Got a Side Hustle? Here's How it Affects Your Tax in 2025

That weekend craft stall that’s bringing in extra cash? Your ride-sharing income between your main job? The YouTube channel you started during lockdown that’s now generating decent revenue? If you’re one of the growing number of Australians earning money from a side hustle, you need to understand how the ATO views your extra income — and what it means for your 2024-25 tax return.

Here’s the reality: the ATO is paying close attention to undeclared income from secondary work, including from the sharing or ‘gig’ economy this tax time. With new income reporting laws that require companies like Patreon to collect and report the taxpayer information of sellers who earn income on their platforms, and sophisticated data-matching that can track everything from digital payments to cash transactions, flying under the radar is no longer an option.

As tax professionals who’ve been helping Australians navigate complex tax situations for over 50 years, we’re seeing a surge in side hustle questions. The rules aren’t always intuitive, and the difference between getting it right and facing an ATO audit can be significant. Whether your side hustle is a casual hobby or growing into a genuine business, understanding your tax obligations isn’t just about compliance. It’s about maximising your legitimate deductions and keeping more of your hard-earned money.

With current tax year returns being lodged for 2024-25 (the year that ended 30 June 2025), and new income reporting systems now in full effect, there’s never been a more important time to get your side hustle tax strategy right.

Quick Summary: Your Side Hustle Tax Essentials

The golden rule is straightforward: when you provide your labour, skills or goods for a fee, you need to report this income in your tax return. This applies whether you’re using a digital platform or more traditional methods.

Key points for your 2024-25 return:

All side hustle income must be declared, regardless of amount
The Sharing Economy Reporting Regime (SERR) means platform operators must report certain transactions to the ATO
You can claim legitimate business expenses if you keep proper records
Once your side hustle crosses certain thresholds, you may need an ABN and GST registration
The $20,000 instant asset write-off is available for eligible small business entities until 30 June 2025

Bottom line: The ATO’s data-matching capabilities mean your side hustle income is likely already visible to them. Focus on proper reporting and maximising legitimate deductions rather than hoping income won’t be noticed.

The New Reality: Why Side Hustles Are on the ATO’s Radar

The sharing economy has exploded, and the tax office has kept pace. Digital platforms such as YouTube, Patreon, Airtasker, UberEats, and even OnlyFans are now legally required to report the income of their users to the ATO under the Sharing Economy Reporting Regime (SERR).

What the SERR Means for You

Starting from 1 July 2024, the SERR expanded beyond just ride-sharing and short-term accommodation to include virtually all digital platforms facilitating commerce. The SERR requires EDPs providing rights and services, such as Uber and Airbnb, to report all transactions to the ATO twice yearly.

“The ATO have got such good reporting and data-matching mechanisms now,” explains senior ITP tax advisor David Campbell. “If you’re making income through these platforms, it’s going to get caught. Until this year, individuals have been required to self-declare the income from their side-hustles — now nothing will go under the radar.”

This means platforms are now reporting:

Your personal details (name, address, date of birth)
Transaction amounts and frequencies
Payment methods and timing
Whether you had an ABN for the transactions

When Your Side Hustle Becomes a Business

Understanding whether you’re running a business rather than just earning casual income is crucial for your tax obligations. If you earn money through continuous and repeated activities for the purpose of making a profit, then it’s likely you’re running a business.

The ATO’s “Commercial Flavour” Test

The ATO looks at several factors to determine business status:

Profit Motive: Are you genuinely trying to make money, or just covering costs?

Systematic Approach: Do you keep proper records, maintain business bank accounts, and operate with regularity?

Scale and Frequency: Are these regular transactions beyond occasional sales to friends?

Business-like Behaviour: Marketing efforts, proper invoicing, and strategic planning all indicate business operation.

“We often see people surprised when their weekend hobby becomes a business in the ATO’s eyes,” notes ITP business tax specialist Sarah Kim. “Once you start advertising, keeping stock, or operating with regular customers, you’ve likely crossed from hobby to business.”

Case Study: When Hobby Becomes Business

Consider Maya, who started making jewellery as a stress-relief hobby during 2024. Initially, she gave pieces to friends who offered to pay her costs. By December 2024, she was:

Taking custom orders through Instagram
Maintaining inventory of materials
Attending weekend markets with a business permit
Earning $800-1,200 per month

Maya’s activities clearly demonstrate business intent, even though she started casually. For her 2024-25 tax return, all this income must be declared, but she can also claim legitimate business expenses like materials, market fees, and business insurance.

What Income Must Be Declared

The simple answer: all of it. It doesn’t matter whether you are an employee, independent contractor, carrying on a business, or none of these — income earned through side hustles must be reported.

Cash, Digital, and “In-Kind” Payments

Cash Payments: Just because there’s no digital trail doesn’t mean it’s not taxable. The ATO traps many businesses that — deliberately or otherwise — don’t record cash sales.

Digital Platform Payments: With SERR reporting, these are automatically visible to the ATO.

Bartering and “In-Kind” Payments: If you are paid in kind, it’s considered a “bartering transaction” and you’ll need to calculate the value of the goods received to work out what you’ll need to include in your income at tax time.

This means if you’re a fitness influencer receiving free products worth $2,000 in exchange for promotional posts, that $2,000 value is taxable income.

Business Registration Thresholds

Understanding when you need formal business registration can save you from compliance issues and unlock valuable tax benefits.

ABN Registration

While there’s no specific income threshold for ABN registration, you should consider obtaining one if you’re:

Operating with business intent
Wanting to claim business deductions
Dealing with customers who may need to withhold tax at higher rates for non-ABN suppliers

GST Registration

Once your annual turnover hits $75,000, GST registration becomes mandatory within 21 days. Many successful side hustlers underestimate their growth trajectory and find themselves needing urgent GST registration.

PAYG Instalments

The ATO automatically enrols you in the PAYG instalment system when your side hustle income generates a tax liability of $1,000 or more. This means quarterly payments based on your previous year’s income to prevent a massive tax bill at year-end.

Maximising Your Deductions

Once you’re legitimately in business, the deduction opportunities can be substantial. If you declare side hustle income, the good news is you can also claim deductions for expenses if you have kept your receipts and it directly relates to earning this side hustle income.

Equipment and Assets

Instant Asset Write-Off: Small businesses with an aggregated turnover of less than $10 million, can deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use between 1 July 2024 and 30 June 2025.

This means if you bought a $15,000 van for your delivery business in March 2025, you can claim the full cost as a deduction in your 2024-25 return rather than depreciating it over several years.

Computer and Technology: Laptops, phones, cameras, and software directly used for your business are generally deductible.

Operating Expenses

Direct Costs: Materials, inventory, platform fees, and advertising costs are typically fully deductible.

Professional Services: The cost of managing your tax affairs through a registered tax agent is deductible.

Home Office Expenses: If you use part of your home exclusively for business, you may be able to claim a portion of household expenses.

The “Apportionment” Rule

You can only claim a deduction for the work-related part of your expenses. If you’re a food delivery rider, you can claim some of your bike costs, but you can’t claim for your personal riding time and costs.

“Don’t rely on what other people claim as a guide to what you can claim,” warns ITP advisor Sarah Kim. “Every job is different, and what is required to earn an income for one occupation may not qualify in another.”

Common Side Hustle Scenarios and Tax Implications

Rideshare and Food Delivery

Income: All earnings from platforms like Uber, DoorDash, and Menulog must be declared.

Deductions: Vehicle expenses (fuel, maintenance, insurance), phone costs, insulated delivery bags.

GST Considerations: Most drivers operate as sole traders and need to register for GST once earnings exceed $75,000 annually.

Online Content Creation

Income: Ad revenue, sponsorship payments, subscriber income, and product placement value.

Deductions: Equipment (cameras, lighting, editing software), internet costs, props and materials.

Tip: Keep detailed records of content creation expenses versus personal use of equipment.

Craft and Handmade Goods

Income: All sales through platforms like Etsy, markets, or social media.

Deductions: Materials, packaging, platform fees, market stall fees, business insurance.

Inventory Considerations: You may need to account for stock on hand at year-end.

Freelance Services

Income: All payments for services, whether through platforms like Airtasker or direct client relationships.

Deductions: Professional development, equipment, software subscriptions, insurance.

Professional Indemnity: Insurance costs for service-based businesses are typically deductible.

Record-Keeping That Actually Works

Proper record-keeping isn’t just good practice — it’s your insurance policy against ATO scrutiny.

Digital Solutions

Modern apps can automatically categorise expenses, store receipts digitally, and integrate with accounting software. Popular options include:

MYOB for comprehensive business accounting
QuickBooks for simplified expense tracking
Receipt Bank for automated receipt processing
ATO’s myDeductions tool for basic expense tracking

What Records to Keep

Income Records: Bank statements, platform payment summaries, cash receipts, invoices issued.

Expense Records: Receipts, invoices, bank statements, credit card statements, loan documents.

Business Activity: Diary notes of business activities, kilometres travelled for business, hours worked.

Asset Records: Purchase receipts, installation dates, business use percentages.

The Five-Year Rule

Keep all business records for five years after lodging your tax return. This includes receipts, bank statements, contracts, and any professional advice documentation.

Avoiding Common Mistakes

After helping thousands of side hustlers with their tax obligations, we’ve seen the same costly mistakes repeatedly.

Mixing Personal and Business Expenses

Keep separate bank accounts and credit cards for your side hustle. This makes record-keeping easier and provides clear audit trails for business expenses.

Claiming Personal Expenses

That holiday where you took some photos for your travel blog? The business portion is the time specifically spent creating content, not the entire trip cost.

Ignoring the Business vs Employee Question

Some platforms treat you as an employee (with PAYG withholding), others as an independent contractor. Understanding your status affects what expenses you can claim and when tax is due.

Underestimating Income Growth

Don’t wait until you’re earning $80,000 to think about GST registration. By then, you may already be overdue for registration and facing penalties.

Tax Planning Strategies for 2025-26

Smart side hustlers think beyond just compliance to strategic tax planning.

Timing Your Income and Expenses

If your side hustle is growing rapidly, consider whether deferring some income to the next financial year (starting 1 July 2025) might keep you in a lower tax bracket.

Conversely, if you’re having a high-income year, bringing forward deductible expenses like equipment purchases can provide valuable tax relief.

Superannuation Contributions

Side hustle income can be used to make additional superannuation contributions, potentially qualifying for government co-contributions and tax deductions.

Business Structure Considerations

As your side hustle grows, consider whether operating through a company or trust structure might provide tax advantages. This typically becomes relevant when annual income exceeds $50,000-100,000.

Professional Help When You Need It

Side hustles can quickly evolve from simple income streams to complex business operations. Professional advice becomes valuable when you’re dealing with:

Annual side hustle income exceeding $20,000
Multiple income streams requiring different tax treatment
Decisions about business structure and GST registration
Complex expense apportionment between personal and business use
ATO queries or audit situations

At ITP, we’ve been helping Australians navigate evolving tax landscapes for over 50 years. Our business tax specialists understand that today’s side hustle could be tomorrow’s main business, and we can help you establish compliant systems that grow with your success.

Whether you’re just starting out and want to understand your obligations from day one, or you’re an established side hustler looking to optimise your tax strategy, our experienced advisors can provide tailored guidance for your specific situation.

Book a consultation with one of our business tax specialists, or visit one of our offices across Australia to discuss how we can help maximise your side hustle’s profitability while ensuring full ATO compliance.

Remember, the cost of proper tax advice is typically far less than the cost of getting it wrong. Starting with the right systems and understanding from the beginning sets you up for long-term success.

FAQs: Your Side Hustle Tax Questions Answered

Do I need to declare side hustle income if I earned less than $600?

Yes, all income must be declared regardless of amount. If your side hustle makes you money, then you need to declare it on your tax return. There’s no minimum threshold for income declaration in Australia.

Can I claim expenses if my side hustle made a loss?

Yes, if you’re genuinely operating a business with profit intent, you can claim legitimate business expenses even if they exceed your income, creating a tax loss that may offset other income.

When do I need to start paying tax on my side hustle income?

Tax obligations begin immediately when you earn assessable income. However, if tax isn’t withheld by payers (which is common for side hustles), you’ll typically pay when you lodge your annual return or through PAYG instalments.

How does side hustle income affect my main job’s tax?

Side hustle income is added to your total assessable income, potentially pushing you into higher tax brackets. This can mean your main job’s tax withholding becomes insufficient, leading to a tax debt at year-end.

Can I offset side hustle income against investment property losses?

Yes, if your side hustle operates as a business, profits and losses are treated as ordinary income that can offset other income sources, including negative gearing losses from investment properties.

What happens if I didn’t declare side hustle income in previous years?

Contact the ATO or a tax professional immediately to make voluntary disclosures. The ATO is generally more lenient with voluntary corrections than discovered omissions, and there may be penalty reductions available for proactive disclosure.

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