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Side hustles and tax: What to consider

Almost a million Australians have side hustles, but they come with tax implications.

Mar 25, 2024, updated Mar 25, 2024
Even being paid "in kind" has tax implications according to the ATO. Photo: TND

Even being paid "in kind" has tax implications according to the ATO. Photo: TND

A growing number of Australians are taking up side hustles to top up their incomes amid the cost-of-living crisis, but what many people don’t know is that a side job has tax implications.

That means whether you’re working in the gig economy, selling home-made goods out of your garage warehouse or being paid to advertise for brands as a social media influencer, you’ll need to make sure all your income is declared to the Australian Taxation Office.

But there’s plenty to consider; for example, when does a side hustle become a business?

And should promotional deals that pay you in free products be included as taxable income?

Let’s step through what you need to know about side hustles and getting your taxes right.

Taxable income and side hustles

Australians need to report all their income to the ATO, regardless of from where it’s sourced.

If you’ve taken up a side hustle and are earning an income from it, then chances are that means it needs to be reported at tax time.

You might even be running a business without realising it, but how can you tell?

Accountant and Perigee Advisers principal Lisa Greig said for many Australians side hustles are “passion projects” that begin without much thought about how it might affect taxes.

But with the ATO now focusing on the almost one million Australians doing a side hustle, you’re likely to be caught out if you fail to report all your income properly to the ATO.

“The ATO have got such good reporting and data-matching mechanisms now,” Greig said.

“If you’re making a passive income, it’s going to get caught.”

This particularly applies to Australians working on gig economy platforms like Uber, Greig said, because the ATO is now taking in data from platforms themselves about earnings.

It means some workers may even see their side hustle show up in their pre-fill at tax time.

The ATO itself says all taxable income must be reported, while those engaged in a “repeated activity” or to turn a profit are running businesses.

That means you’ll also need to register for an Australian Business Number (ABN) and potentially even Goods and Services Tax (GST) withholding if your side hustle earns enough.

This is different from a garage sale, for example, which could result in a one-off cash windfall that wouldn’t be considered a business unless you held such a sale routinely.

What if you’re paid in kind?

Greig said it can be difficult for some Australians to determine what their income from a side hustle actually is, especially if they are paid through free products or services.

For example, an Instagram influencer could be given free meals, clothing or appliances by brands in return for promoting their goods and services in lieu of any cash payments.

But it would be a mistake to think that because it’s not cash, it doesn’t count come tax time.

An ATO spokesperson said that in-kind payments are still taxable.

“The income tax and GST implications of earning income from content creation, including as an influencer, is the same as for anyone else,” the spokesperson said.

“Income earned is taxable, regardless of the form in which it is given to you.”

If you are paid in kind, it’s considered a “bartering transaction” and you’ll need to calculate the value of the goods received to work out what you’ll need to include in your income at tax time, the ATO said.

TND

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