Tax Advantages Explained

Are you passionate about a hobby that generates income? Do you wonder if it could be considered a business for tax purposes? Understanding the distinction between a hobby and a business is crucial, as it can impact your tax liabilities. In this article, we will explore the tax advantages of both scenarios, helping you determine how the Australian Taxation Office (ATO) views your activities.

Is it a business or a hobby?

Business Tax Advantages:

  1. Deductible Business Expenses:

As a business owner, you can claim a wide range of expenses as deductions. These may include rent, utilities, raw materials, employee wages, marketing costs, and more. These deductions can significantly reduce your taxable income, leading to lower tax payments.

  1. Immediate Asset Write-Off:

Businesses often enjoy the benefit of immediate asset write-offs. This means you can deduct the full value of certain assets, such as equipment and machinery, in the year of purchase. This accelerates tax benefits and encourages business investment.

  1. Loss Offset:

If your business incurs losses, you can use them to offset income from other sources. This ability to carry forward losses can help reduce tax burdens in profitable years.

Hobby Tax Advantages:

  1. Income Threshold:

Hobbyists who earn a small amount of income may not be required to pay taxes on it. If your hobby earnings fall below the ATO's income threshold, you might not need to report it as taxable income.

  1. Deductions for Hobby Expenses:

While hobby expenses are generally not deductible, there are some exceptions. If your hobby generates income of less than $20,000 annually, you can claim deductions for expenses up to that amount. However, the ATO prohibits claiming losses from hobbies to offset other income.

  1. GST Exemption:

Hobbyists are generally exempt from registering for the Goods and Services Tax (GST) if their annual turnover is below the threshold (currently $75,000). This exemption simplifies tax obligations for hobbyists.

Determining Business vs. Hobby:

  1. ATO Guidelines:

The ATO considers several factors to differentiate a business from a hobby. These include the intention to make a profit, the level of organization and commerciality, repetition, and scale of activity. Keeping proper records and documenting profit-making efforts can help support your case.

  1. Professional Advice:

If you are unsure about your activity's classification, seek advice from a tax professional or the ATO directly. Getting the classification right from the start can save you from potential penalties and unnecessary tax burdens.


Understanding the tax advantages of having either a business or a hobby is essential for all Australians. Businesses can claim deductions, write off assets, and offset losses, significantly reducing tax liabilities. On the other hand, hobbyists benefit from exemptions and limited deductions. Be sure to consult the ATO or a tax expert to determine the appropriate classification for your activity and maximize your tax advantages accordingly

Participants involved with the NDIS are assisted to live independently and plan out their ongoing future, including their home and living goals. The NDIS Housing in Superannuation can provide support to accessing housing for these individuals, but availability is often limited due to high demand.

NDIS Housing in Superannuation

Using your Self Managed Super Fund to invest in an NDIS property is a mid-to-long-term investment that could supplement your super to fund the retirement you want and deserve.

Having a self-managed superannuation fund gives you the ability to leverage your super by borrowing money from a lender to be able to make more sizable investment purchases, such as NDIS Property.

The rules and regulations around using your SMSF to purchase NDIS property can be quite complicated.

An SMSF can borrow money to purchase a house and land package as long as it is purchased together in one transaction (a one-part contract) as a single acquirable asset where the asset is identified up front as vacant land with a completed house on it.

There are specific considerations to consider to determine whether or not the investment property can be purchased through your SMSF.

Location & Demand

The property must be in an area with high rental demand (typically considered as anywhere within a 50-kilometre radius of an Australian capital city or a 35-kilometre radius of a major city).The areas generally fall into these areas and have a vacancy rate of 1% or below (meaning that the rental demand for investors is there).

Bank Approval

The property purchased through your SMSF must be ideally as new as possible as it needs to be approved by the bank. This is because the property must be positively geared (income from the rent should be higher than the outgoings on the property). At the very least it should have a neutral cash flow (meaning the incomings and outgoings are relatively even).

No Personal Gain From The Property

The last criterion is that you can’t see any personal gain from your investment property. This includes:

Some risks can accompany using your SMSF (Self-Managed Super Fund) to invest in NDIS property – the number one is cash flow. Your loan repayments will come from your SMSF. Sufficient income into your SMSF (including NDIS Rent from the tenant/s) needs to be ensured to make the repayments.

Some ongoing costs can come with using your SMSF to purchase a property. These may include:

When you retire, there will be two options available to you with the property.

  1. Continue to receive rent on your investment property as your pension-based income, or

In short, using funds from your SMSF to purchase an NDIS investment property is not the same as a regular SMSF property investment loan. Doing so should consider guidance from professional advisers and careful planning.