Side Hustle Tax: When Extra Income Needs Declaring

The money from walking dogs on the weekend, selling prints online or doing a few design jobs usually arrives without tax taken out. That feels great until you wonder whether the tax office expects a share.

It usually does, and most side income simply joins your wages on the tax return you already lodge. What catches people out is the timing: the tax may fall due long after the payment arrives.

Most side income goes on your tax return

A side hustle is paid work you do on top of your main job. The ATO sorts it into one of three kinds, and the kind decides what you do at tax time.

Most side hustles sit in the first two columns. Being a business adds registrations such as an ABN, and GST once turnover is high enough; our guide to whether you need an ABN covers that side of it.

The third kind is the only one that's left off. A hobby is something you do mainly for enjoyment, even if it brings in the odd sale. Clearing out your wardrobe on Marketplace counts here too, because those things were bought for your own use, not to sell. Buying things in order to resell them is different.

When a side hustle counts as a business

There's no single test or dollar amount. The ATO looks at the whole picture, and a side hustle looks more like a business when you're doing it to make a profit, doing it regularly and running it in a planned, organised way. Advertising, keeping track of stock or setting a weekly schedule all point that way. Being small doesn't stop it being a business.

A one-off job usually isn't a business. Neither is something you do with no aim of making a profit, like a free weekend fitness group where friends chip in for equipment. If that group starts charging a set price per session, it has changed.

If you're not sure which kind yours is, the ATO's are you in business? guides walk through examples for selling online and creating content. Both business income and other taxable side income go on your return.

Tax usually isn't taken out

Your employer withholds tax from each pay, so your wages arrive with most of their tax already paid. Independent side income usually arrives without tax withheld. The tax on it is worked out when you lodge your return, after the end of the financial year on 30 June, and it's added to whatever your job's withholding didn't cover.

Side profit is added above your wages and taxed in the brackets it reaches, usually with the 2% Medicare levy as well. Your marginal rate is the income-tax rate on your next dollar.

Here's a made-up example. Ava earns $75,000 a year plus super in her job. On weekends she walks dogs and minds pets through an app, and over 2026–27 that brings in $6,000.

Ava's job already uses her tax-free threshold, so none of the $5,000 profit is tax-free. Her total income of $80,000 sits in the 30% bracket, and with Medicare that makes 32 cents of each dollar of profit. If she spent the whole $6,000 through the year, the $1,600 would arrive as a bill. Our guide on what to do if you can't pay a tax bill covers that situation, but setting it aside as she goes avoids it.

How much to put aside

The simplest habit is to move a share of each payment into a separate savings account the day it lands. The share depends on your total income for the year, your wages and side profit together.

These are rough buffers, before HELP repayments, surcharge changes or income-tested payments. The first row is rounded up and the second allows for the low income tax offset, a tax reduction that shrinks as income rises. A reduced Medicare levy can also change the amount on low incomes. If you have a HELP debt, side profit also counts towards your repayment income, and our HECS-HELP guide explains the repayment rates.

You can put the share aside from what clients pay you, or from profit once costs come off. Setting it aside from the full payment is simpler, and anything left over once your return is done is yours to keep. If your income moves around from month to month, budgeting on an irregular income shows how to plan around the quieter months too.

Clova puts each transaction in a category, so you can see side payments and the costs of earning them apart from your everyday spending. A savings goal for the tax share tracks what you've put aside.

Keep a record as the money comes in

A record of what came in and what it cost to earn makes tax time quicker, and it's what lets you claim those costs. Keep the date, amount and who paid for each payment, and a receipt for each cost. Platform statements help, but cash and bank transfers need noting yourself. The ATO's records you need to keep covers how long to hold on to them.

Only the costs of earning the side income count. For Ava, that's the app's fees, a few leads and the treats she carries; her own dog's food isn't. Where something is used for both, such as your phone, you claim the work share. Our guide to tax deductions goes through how that split works.

When the side hustle grows

Two things change as side income gets bigger. Once a tax return shows $4,000 or more of business and investment income, and enough tax on it, the ATO can move you onto PAYG instalments: smaller payments during the year towards the next bill, instead of one amount at the end. The ATO tells you by sending an instalment notice. And a business has to register for GST when combined business sales reach, or are expected to reach, $75,000 over 12 months, or straight away if it carries passengers through a rideshare app.

Moving the tax share when you're paid is a useful place to start.

A note from us

We are building Clova, a budgeting app for planning the money left after tax.