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  • #983932
    Harmonysweetpea
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    Hello

    I have been trying to work out if my small ‘business’ plan is just a hobby but am still a bit lost so hoping for some guidance. I’m a first time mum & while I have returned back to work part time, I have decided to start making & selling baby related accessories as a side project. Things like headbands, hats etc. I have been purchasing supplies from an Aussie supplier who sells at wholesale but have also purchased some of the same types of stuff in bulk from DHGate.com & ailexpress.com. Headbands, fabric flowers etc. I have about 20 items ready to go, a Facebook page set up ready to launch & a rough idea on postage etc.

    I expect it will make a profit but not a massive amount as the products will only be selling around $10 each with $2-3 material cost to make. I have spent about $500 on supplies which should set me up for a while & I expect future supplies will be purchased with profit.

    I’ve created a separate bank account but just in my name, not a business name. I will probably spend a few hours each week on it. Does it sound like a business or a hobby? Should I get an ABN?

    Thanks

    #1144946
    Peter – FS Administrator
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    Hi and welcome to the forums,
    Congratulations on setting up your side business!

    This is a question that does come up and generally relates to tax obligations.

    Some of our finance experts may jump in here, but in the meantime here are a couple of recent threads that might help:

    http://www.flyingsolo.com.au/forums/money-matters/25861-income-hobby-must-i-file-tax.html

    http://www.flyingsolo.com.au/forums/money-matters/25757-tax-enquiries-new-sole-trader-business-startup.html

    All the best with the business :)

    #1144947
    CindyK
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    Hello!

    This question comes up quite a bit. Unfortunately there is no hard and fast answer that allows you a quick solve.

    Here is the link to the ATO explanation

    Make yourself a list and write or type in those top questions and do your best to answer them. Where you are unable – then look for further clarification from the ATO – or this forum.

    With the ATO – the objective is always to be able to state your position clearly and with proof of your position or reasoning.

    For example

    Question 1:
    Does your activity have a significant commercial purpose or character?
    For example: Do you have a company logo? Branded designs? Do you package and sell the items with your branding on them? Are you actively seeking to expand into a larger market? This asks if you have a significant commerical purpose. The understanding is that someone who sells hand-made jewellery at the markets each weekend is operating a different type of venture to someone who makes jewellery perhaps has employees or others working for them also, packages it up and has found extra markets to sell through – perhaps approaching retail fashion stores etc.

    Happy reading!

    #1144948
    Jason@Plumsale
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    Hi,

    I remember when my wife contacted the ATO regarding the same question. Over the phone they asked the simple question. If my wife wanted to make a profit. If you have no intention of making a profit then its a hobby. If you intend on making a profit, no matter how small then the ATO want their cut of it.

    That was a couple of years ago, I’d recommend talk to your accountant, or call the ATO.

    #1144949
    Kennethti
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    Remember folks!

    If you intend to make a profit it is not a hobby, it is a business.

    Hobbies are where you buy stuff related to your hobby, and use it, and sell it if you have an excess of it or if you need to get something else and need the funds for it. Sort of like, buying model trains… perhaps using them a little… oh there’s a new one. I can’t afford it, I’ll need to sell a few pieces of my collection to get that one. Or, hey I want to knit a sweater… and it’s done. Oops I bought too much red wool. Not going to use it anytime soon… probably better sell it.

    #1144950
    MatthewKeath
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    Kennethti, post: 166271 wrote:
    Remember folks!

    If you intend to make a profit it is not a hobby, it is a business.

    Hobbies are where you buy stuff related to your hobby, and use it, and sell it if you have an excess of it or if you need to get something else and need the funds for it. Sort of like, buying model trains… perhaps using them a little… oh there’s a new one. I can’t afford it, I’ll need to sell a few pieces of my collection to get that one. Or, hey I want to knit a sweater… and it’s done. Oops I bought too much red wool. Not going to use it anytime soon… probably better sell it.Great answer!

    #1144951
    Jason@Plumsale
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    Another example which is how a lot of solo businesses start out. This was my wifes situation a few years ago, before she turned it into a business.

    You can make jewllery and sell it as long as the price you sell it for is equal to the cost price of the items used to make it. you cannot charge for your time to make it either. ie no wages or profit are allowed.

    If this example is still true, then can you class buying and selling items online a hobby. ie as long as you never intend on making profit.

    Note: Being bad at business and making a loss is not a hobby, if the intention was to make money.

    #1144952
    hcc89
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    Im a keen golfer and always trading clubs. Does it make it a business if i keep buying and selling on a frequent basis?

    I do make profits and losses along the way.

    Thank you.

    #1144953
    Kennethti
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    hcc89, post: 166390 wrote:
    Im a keen golfer and always trading clubs. Does it make it a business if i keep buying and selling on a frequent basis?

    I do make profits and losses along the way.

    Thank you.

    Naaah, see model train example.

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