Sanjeev Sabhlok's notes on technology, hardware, gardening

Is income from running avertisements/ google ads (adsense) on a blog taxable or hobby income in Australia?

I started my blog in mid-2010 and sometime – perhaps in 2011 or 2012, tried ads. Nothing happened. Then, around 2013 I tried ads again – by spending some time to understand the details, and using a plugin.

Slowly I received my first $100 from google. Now the amount is larger, each year, and I the returns from the blog exceed its costs (although not from inception of sabhlokcity.com and my many domains, etc). I might "break even" in a year or two. Then what happens? Is this hobby income or business income?

ATO's position: https://www.ato.gov.au/forms/trust-tax-return-instructions-2013/?page=8

Turning a blog into a business

Here's a discussion: http://forums.whirlpool.net.au/archive/2299507

According to an ATO spokesperson, there is no simple answer as to whether you are in business or not because it depends upon the facts in each case

You would normally be considered to be in a business for tax purposes if you enter into an activity with the intention of running it as a profit-making business, and if the activity is carried out in a way that shows it has a significant commercial purpose and viability.

 good indicators of a business include the scale of the operation, whether you keep business records, and whether you advertise.

 if you're consistently making profits [from the operation in question], you're in business. [Source]

Further:

Technically, selling ad exposure to Google is classed as exporting, so it would be wise to talk to your accountant or bookkeeper about receiving a new source of foreign, non-GST income. [Source]

Tax Office determines YouTube income as taxable

The tax decision says someone who received income from Google for their cooking and baking videos uploaded to YouTube was subject to the same income tax laws that apply to people with fluctuating income such as performing artists, authors and sportspeople. 

Minter Ellison special counsel Hamish Wallace agreed, saying the Tax Office’s decision was a warning to anyone earning money online to seek professional advice.

“I think there’s quite a few people out there who might be carrying out activities thinking it’s just a hobby, but from the ATO’s perspective it’s carrying on a business and generating taxable income,” Mr Wallace said.

“In the digital age, what starts out as a hobby can quickly turn into something commercial if a person develops an online following and derives income as a result” Mr Cartoon said.

“If there are a lot of hits and the clip is deriving income, it’s going to be hard to say that the income is not assessable for tax purposes, particularly if the activity is organised and repeated.”

But looks like the volume of income does matter (not just the regularity):

"Almost by accident my blog turned into a business [Source]

Apparently around 5K is the benchmark for hobby income:

Regarding your example of someone who earns income as an employee as well as from Adsense someone in that category really should set up as a sole trader with ABN etc if earning 5 grand a year because that’s beyond what the ATO considers a hobby" [Source]

Apparently these are the rules in India (but these are irrelevant to me).

These are the rules in USA. And see this. And this. More.

If you have been lucky enough to make a profit from your blog, or small business, in three out of the last five years the Internal Revenue Service (IRS) considers it a business rather than a hobby. Even more precisely, if you have treated your blog like a business by regularly working on it with the purpose of making a profit, the IRS would also deem this a business and as such would also qualify for business deductions.

Google's opinion.

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