Distinguishing a Hobby from a Business

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Distinguishing a Hobby from a Business Business or Hobby The difference between a hobby and business according to Australian Tax Office is based on whether a business exists for tax purposes or not. It is significant to consider if the activity carried out is for commercial purposes or is located in a commercially viable environment. The fact that a taxpayer carries out a professional practice or engages in another business does not disqualify the finding that the additional activity is a business. The Australian Taxation Office clearly illustrates that investors must engage in self-justifications and make critical decisions before starting any business. An investor must intend to make profits or believe that profits will be realised in the future for an activity to qualify as a business according to the ATO's guidelines. In circumstances where the level of the activity is dependent on other businesses in the industry, and can enable the investors make credible and sustainable profit, then the activity is considered a business not a hobby (Accounting Tools Online, 2012). These indicators present clear guidance as to whether activities are businesses or hobbies according to Australian business law. Given that the activity fails to comply with the above indicators, does not automatically discount the activity as a business. Failure to qualify as a business does not make the hobby to be a pursuant of a business mission, since income generated from hobbies are not
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