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The ATO is keeping an eye on your side hustles

The ATO has recently issued a media statement that serves as a reminder to taxpayers that they are paying close attention to undeclared income from secondary work, including from the sharing or "gig" economy. A person with a "side hustle" needs to consider their tax obligations, including the need for an ABN, GST compliance and tracking income and expenses. They also need to lodge their activity statements and annual tax returns and may need to seek advice from a registered tax agent.

Claudia Lyons, Maddocks Lawyers

The ATO has issued an important reminder about undeclared income from secondary work. The gig economy has provided many people with a source of income after suffering financially due to the pandemic. As more Australians earn income from their side hustles, it is important that income from these jobs are reported to the ATO and any tax obligations are complied with.

Side hustles may include:

  • food delivery driver;
  • freelancing;
  • market stalls;
  • Airtasker; and
  • subscription platforms such as Patreon, Twitch or OnlyFans.

The ATO has confirmed that they receive income information from a range of financial institutions, online marketplaces, ride-sourcing applications and short-term rental websites. They are able to match up this data with individuals' and company's tax returns so it is unlikely that you can prevent the ATO from seeing that you have obtained additional income.

It may be necessary to consider if your circumstances are merely a private arrangement with informal compensation. For example, if you clean your friend's house and in return they pay for your dinner, this would not constitute a side hustle. However, if word spreads about your excellent cleaning skills and you start cleaning multiple houses a week in return for cash payments - tax obligations arise.

What if your side hustle become your side business?

If your side hustle takes on more characteristics of a full-fledged business, you may consider obtaining advice from a registered tax agent. For instance, if your activity is planned, organised and carried out in a businesslike manner, if you have a separate business bank account, operate from a business premises, or have a registered business name, you will need to consider your additional tax obligations including the need for an ABN, registering for GST, and implementing a record keeping system to track income and expenses. You will also need a plan for paying tax on your business income when you lodge your activity statements and annual tax returns.

Pay As You Go Instalment System

To assist with paying your income tax, the ATO has the Pay As You Go Instalment system (PAYG Instalments) which helps you set aside tax payments throughout the year to avoid paying a large tax bill when you lodge your tax return. This system is different to PAYG withholding, where your employer collects tax from your income before they pay to you. If you're new to business, or you think you're going to make a profit from your business, it may be beneficial to voluntarily enter into the PAYG Instalments.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Revenue Practice Group.

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Julia Tonkin
Julia Tonkin
+61 3 9258 3318

Qualifications: BA, LLB, University of Melbourne

Julia is a Partner in Maddocks Corporate and Private Clients team. Julia has extensive expertise in:

  • estate planning, structuring for succession of ownership and control of private and family businesses.
  • charities and not-for-profit space.

Julia’s clients include high net worth individuals and families and privately held businesses.

Clients value Julia’s empathic, common sense yet technically sound approach to complex legal (and often interpersonal) issues.

She has been recognised as an Accredited Specialist by The Law Institute of Victoria with an accreditation in Wills & Estates Law. She has also been recognised in Doyles Guide for Wills, Estates & Succession Planning Law Recommended – Victoria in 2023.

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