the Australian Taxation Office website would be the ideal place for you to get the information you seek EXCEPT that the website has been down for some time now. They have a page where they ask questions that help you determine whether your activity is a hobby or business.
The simple test would be to ask yourself why do you sell on eBay? If you sell to make money you should declare any profit as income. If you are simply selling stuff you have owned, personal possessions, then you probably do not need to declare the money you get to the tax office.
If you are buying things with the express intention of selling them then that is hard to prove as a hobby i.e. going around garage sales, or OP shops, and buying items that you will sell on eBay then you need to declare profit to the tax office. Simply doing something you enjoy does not define a hobby for tax purposes.
All this gets complicated if you are the recipient of any government benefit. Best to speak to centerlink about that.
edit:DISCLAIMER - I am not a tax expert and have no formal training in tax matters.
There is no income threshold point when an activity suddenly becomes a "business" - others claim it is if you turnover $10K that is carp, if you are undertaking a business activity, even if you make a loss, you must declare the income to the ATO as well as claim deductions.
My advice is that you seek general advice from the ATO and more detailed advice from a reputable accountant.
The Australian Govt has a website http://www.business.gov.au that has lots of information relating to business, including info on set up, registration, links to tax office etc etc
The first $18000 is tax free so if you don't earn that then you still need to let ATO know this,and the $10000 is because ebay are obliged to let the ATO know when you have earned this amount in a tax year.
Yes you need to do a profit/loss but if you haven't earned over $18000 then you won't need to pay any tax
You are required to report ALL income derived to the ATO from dollar #1.
If it is your only source of income then you will not be subject to income tax on it until you cross that $18K threshold.
If you also have another 9-5 job then the selling income adds onto that and is then taxable from dollar #1.
This $10K reporting threshold is only a notional reporting threshold for ebay to report to the ATO but this does not clear you of any obligation to report any and all income generated from sales to the ATO even when under $10K.
The minute you use the word "profit" then the ATO will class it as a business income not a hobby.
It's very hard to convince the ATO that you are a hobby seller.
Clearing unwanted 2nd hand items from your shed will be classed as hobby but the minute you buy something to resell for a higher amount they will class it as a business.
If you earn $50 (or any amount) interest from a bank you are required to declare that and banks report from dollar #1.
If you fail to report it and get caught then the consequences will be much greater than any tax you may/may not have been liable for.
IMO better to report it and pay no tax (if the sum of the sales and your 9-5 job are under $18K) that way its all above board and legal.
The first $18000 is tax free so if you don't earn that then you still need to let ATO know this,and the $10000 is because ebay are obliged to let the ATO know when you have earned this amount in a tax year.
Yes you need to do a profit/loss but if you haven't earned over $18000 then you won't need to pay any tax
(this post in reply to crow, but aimed towards the OP)
The figure that eBay are required to notify the tax office has come down in recent years. It used to be $20,000 but was halved to $10,000. You should also know that the figure of $10,000 is turnover and not profit as eBay have no way of knowing how much profit you are making, so postage paid to you is also included in the $10,000 and would be a legitimate deduction as a business expense in any profit assessment.
wildhogs, you said you have $2,000 profit per year, but what is your total turnover?
I suspect that limitations on the tax office's ability to process every eBay seller is the reason why they have the $10,000 threshold. However, as computers get more advanced and the tax office improves it's data matching capabilities I believe that the threshold will come down even further . . . . . . probably to $5,000 within the next few years. If a taxpayer is avoiding tax from their eBaying they may also be avoiding tax from other means, which is why I believe the threshold will come down.
**DISCLAIMER** : Once again, I do not claim to be an expert on tax matters, and have no training in tax matters. The figures I have quoted of $20,000 reduced to $10,000 are a matter of public record, as is the turnover rather than profit statement I have made above. The further reduction from $10,000 to $5,000 is just my own opinion and based solely on the fact that I believe that technology advances will increase ATO ability to analyse taxpayer incomes, especially when matching banking activity.
I think more posters should include disclaimers in their posts when offering advice, otherwise they may come across as offering professional advice . . . . but once again this is just an opinion of mine
If you are selling over $10000 per year then it's a business,profit doesn't come into the equation at all.
And if you have more than 1 income then it doesn't matter what you earn on ebay because you need to declare everything that you earn.
Eg- Main income say $40000 and ebay income say $5000 so your total income is $45000,you need to declare all of this.
But the good thing is the first $18000 is tax free and now you can get $20000 tax deductions if you had spent that much on materials.
before anyone jumps up and down with joy over the prospect of $20,000 tax deductions you should check eligibility criteria first. I did a google search and found that you have to be a registered business and have an ABN for starters, there are further requirements as well like the $20,000 deduction is not for buying stock.
I hardly think that someone who has a main job paying $40,000 and an eBay income of $5,000 will be getting $20,000 tax deductions, but I suspect that crow wasn't meaning that someone in this position would be eligible, it just reads that way.
DISCLAIMER - members need to check tax issues themselves and not rely on a discussion forum for their business advice.
