If you earn wages and also run a side hustle as a sole trader, both go on the one individual tax return: your wages from your employer’s income statement, and your side income and expenses in the business items section. There is no separate return for a sole trader’s side business. What you need to keep for the side hustle is a clear record of its income, its costs, and which part of any shared cost is business.
The details below are as at October 2026, from the ATO’s own pages (linked at the end). They are general information: where it depends, the answer depends on your own facts, and the ATO or a registered tax agent can say how they apply.
Is it a business or a hobby?
The ATO says a business generally involves a set of continuous and repeated activities done for the purpose of making a profit. It is not a business when it is:
- a one-off transaction (unless it is the first step in a business, or intended to be repeated)
- done as an employee
- a hobby or recreation from which you don’t seek to profit
- a simple investment, such as holding shares or a rental property let through an agent.
For anything in between, the ATO says the more of these questions you answer yes to, the more likely it is a business: do you intend to be in business, and to make a profit; is the scale enough to make a profit; are the activities repeated and continuous; and are they carried out in a business-like way (business records, a separate business bank account, advertising to the public rather than friends and family, a business name or an ABN).
Two things worth knowing. First, having a business name or an ABN is one factor on the ATO’s list, not a test on its own. Second, even when something isn’t a business, the ATO says you may still need to declare some payments as assessable income, such as rent, income from providing services, or the market value of goods and services you receive in a barter deal. If it is unclear, the ATO has a guide to work through, and a registered tax agent can look at your facts.
Do you need a separate account?
None of the ATO pages linked below requires a separate bank account for a side hustle, so this is practice rather than law, though it is one of the business-like indicators the ATO lists. The reason people do it is simple: the ATO says the minimum information on a record includes the date, amount, description and purpose of each transaction, and that where an expense is part business and part personal, you need clear documents showing the business portion. A separate account does most of that sorting for you. If you share one account, you can still do it, but each shared line needs to be identified as business or personal.
What records to keep
The ATO’s record-keeping rules for business apply to a side business the same way they apply to a full-time one:
- Keep records of all transactions relating to your tax affairs: income, expenses, and how you worked out any estimate or claim.
- Most records must be kept for five years, from when you prepared or obtained the record or completed the transaction, whichever is later. Some need longer.
- Records must not be altered, must be kept in English (or be easily converted), and you must be able to show them to the ATO.
- For mixed-use expenses (a phone, a car, a room at home) keep documents that show how you worked out the business portion.
- Income records include invoices, bank statements and online payment receipts (the ATO names eBay, PayPal and Stripe as examples). Expense records include tax invoices and receipts.
You can only claim a deduction for the business part of an expense, and only if you have the records.
A worked example
Jordan works for a council by day and takes on freelance design jobs on weekends, invoicing under an ABN. In the year, Jordan invoices $18,400 and has these business costs:
| Item | Amount |
|---|---|
| Software subscriptions | $620 |
| Advertising and website | $1,950 |
| Phone and internet: business share, 40% of $1,200 | $480 |
| Public liability insurance | $350 |
| Total business costs | $3,400 |
Jordan’s net business income is $18,400 minus $3,400, which is $15,000. It is reported in the business items section of the same individual return as the council wages, and both count towards Jordan’s taxable income. The 40% figure only works if Jordan can show how it was worked out, for example with a diary or a record of use. Jordan’s GST turnover is well below $75,000, so GST registration is optional.
GST: the $75,000 threshold and the ride-sourcing exception
You must register for GST when your GST turnover reaches $75,000. Your GST turnover is your gross business income (not your profit), measured over the current month and the previous 11, or projected over the current month and the next 11. It includes income from all your businesses, not your wages. You have 21 days to register once you reach it. Below the threshold, registering is optional, and if you choose to, you generally have to stay registered for at least 12 months.
The exception: if you provide taxi, limousine or ride-sourcing services, you must register for GST regardless of your turnover. The ATO also lists income through the sharing economy and digital platforms as a case for registering, so if you drive or deliver through an app, check its page.
Once registered you lodge a BAS, charge GST on your sales, and claim GST credits on purchases for the business. For purchases over $82.50 you need a tax invoice, and the ATO says to wait for it before claiming.
PAYG instalments might start
Your employer withholds tax from your wages. That does not cover the side income. PAYG instalments are regular payments, usually quarterly, towards tax on business and investment income. The ATO may enter you automatically, based on your latest tax return, if an individual has all of the following: instalment income of $4,000 or more, tax payable on the latest notice of assessment of $1,000 or more, and estimated (notional) tax of $500 or more. Instalment income is your gross business and investment income, excluding GST and capital gains. (These are the entry thresholds on the ATO’s page as at October 2026; the page was last updated in December 2024.) You can also start voluntarily, which the ATO suggests if you are new to business, to avoid a big bill at tax time.
If the side hustle makes a loss
A business loss can usually be set against your wages only if the non-commercial loss rules are met. Broadly, your income for the loss test must be under $250,000, and the business must pass one of four tests: assessable income from the activity of at least $20,000, a profit in three of the past five years, real property of at least $500,000 used in it, or other assets of at least $100,000. If it doesn’t pass, the loss is generally deferred and carried forward against the same activity’s future income. There are exceptions and a Commissioner’s discretion, so check the ATO’s pages before relying on a loss.
Questions
Do I declare side hustle income if it’s not a business?
Possibly. The ATO says you may still need to declare certain payments as assessable income even if you aren’t in business, such as payments for providing services. If you are unsure, use the ATO’s guide or ask a registered tax agent.
Do I need an ABN for a side hustle?
Not necessarily. Not everyone needs an ABN, and you can only get one if you are running a business or other enterprise. You need one before you can register for GST, and business.gov.au notes it lets you avoid PAYG tax being withheld from payments you get.
Do my wages count towards the $75,000 GST threshold?
No. GST turnover is your gross business income, and the ATO lists work done as an employee as not being a business.
I drive for a ride-sourcing app. Do I need to register for GST?
Yes. The ATO says you must register for GST if you provide taxi, limousine or ride-sourcing services, whatever your turnover.
Where Beans fits
The hard part of a side hustle is the line between your business money and your own. Beans keeps the books as you go: bank lines and receipts are recorded in the right entity’s books as they arrive, across several entities and your personal money. Receipts can be emailed in, and Beans only asks when the call is yours to make, such as whether something is the business’s or personal. If you register for GST, it works up the BAS from books that are already done, and the BAS waits for your yes. It also flags a purchase that is still missing a tax invoice, so you can chase the supplier before the BAS. Beans doesn’t hold the credit back: when the BAS is ready, it lists the bills still missing a tax invoice, and you choose whether to keep claiming or not.
Sources (ato.gov.au and business.gov.au, checked 15 October 2026): Are you in business?, Business, partnership and trust income, Business structures: key tax obligations, Side hustles are front of mind this tax season, Overview of record-keeping rules for business, Records required for your business’s tax return: income, Records required for your business’s tax return: deductions, Register for an Australian Business Number, Registering for GST, When you can claim a GST credit, Starting PAYG instalments, What is a non-commercial loss?.
General information, not tax advice.