Business Structures: Hobby

Key Takeaways

[Music] hi my name is Adrienne Carmen I'm the principal of carbon law and today I'm going to be talking about business structures and in particular the business structure of a hobby now I've got this as business structure number zero because it really is in a business structure it is you are not running a business so the quick question is is how do you know when you're running a business and when you're not so 1 are you intending to make a profit so there is a very simple but cynical rule that rule of thumb that the tax office might apply and that is if you are going to make a profit you're more likely to be running a business and if you're making losses then you might not be now more technically the test is are you running something in a businesslike manner so if you are stand collecting or selling model train parts or running a sporting club either of these things could be done as a hobby or as a business now if you are doing something that involves that that would only be done for making money so you're doing some cleaning or you're driving goobers on the weekend and thor's are going to be a business and the income that you earn will be taxable but money that you make from a hobby small amounts will not be taxable so one advantage is that you don't need to worry about paying tax you don't need to worry about other reporting you don't either an ABN you don't need a tax file number don't need to declare your income and so you don't get to claim input tax credits you don't get to claim any losses so there are a bunch of rules called the non commercial loss rules if you're not making profits or you doesn't look like to be making profits you're not having large enough income you're not using sufficient assets in in the business and all you don't have you know running things in a businesslike manner it might be the case that you are not running a business at all and if you make losses then you can't offset them against other income that is to say there are a lot of people who count with businesses that we're running that say their stamp collecting or you know some kind of small business somewhere that makes a small amount of money but then generates a lot of losses and then they claim that against their tax unfortunately you can't do that so and if you are not running a business when you're not ready a commercial business you certainly kind of offset those losses so can't do you need a company or trust or something else well not really if you're running something that's non for profit you might want to consider a non profit structures if you are running a a sporting club maybe you should incorporate the Association or maybe house as an unincorporated association with some set of rules if you're running charity maybe you should formalize those if you're running a high leading something you make a small amount of money you will have the risk in your own name so if you create some something negligent you you're right teaching soccer and someone have you not paying attention and someone injures themselves you will be at risk obviously need to take out personal insurance but I'll be not a business structure you're not writing a business no reporting no income no tax no losses maybe no worries thank you I'm a drink common principle accountable [Music]