When is selling clothes or other items online a hobby vs a business? These are the tax rules
When do you need to declare online sales income to the tax office? The answer can be as messy as your wardrobe – so two experts explain what you need to know.
Online selling of clothes or other items in Australia can be a hobby or a business, depending on various factors and the tax rules. There is no minimum sales threshold that automatically makes an activity taxable. However, the tax office collects transaction data from platforms like eBay, Amazon, and other sellers for a large number of transactions annually.
If you sell items occasionally, like a dress you bought for A$250 and sold for $100, it is likely considered a hobby or a personal activity. The tax office is less likely to view it as a business, and you do not necessarily have to pay tax. However, you still need to keep records to support your position.
When you start buying vintage clothes from friends, family, and op shops and reselling them, it may indicate a pattern of getting involved in the market. In such cases, the tax office may consider it a business if you regularly engage in this activity. Systematic actions and acting in a "business-like" manner, such as proper record-keeping and advertising beyond family and friends, can also tip the scale in favor of a business classification.
There is no specific dollar threshold that automatically categorizes activities as a business. Amazon and eBay share data for people who sell goods worth A$12,000 or more in a single year. Earning less than this amount doesn't rule you out of being a business, but it might lead to more scrutiny from the tax office.
If you make a profit from selling valuable items like jewelry or personal items, it is considered taxable. However, if you make a loss on such high-value transactions, the tax office may restrict how you can use those losses for tax purposes. If you are uncertain about whether your online selling activities are a hobby or a business, it is best to consult a registered tax professional for advice.
Written by urgent.news from The Conversation AU's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
