With the countdown to christmas holidays quickly approaching there is a mad rush to complete things before we close the office. To add to that, I’ve been in major stress mode about my christmas shopping. I’m usually so organised and have most things bought and wrapped by now. I found a solution though – there are a multitude of facebook pages/businesses selling all these fantastic gifts. I had a great time (wasting many hours) going through each page and seeing what items they had for sale – some handmade, some sourced from suppliers.
I was surprised at the number of transactions each page/business seemed to be doing. One was doing about 20 sales a day and my spend with them was around $25, this equates to about $130,000/year! Before you all rush out to start facebook business pages I will note that my calculations make no allowance for the fact that this is most likely the busiest time of the year but nevertheless, it got me thinking. I wonder how many of these businesses are real businesses and how many are being run as hobbies? Are the people running these pages even aware of their tax obligations?
As with many taxation issues there is no black or white answer to the question “Am I running a business or is this a hobby?” The ATO provides a list of questions to help you make a decision:
- Does your activity have a significant commercial purpose of character?
- Do you have a profit making intention?
- Is there repetition and regularity to your activity?
- If you activity planned and carried out in a business like manner? Eg. Business name, premises, plan.
- What is the size, scale and permanency of your activity?
There’s many other factors to take into consideration as well such as how much time are you spending on the activity, how much capital is invested and is advertising done? It’s very important to assess these characteristics as if you are classified as a business, you need to get an ABN and declare your income in your tax return. You can also claim a deduction for your business related expenses.
My dealings with the page owners was varied. Some sent me proper tax invoices, some simply via email. If you know anyone who may need some advice in this area, please put them in touch – we are always happy to help.