Many Australians find immense joy and fulfilment in pursuing hobbies during their leisure time.
There are many ways to share our creations, from baking or gardening to DIY and craft activities.
Thanks to platforms like Etsy and Facebook Marketplace, making money from those creations has become much more manageable.
Hobbies may start as an opportunity to explore interests and talents. However, some have the potential to generate income, leading to the question…
When does a hobby become a side hustle?
This article will provide valuable insights if you are an Australian who enjoys a hobby that generates pocket money.
We discuss the various stages of transitioning your beloved pastime into a full-fledged business – if that is your intention.
The first step if you are looking to upscale your hobby is to know if it will be worth it.
How to Measure Demand and Profit Margin?
As your hobby starts to generate income, it’s crucial to assess the market demand and profit potential.
Begin by understanding your target audience and what they are willing to pay for your products or services.
Conduct market research to identify your competitors, pricing strategies, and consumer preferences. This can be done by looking at the recommended sellers and products that Etsy or FB Marketplace places under your profile for buyers to view.
By analysing these factors, you can gauge the demand for your offerings and estimate your profit margins.
Demand and profit margins fluctuate, so continuous monitoring and adaptability are essential to sustainable success.
If your hobby evolves into a business, you must set financial boundaries to ensure its growth doesn’t lead to financial risk. The whole point of a side hustle is to make money, not bleed it.
Do I Have to Register for GST?
As your hobby generates income, you may reach the threshold where you are required to register for the Goods and Services Tax (GST).
At the time of writing, the GST threshold is $75,000 in annual turnover. If your business earns more than this in 12 months, you must register for GST with the Australian Taxation Office (ATO).
Registration involves obtaining an Australian Business Number (ABN) and submitting regular business activity statements (BAS) to report your GST obligations.
It’s essential to keep accurate financial records and comply with GST regulations to avoid penalties and legal complications.
When Do I Have to Start Payroll for a Side Hustle?
As your business grows, you may find it challenging to manage all aspects of your operations independently. Hiring help becomes essential when your workload exceeds your capacity, or you need specialised skills to expand your business further.
At this point, consider starting payroll to compensate employees or freelancers who contribute to your business’s success.
Payroll involves managing wages, taxes, and other employee-related expenses. This makes applying for an ABN essential to provide your employees with the correct paperwork.
Before hiring staff, understand employment regulations and obligations, including minimum wage laws and superannuation contributions.
When Do I Have to Start Paying Taxes on a Side Hustle?
As your hobby transitions into a profitable business, you must pay income tax on the earnings generated.
The Australian tax system operates on a pay-as-you-go (PAYG) basis. You must estimate your tax liability and make regular payments throughout the financial year.
Keep meticulous records of your business income and expenses to calculate your taxable income accurately.
Create a clear and realistic budget that covers essential expenses. Include supplies, equipment, marketing, and any other costs associated with running your business.
Understanding your financial limitations will help you make informed decisions and prevent overspending.
Be cautious about investing more money than your business can reasonably generate in revenue, which can jeopardise your financial security.
Additionally, be aware of any tax deductions or concessions available to small business owners, as they can significantly impact your overall tax liability.
There are currently multiple tax deductions small business owners can claim for eclectic assets and technology integration.
When Your Passion Makes a Profit
The journey from a hobbyist to a business owner can be rewarding but requires careful consideration and planning.
As your hobby generates income, you may assess market demand and manage your finances responsibly. If you pursue it as a side hustle, ensure you comply with tax and regulatory obligations.
Remember that every business is unique, so there is no fixed formula for success.
Stay adaptable, seek professional advice when needed, and continue to nurture your passion for your hobby. To ensure your transition into a successful business is both fulfilling and financially sustainable, remember why you started.