Objects of desire

Whether it’s cars or coins, a fun hobby can become a serious business

- DAVID THORNTON

In 1985, JR Walker, a real estate agent in Townsville, found himself in the Supreme Court. Years earlier, he’d forked out $3000 for an angora goat with reproductive potential. Not wanting to see a good thing go to waste, he spent a further $2000 for a number of high-quality bucks to service the goat, which was in Victoria. He researched widely, joined his local Angora Goat Society and kept records of his income and expenses.

The operation ended up producing four offspring, which Walker promptly sold off for a loss. He then claimed his expenses against his regular taxable income as a real estate agent.

The tax department rejected the write-off, claiming Walker fit the definition of an investor, not a primary producer. The court decided otherwise and awarded Walker his tax deductions.

The case shows how little it takes to fit the definition of a business – even if the tax office doesn’t think so. So understanding the fine line between a hobby and business or side hustle should be well understood by collectors looking to turn pro.

Even the most benign of activities, such as making pocket change at the Sunday market, can be considered a business in the eyes of the taxation office.

If you answer “yes” to any of the following questions, chances are you’re running a small business:

• Is your activity being undertaken for commercial reasons?

• Do you undertake it to make a profit? • Do you regularly and repeatedly undertake your activity?

• Is it planned, organized and carried out in a business-like manner?

If this is the case, you’ll need to register an Australian business number (ABN) and declare your earnings through a tax return. It’s not all bad news, though. As with any business, you can claim the cost deductions against the income.