Hobby making jam, colourful jam jarsDo you sell pot plants or homemade jam to friends or at your local weekend market? While this may be just a hobby to you, in the eyes of IRD it could be classed as a business and therefore is eligible to be taxed. Regular sales – however small they may be – can mean you’re in business and should be declaring those sales as income.

In very general terms, a hobby is something you enjoy doing in your spare time, while a business is a commercial venture aiming to make a profit. However, it can be easy for the lines between the two to become blurred. For your hobby do you:

  • Charge for the products or services you provide? Payment doesn’t necessarily have to be in cash.
  • Supply your products or services on a regular basis?
  • Aim to make a profit from your products or services?
  • Conduct your activities in a “business-like manner”, i.e. keep receipts and records, or have a separate bank account for them?

If you answer yes to some or all of these questions then the IRD is likely to class your hobby as a business and you should probably declare your income.

Occasional sales of your products or services, such as to friends, neighbours, local markets and so on, or on sites like Trade Me or Facebook buy/sell/trade pages will not constitute a business because there are no tax implications for private one-off sales. However, regular sales made either in person or online, or selling with the intent to make a profit, are more likely to constitute a business from the IRD’s perspective.

Contact us if you’re not sure whether you have a hobby or business. We can help you to consider all of the factors that apply to your particular situation, and if you are in business we can help you to work out your tax obligations.