Taxpaying Entities


Whether or not your activity is undertaken as a business or as a hobby is a question of fact and circumstance and this is one of the most frequently asked questions, at workshops and seminars, at Arts Law Centre of Queensland advice sessions, and in the office.

It is important to get this question right because if you are undertaking the activity as a business, then the income is assessable (has to be included in your tax return) and the expenses incurred will be tax deductible. If, on the other hand, you are not in business, then whatever receipts you get will not be assessable and the expenses will not be tax deductible.

If you are “in business” –

  • You will be carrying on the activity with the intention of making it commercially successful. If your business is in the arts there will be an expectation that the realization of your commercial goals may be longer term than if you were opening up a fish and chips shop, in other words, you do not need to be making a profit from day one. You do need, though, to show what actions you are taking to maximize income producing activities – if you are a visual artist you will have a body of work available for sale, may have exhibited (group or solo), have a dealer/gallery on board; a musician will be playing regularly (not necessarily for a fee) and promoting themselves unmercifully; a writer will be submitting pieces for publication, having manuscripts appraised; an actor will be regularly auditioning and performing, and everyone will be applying for grants…
  • The activity will be undertaken in a regular, systematic and continuing fashion. This does not necessarily have to be on a full-time basis (although that obviously helps) but if it’s on a part-time basis then that has to be regular. Irregular and sporadic activity may indicate that you do not consider the activity seriously enough for it to be considered a business
  • You would probably be a member of a related professional or industry body; a visual artist might be a member of Artworkers (here in Queensland) or of NAVA; a dancer, Ausdance; a writer, the Queensland Writers Centre or your respective state body; a musician, QMusic. You would also be a member of the respective copyright collecting society; APRA, Viscopy, CAL etc.
  • You may have some training in the field, either at tertiary level or otherwise, or you may simply be self taught; nothing wrong with that. You would also be engaged in a continuing process of creative and professional development
  • You will be keeping all of the records of income and expenses that someone in business would be expected to keep
  • You definitely intend and expect to be, ultimately, profitable

If you are not “in business” –

None of the above will apply. The activity will be carried on when you feel like it, you could not care less whether you ever sell anything or earn anything from the activity, it costs you much more than the amount you get back, and so on.

It is important to remember, though, that you could be earning income from this activity, in spite of your best endeavours not to. In that case, the proceeds could well be assessable income anyway, and most probably if the amount received is more than the expenses incurred.

You may declare that the activity is a hobby, but if the result of the hobby is regular income and profits, then the ATO will consider any profit to be taxable, particularly if the activity is undertaken on a regular basis.

See also Overview of Income
See also Overview of Deductions
See also Non-commercial Loss provisions