For some people music is a career and for others it is a passionate pastime, but what if that pastime leads to the odd paid gig and you’re asked for an invoice by the bar or club you’re playing? Most people will have a scratch around the ATO website and realise they need to get an ABN to stick on that invoice otherwise the person paying them will need to withhold a lot of tax (currently 47%). The same principle applies to other pursuits turned money spinners, possibly including production of macrame plant hangers or performing as a busking mime.
So, you go online to get your ABN and you realise you’re not eligible because you’re not actually carrying on a business. What you’re doing the government considers to be a "hobby".
So, no ABN. Now what?
Forgive me as I get technical for a moment. The Tax Administration Act 1953 has an exception from the normal “no ABN means you have 47% withheld from your payment” rules for certain people if the work “is made in the course or furtherance of an activity, or series of activities, done as a private recreational pursuit or hobby“.
In order to access this concession, assuming you are carrying on a hobby and not a business, you simply need to issue the payer with the appropriate paperwork along with your invoice and they won't have to withhold anything from your payment. You can find more about this paperwork here on the ATO website and the form is called a "Statement by a supplier". In addition to this you might want to make note regarding your no-ABN status on your invoice, perhaps saying that “No ABN stated. No withholding required as this activity was carried out as a hobby. Refer to TAA53 Schedule 1 s12-190(6) and attached Statement by a supplier”.
Also remember that income from a hobby is not assessable income, whereas business income is. This means that any costs associated with earning the hobby income won’t be tax deductible, both income and expenses are to be disregarded for tax purposes.
If you’ve got issues in your business you don’t seem to be able to get on top of, why not get in touch? We are here and we are keen to help.