Interesting article in todays paper re 'hobby income'

[Splitmore]

Did anyone else read the article in todays Sydney Telegraph re the Aussie guy who took out the $10 million poker tournament in the US a few months ago?
Apparently there was some conjecture on whether he was liable to pay tax on the winnings back here in Australia. The ATO ruled that as the guy already had a full time job as a mortgage broker that playing poker was his hobby and therefore not liable to pay any tax.
It was only a small article but the way it was worded the so long as the income in question is deemed to come from a hobby you aren't liable to pay tax regardless of the amount.
Maybe Peter could comment on this one?

 

[Hickson]

I thought all prizewinnings were tax-free.



Hix

 

[craig.a.c]

So breeding snakes being a hooby of most people, don't have to pay tax no matter how much they get from it????

 

[Slateman]

My importing business is also hoby of mine. Honest

 

[Splitmore]

So breeding snakes being a hooby of most people, don't have to pay tax no matter how much they get from it????

thats what I got from the article. I guess you'd have to check their definition of a hobby too.
Hix, your right most winnings you don't have to pay tax but I know shows like big brother they make those winners pay tax on whatever they get.

 

[pugsly]

You are correct, hobby income is tax free. There are limits though, tax law is very complicated and difficult for 99% of people to grasp. But yes breeding and selling snakes provided that is not your only form income i.e you have a full time job or are on a full time pension, you are exempt from paying tax on those monies.

 

[Tristis]

pugsly, i have a full time job. this year i should make more selling snakes and monitors (if all my eggs hatch) than i would make at work. does this still come under the "hobby income".

 

[yommy]

I've heard though i'm not 100% But you can earn up to $50 000 from the sales before tax effects you. Any income over that you need an abn number and it would become a bussiness. But if you could make $50 000 out of your passion i'd quit my full time job in a blind of an eye lid.

 

[Bakes]

I got paid for a hunting article I wrote once. I had to sign a form so I wouldn't get taxed. I got $120 the article without tax, I would've got $80 odd if I didn't sign. Asked the accountant that year and he said no worries. Must be the hobby clause 8)

 

[peterjohnson64]

Can I write a 3 page post?

 

[olivehydra]

Can I write a 3 page post?

Yes please Pete, I'm all out of sleeping tablets :wink:

 

[peterjohnson64]

OK, for those about to sleep. Here goes a really abridged version. Firstly, yes, hobby income is never taxed. That is a no brainer. The question is whether or not you are in a hobby. And that is certainly not a black and white answer. There is no rule to say you are one or the other. You could sell a clutch of BHP's for $100k and be a hobby but conversely you could sell your clutch of beardies and have a business. It depends on your circumstances and how you operate. The tax office look for "badges of business" to determine if you are a business or a hobby. Things like a business name, regular advertising, separate bank account, system of receiving & spending money. There is also the reason you went into the oiperation in the first place. If you borrowed $20,000 to buy a pair of GTP's so you could sell the babies and make money then you are a business by mere intent.

The most important thing to remember is to get it right. If you are a business but don't bother declaring any income or registering for GST then look out. If you get caught you will have to pay the tax and a penalty of at least 100% plus interest at more than 10% compounding. Oh, and 1/11th of your sales in GST.

Hey, I happily ask you guys for advice concerning my reptiles - you should do the same.

And I know that I have dealt with people in this hobby who think that they are a hobby and wouldn't last a minute in an audit.

We are all peaches and cream us accountants aren't we?

Now folks - the legal bit - please remember that these comments are of a general nature only and may not suit your individual circumstances. You should seek specific advice about your own individual circumstances before trying to act on any of the information given above.

NOW GO TO BED!

 

[olivehydra]

OK, for those about to sleep. Here goes a really abridged version. Firstly, yes, hobby income is never taxed. That is a no brainer. The question is whether or not you are in a hobby. And that is certainly not a black and white answer. There is no rule to say you are one or the other. You could sell a clutch of BHP's for $100k and be a hobby but conversely you could sell your clutch of beardies and have a business. It depends on your circumstances and how you operate. The tax office look for "badges of business" to determine if you are a business or a hobby. Things like a business name, regular advertising, separate bank account, system of receiving & spending money. There is also the reason you went into the oiperation in the first place. If you borrowed $20,000 to buy a pair of GTP's so you could sell the babies and make money then you are a business by mere intent.

The most important thing to remember is to get it right. If you are a business but don't bother declaring any income or registering for GST then look out. If you get caught you will have to pay the tax and a penalty of at least 100% plus interest at more than 10% compounding. Oh, and 1/11th of your sales in GST.

Hey, I happily ask you guys for advice concerning my reptiles - you should do the same.

And I know that I have dealt with people in this hobby who think that they are a hobby and wouldn't last a minute in an audit.

We are all peaches and cream us accountants aren't we?

Now folks - the legal bit - please remember that these comments are of a general nature only and may not suit your individual circumstances. You should seek specific advice about your own individual circumstances before trying to act on any of the information given above.

NOW GO TO BED!

C'mon Pete, that was actually interesting and made sense, not like the dribble my accountant produces :wink: I like your little disclaimer at the end to prevent me from saying "uncle Pete the accountant said it was all above board" :wink: I would also be interested in how NPWS views things in NSW, perhaps they use the same criteria as the ATO?

 

[peterjohnson64]

No they wouldn't. The ATO will happily let you operate as a drug dealer as long as you pay taxes but the NSW Police certainly treat it differently. The advantage we have in NSW is that we can argue that we can't possibly be a business because there is no mechanism for selling. cool huh.

 

[olivehydra]

No they wouldn't. The ATO will happily let you operate as a drug dealer as long as you pay taxes but the NSW Police certainly treat it differently. The advantage we have in NSW is that we can argue that we can't possibly be a business because there is no mechanism for selling. cool huh.

Pete you're making me paranoid, I wasnt talking about NSW police I was referring to parks and wildlife and not being a "pro breeder" as opposed to offloading excess animals as a hobby? Who said anything about police and drugs? :wink:

ps. you still ok with the paperwork for tomorrow? Big Tony is asking questions :wink:

 

[peterjohnson64]

Hehehehe. I was really just drawing an analogy to show how the ATO don't copy any other department. I love this post. It makes me feel like I know something for once on this site.

 

[peterescue]

Its a great thread Pete, never know to much about this sort of thing.
When they decide you are not a hobbyist anymore can you claim expendituure for the past 20 plus years that got you where you are today.

 

[peterjohnson64]

Hey Pete, great question. That all depends on whether you were a business before or not. If you were then yes, you can. However, under new rules, you can't "negatively gear" business losses and write them off against your job like you can with rental properties. So that is all gone.

As I have no life I have been researching rulings tonight to add a bit of oomph to this thread. Amazingly, all the rulings are about people trying to prove that they are a business when the ATO says that they are not. the reason for this is that all other hobbiests lose money. Even horse breeders!!! The guy they got as a business instead of a hobby was actually a professional gambler on greyhounds!!! I kid you not.

So to the person who said all prozes are not taxable - that is definitely not the case.

 

[Bakes]

Can I write a 3 page post?

Well throw in some good pictures, have a chat to the administrator and see how you go :wink: :lol:

 

[TrueBlue]

I always thought that you can make 5 grand a year out of a hobby and anything over that is subgect to tax.