Are you a business? It seems like a straightforward question, but the answer isn't always clear for those who start off as hobbyists. Knowing when you've made the switch is key to avoiding tax trouble.
At Gauri Maini's home in Sydney's north, the scent of essential oils permeates the air.
As her soap and skincare business, A Wicked Scrub, has grown over the years, it's slowly taken over parts of the house: batches of soap are cooked in the kitchen, online orders are wrapped in the laundry, and a spare room is where soaps are cut and stored.
Gauri began experimenting with soap-making three years ago, craving a creative change from her corporate career.
"I made my first one, and I went oh my god this is so much fun - and it actually lathers!"
As she continued experimenting, she soon had a surplus.
"At the six month mark it was about what can I do to be able to keep doing this - because I can't make the amount of soap I want to make because there's too much, I have to sell it. So I wanted to sell enough to keep the hobby going."
That's when her business began taking shape. She initially sold her products at local markets, but soon switched to online sales. Her soaps are now sold on her own website, and the Farmhouse site.
Hobby to Business
Gauri's journey is similar to that of many crafty business owners, who often start off cultivating a hobby.
But unlike a hobby, businesses have tax implications.
"The great part about it though is if you are in business and have assessable income, you might be able to claim some deductions," says Australian Tax Office assistant commissioner, Deborah Jenkins. "So some of your expenses, for example, you might be able to claim back."
And while it was clear for Gauri when her hobby became a business, many other hobbyists can find themselves in a grey area.
So how do you know if you've transitioned from a business to a hobby?
The ATO says there is no one factor that determines it, but there are a few key characteristics. For example, if you intend to make a profit, or if you repeat similar activities (like making soap) - or if you have account books or registered business name, you're likely a business.
"It's not a fine line, 75,000 dollars and you're in or you're out. It's just really important to maybe have that broader discussion with a business adviser," Deborah says.
A Wicked Scrub and The Culture Advantage
A Wicked Scrub is now one of two businesses Gauri runs. Her HR consultancy The Culture Advantage takes her back to her corporate roots.
"I work from a place of strengths, what are your values, how do you bring them to work," she explains. "You're going in as a consultant, working with an amazing bunch of people, and then you can go back out and make soap!"
With the soap business growing - on track for turnover of about $70,000 - Gauri's keen to keep it contained.
"This is going to always be just a one person show. So I don't want to make it too big.
"The philosophy is that you want to create time for yourself - it's similar to my consulting work. If you're running a home, you have kids, compassion to yourself is the most important."