Side Hustle Tax Australia — Do I Have to Pay Tax on Side Income? (2026)
Yes, side hustle income is taxable in Australia. Learn how to declare it, what you can claim, ABN requirements, and how it affects your PAYG, Medicare levy, and HECS repayments.
Is side hustle income taxable?
Yes — all income you earn in Australia is taxable, including side hustle income, freelance work, gig economy earnings, selling goods online, and any other money-making activity. The ATO requires you to declare all income in your tax return, regardless of the amount. There is no 'hobby exemption' threshold — even $500 from selling handmade items on Etsy is technically assessable income if you are running it as a business (i.e., with an intention to profit, operating in a businesslike manner).
Hobby vs business: how the ATO decides
The ATO distinguishes between a hobby and a business. A hobby is an activity done for pleasure without a profit-making intention — hobby income is generally not taxable, but you also cannot claim deductions. A business involves: a genuine intention to make a profit, repeated and regular activity, operating in a businesslike manner (invoicing, record-keeping, marketing), and having a business plan or strategy. If your side activity has any of these characteristics, the ATO will treat it as a business, and all income is taxable. If you are unsure, the ATO has a hobby vs business decision tool on their website.
Do you need an ABN?
You need an Australian Business Number (ABN) if you are carrying on a business — including a side hustle. An ABN is free to apply for and is required to: invoice clients without having tax withheld at the top rate (47%), register for GST (required if turnover exceeds $75,000), and operate as a sole trader. If you do not provide an ABN when invoicing, the payer must withhold 47% of the payment and send it to the ATO. You can claim this back in your tax return, but it affects your cash flow during the year.
What can you claim as deductions?
If your side hustle is a business, you can claim deductions for expenses directly related to earning that income. Common side hustle deductions include: (1) Home office expenses — a portion of internet, electricity, phone, and office supplies. (2) Equipment — laptop, tools, software used for the business. (3) Travel — if you travel for the side hustle (not commuting to a regular workplace). (4) Marketing — website hosting, advertising, business cards. (5) Professional development — courses or training related to the business. (6) Materials and supplies — raw materials if you make products. Keep receipts for everything. The ATO can audit you and will disallow deductions without evidence.
How side income affects your tax, Medicare levy, and HECS
Your side hustle income is added to your employment income, and you pay tax on the combined total at your marginal rate. This means side income is effectively taxed at your highest marginal rate. For example, if your day job pays $80,000 and your side hustle earns $20,000, your total taxable income is $100,000 — and the $20,000 side income is taxed at the 37% marginal rate (not the lower rates that apply to your first dollars of income). Side hustle income also counts towards: your Medicare Levy Surcharge threshold (if you don't have private health insurance), your HECS-HELP repayment income (potentially pushing you into a higher repayment bracket), and your eligibility for government benefits and offsets.
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General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
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