australians are exploring side hustles – from ridesharing and food delivery to selling handmade goods online or freelancing. But if you’ve recently picked up a side gig, it’s important to understand your tax responsibilities.

What Counts as a Side Hustle?

A side hustle is any secondary activity you do to earn extra income, whether it’s occasional or regular. Popular examples include:

  • Driving for Uber, DiDi, or Ola
  • Delivering food through platforms like DoorDash or Menulog
  • Renting out a room or property on Airbnb
  • Selling goods on eBay, Etsy or at markets
  • Freelance work such as photography, consulting or digital design

If you’re earning money through one of these activities – even if it’s just a few hours a week – you may be running a business in the eyes of the Australian Taxation Office (ATO).

Do I Need to Report My Income?

Yes. All income you earn from a side hustle must be reported in your tax return, regardless of how small or irregular it is. Even if you’re just testing the waters or it’s something you do on weekends, the ATO requires you to declare this income.

Keep in mind, platforms like Uber and Airbnb are often required to share information with the ATO, so it’s best to be upfront and accurate with your reporting.

Do I Need an ABN?

If your side hustle involves running a business or providing services regularly, you’ll likely need to apply for an Australian Business Number (ABN). You may also need to register for Goods and Services Tax (GST), especially if your annual turnover exceeds $75,000 – a common requirement for ride-share drivers and delivery partners.

What Can I Claim?

The good news is you may be eligible to claim tax deductions for expenses directly related to your side hustle. This could include:

  • Fuel or car maintenance for delivery or rideshare services
  • Costs associated with buying materials or products to sell
  • Home office expenses for online or freelance work

Just remember you can only claim deductions for the portion of an expense that directly relates to earning your side hustle income.

Keep Good Records

Accurate record-keeping is essential. Keep detailed records of your income and expenses, including:

  • Invoices and receipts
  • Bank statements
  • Logbooks (if using a vehicle for business purposes)
  • Any communications with customers or clients

These will help you at tax time and ensure you’re not caught off guard if the ATO asks questions about your activity.

Unsure Where You Stand?

If you’re not sure whether your side hustle qualifies as a business, or what your obligations are, the ATO’s website has useful tools to help you determine if you’re in business. You can also speak one of our experienced accountants for tailored advice.

Final Tip: Side hustles can be a great way to boost your income and pursue your passions. Just make sure you’re on top of your tax obligations to avoid unexpected bills down the line.

Want help sorting your side hustle taxes? Reach out to a tax professional today.

Source: ato.gov.au

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