I've recently taken up jewellery making and have started selling some of the pieces I make. Will I need to pay tax on the money I receive from these sales?
The question of whether you will need to pay tax on your sales of jewellery will be determined by whether your activities are considered a business or a hobby.
The Australian Taxation Office has issued practical guidelines in order to help you determine whether activities such as selling pieces of jewellery will be considered a business or a hobby. Factors you need to consider include the size and scale of your activities, your intention to make a profit, and whether you are carrying on your activities in a business-like manner.
In your situation, you should consider factors such as, do you make your jewellery in a manufacturing plant or intend to in the future? How many pieces of jewellery do you expect to sell? Do you have or do you plan to set up a website? Are you issuing invoices? Are you or do you expect to make a profit? Is this your main source of income, or do you work elsewhere? How many hours a week do you devote to jewellery making?
If making jewellery is something you enjoy doing in your spare time, and you decided to start selling pieces on request or to help cover your costs, this is likely to be considered a hobby, especially if jewellery making is not your main source of income, and you don't have a business plan or a profit making motive.
This means that any money you receive from selling jewellery will not be taxable, and none of the expenses are tax deductible.
However, if you spend more time on your jewellery selling activities, approaching local businesses or setting up a webpage to sell your jewellery, and it becomes a key source of income for you, it is more likely to be considered that you're carrying on a business. This means that any income you earn and the expenses you incur must be recorded in your income tax return and taxed.
You will also need to consider any other legal or tax obligations associated with running a business.
This includes applying for an Australian Business Number or considering any potential Goods and Services Tax impact, including whether you should be registered for GST.
Contact your tax adviser or the Findex team at firstname.lastname@example.org to learn more about whether you are considered to be running business activities or merely undertaking a hobby.
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