In short

The ATO classifies a retiree side activity as a hobby or a business using the TR 97/11 indicators — commercial purpose, profit intention, regularity, scale, and record-keeping — applied as a totality, not a dollar threshold. Hobby income is untaxed and ignored for the Age Pension income test; business income is assessable, deductible, and counted as net income against the pension.

The pattern is increasingly familiar. A retired teacher takes on occasional tutoring sessions for the neighbour's children. A retired accountant takes a few consulting projects each year. A retired tradesperson builds a couple of garden sheds for cash. A retired hobbyist sells handmade jewellery at a local craft market. The income is modest, the activity is part-time, and the retiree may genuinely not consider themselves "in business."

The ATO's view is determined not by the retiree's self-perception but by the facts. Two classifications exist, and the difference between them shapes what tax compliance looks like.

Hobby. Income is generally not assessable for tax purposes. No deductions for expenses are allowed. No ABN is required. No GST registration is required regardless of turnover. The activity is treated as private and recreational, not as a commercial undertaking, and is largely outside the income tax system.

Business. All income is assessable. Expenses related to the activity are deductible. An ABN is generally required. GST registration is required if turnover exceeds $75,000. The activity is reported as business income on the tax return, with supporting business activity statements where applicable.

For a small craft seller, the difference is between an activity that is essentially invisible to the tax system (hobby) and one that requires year-round records, an ABN, an annual schedule on the tax return, and possibly a quarterly BAS lodgement (business). Most retirees would prefer hobby classification. The choice is not theirs to make.

What are the TR 97/11 indicators?

The TR 97/11 indicators. The ATO ruling TR 97/11 sets out the indicators used to determine whether an activity is a business. The indicators are applied as a totality — no single indicator is decisive, and the assessment is fact-specific.

The main indicators:

  • Significant commercial purpose or character. Is the activity organised in a commercial way?
  • Intention to make a profit. Is profit the goal, or is the activity primarily recreational?
  • Repetition and regularity. Are activities done as a matter of course, or sporadically?
  • Profit/loss made. Has the activity actually generated profit, or is it consistently loss-making?
  • Size and scale. Is the operation small or substantial?
  • Permanence of operations. Continuing year on year, or episodic?
  • Business plan and records. Does the operator keep books, plan operations, set targets?
  • Skills and qualifications. Does the operator approach the activity with professional skill?
  • Customer base. Regular customers, or sporadic sales?

Applied to a retiree with a woodworking interest: making a few items a year for friends and family, sometimes selling at a craft market for cash, with no website and no advertising — the indicators point to hobby. Setting up a website, taking commissions, shipping nationally, advertising, and generating consistent income — the indicators point to business, even if the volumes are small.

What do the practical scenarios look like?

Practical scenarios.

Etsy or online marketplace sales. Regular weekly sales with a defined product range and consistent pricing typically indicates business. Occasional sales of items the retiree no longer wants — effectively a garage sale taken online — may be hobby. The platform's year-end summary makes the income visible to the ATO; classification matters.

Workshop hobby with occasional sales. Where the primary motivation is the craft and sales are incidental — typically hobby. Where the retiree advertises and takes commissions — typically business.

Tutoring or teaching. A retired teacher giving occasional tuition for cash to neighbours — possibly hobby. A retired teacher with a structured tutoring practice, multiple students, regular hours, and substantial fees — clearly business.

Airbnb hosting. Generally treated as rental income with specific tax rules — neither traditional hobby nor traditional business. Covered separately.

Consulting or contract work. A retired professional taking on occasional projects in their former field is typically running a business — the activity is commercial, profit-motivated, and skilled. PSI rules may also apply.

Ride-share or delivery driving. Always business. The platform requires an ABN; the activity is regular and the ATO position is unambiguous.

Is there an income scale that indicates business?

The income scale. While there is no statutory dollar threshold, in practice:

  • Small income (under a few thousand dollars per year) from sporadic activity is typically hobby.
  • Income above $20,000–$30,000 per year from regular activity is more likely business.
  • Above $75,000 turnover, GST registration is required and the activity is unambiguously a business.

The figures are indicators, not boundaries. A retiree earning $5,000 per year from regular Etsy sales — with a website, repeat customers, and a defined product range — may still be running a business. A retiree earning $20,000 per year from one-off sales of inherited items they're gradually selling may not be.

What is the Centrelink dimension?

The Centrelink dimension. For Age Pension purposes, business income is net income (gross less deductible expenses) and counts under the income test. Hobby income is generally not income at all and does not affect the pension.

The Centrelink position can therefore differ from the tax position. A small craft activity classified as a hobby for ATO purposes may produce no Age Pension impact at all. The same activity, if classified as a business, produces net income that does affect the pension. For pensioners near the income test cut-off, the classification can move the dial between full pension and reduced pension.

How does the Work Bonus interact with this?

The Work Bonus interaction. The Work Bonus disregards $300 per fortnight of employment income (plus an offset bank up to $11,800) from the income test for Age Pension purposes. The Work Bonus applies to employment income — wages and salary from being an employee. It does not apply to:

  • Self-employment income from a business.
  • Investment income.
  • Hobby income (which isn't income at all).

A retiree running a sole-trader business does not benefit from the Work Bonus on their net business income. A retiree employed casually by an external employer does benefit from the Work Bonus on their wages. For some marginal side activities, the structural choice — sole trader business versus casual employment with a hiring entity — has Age Pension implications.

What happens when a hobby drifts into a business?

The drift from hobby to business. Many activities start as hobbies and progress toward business as the retiree finds the work satisfying and the income meaningful. The transition is rarely a single moment — the indicators gradually accumulate. A practical approach: review the indicators annually. If the activity has shifted toward "business" indicators (regular income, repeat customers, business-like organisation, profit motivation), formalise the structure. Register an ABN, set up business records, register for GST if turnover approaches $75,000. Conversely, an activity that has wound down to occasional sales may revert to hobby status.

What documentation should retirees keep?

The documentation principle. Even for activities that are clearly hobbies, keep simple records — a log of any income received and any expenses incurred. If the ATO later requests information, the records demonstrate the hobby characterisation. For activities that are clearly businesses, full records are required: invoices, receipts, bank statements, expense allocations.

For activities in the middle ground — uncertain classification — keep records as if the activity were a business. The cost of doing so is small. If the activity is later determined to be a hobby, no harm has been done. If it is determined to be a business, the records support proper compliance.

Why does an annual review matter?

The annual review. Side income for retirees is rarely a one-decision matter. The activity grows or shrinks year to year; the classification may shift. An annual review at year-end — with the accountant where appropriate — checks whether the activity remains where it was, or has crossed a threshold. Most retirees in this position find the classification clear most years and unstable in the years where the activity is changing meaningfully. Knowing which year you're in is the planning task.

Sources

Key takeaways

  • There is no statutory dollar threshold for hobby vs business — the ATO applies the TR 97/11 indicators as a totality: commercial purpose, profit intention, regularity, scale, and records.
  • Hobby income is generally not assessable and doesn't require an ABN or GST registration; business income is fully assessable, deductible, and needs an ABN.
  • GST registration is required once turnover exceeds $75,000 — a threshold unchanged since GST began in 2000.
  • For the Age Pension, business income counts as net income under the income test; hobby income is generally ignored entirely — the classification can shift a pensioner across the income-test cut-off.
  • The Work Bonus only applies to employment wages, not to self-employment business income or hobby income, which can make casual employment more pension-friendly than running a sole-trader side business.

Frequently asked questions

Is there a dollar amount that separates a hobby from a business for tax purposes?

No statutory threshold exists. The ATO applies the TR 97/11 indicators — commercial purpose, profit intention, repetition, scale, record-keeping, and skill — as a totality. As a rough guide, small sporadic income is usually hobby and regular income above roughly $20,000-$30,000 a year is more likely business, but these are indicators, not boundaries.

Does hobby income affect the Age Pension?

Generally no. Hobby income is not treated as income at all for Age Pension purposes, so it typically has no effect on the income test. Business income, by contrast, counts as net income (gross less deductible expenses) under the income test.

Does the Work Bonus apply to a retiree's side business income?

No. The Work Bonus only disregards employment income — wages from being an employee. It does not apply to self-employment business income or hobby income, so a retiree running a sole-trader business gets no Work Bonus benefit on that income.

When should a retiree with a growing side activity register an ABN and for GST?

Once the TR 97/11 indicators shift toward business — regular income, repeat customers, business-like organisation, profit motivation — an ABN should generally be registered, and GST registration becomes mandatory once turnover reaches or is expected to reach $75,000.

A note on advice. This article is general information only and doesn't account for your personal circumstances. Everyone's situation is different — before acting, it's worth talking it through with a licensed adviser who knows your full picture.