What Is Considered A Business Activity In Australia?

In Australia, a business activity is conduct that's commercial in nature and forms part of carrying on a business. If your side hustle, project or income stream has crossed from hobby to business, a range of legal obligations can start to apply.

That's why it's helpful to understand what regulators mean by a business activity. It can affect whether you should have an ABN, register a business name, put customer terms in place, check licences, protect your brand, hire properly and comply with the Australian Consumer Law.

The phrase also appears in tax settings, including ATO forms. This article focuses on the legal and practical business setup question: when an activity looks like a business, and what you should do next. For tax return treatment and lodgement questions, your accountant or registered tax agent is the right person to guide you.

What Is Considered A Business Activity In Australia?

In Australia, a business activity is usually conduct that's commercial, organised and connected to carrying on a business. Regulators don't apply one single tick-box test. They look at the whole picture of what you do, how regularly you do it and whether it has a genuine commercial purpose.

Broadly, you're more likely to be carrying on a business if your activity is repeated, planned and intended to make a profit. You don't need to be profitable from day one. Many genuine businesses make losses while they're getting started. What matters is whether your behaviour looks like a commercial venture rather than a casual pastime.

Common examples include a freelance designer invoicing clients, an online store with regular orders, a food truck trading at markets, a consultancy working on retainer, or a creator selling digital products through a platform.

A helpful test is this: if a stranger looked at your branding, pricing, website, invoices, customer communication and records, would they say you're running a business rather than doing something casually for fun?

The activity doesn't have to be full-time. A side hustle can still be a business if it's run in a businesslike way. Part-time consulting, weekend market trading and app-based work can all amount to business activity depending on the facts.

Business Vs Hobby: Key Indicators In Australia

No single factor decides whether you have a business or a hobby. Regulators weigh up a group of indicators. The more your activity looks organised, commercial and repeatable, the more likely it's to be treated as a business.

Indicators You Are Carrying On A Business

• Intent to make a profit: You price your goods or services to cover costs and generate a surplus, even if you aren't profitable yet.
• Repetition and regularity: You make recurring sales, take on repeat clients or actively seek ongoing work.
• Businesslike systems: You issue invoices, track income and expenses, maintain records and manage stock or work-in-progress.
• Commercial scale: The time, money, equipment and marketing you invest suggests a serious operation.
• Branding and marketing: You use a trading name, logo, website, social media page or advertising to attract customers.
• Structure and registrations: You have applied for an ABN, registered a business name or arranged licences and permits.
• Customer-facing documents: You use quotes, proposals, terms and conditions, cancellation rules or refund processes.

When It May Still Be A Hobby

• You create or sell things mainly for personal enjoyment, without a real plan to make a profit.
• Your sales are irregular, small in scale and not actively marketed to the public.
• You don't keep business records, set commercial prices or use repeatable systems.
• You occasionally sell leftover items or handmade goods without building an ongoing operation.

For example, selling a few handmade candles at a school fete once a year is likely to be a hobby. But if you build a candle brand, launch an online store, promote products on social media, accept weekly orders and reinvest in stock, you're much closer to running a business.

Some activities also have special rules from day one. For instance, rideshare drivers generally have to register for GST regardless of turnover, which is different from most small businesses. If that applies to you, it's worth checking the summary of GST requirements for Uber drivers and confirming the tax position with your accountant or registered tax agent.

What Does Number Of Business Activities Mean On An ATO Tax Return?

You may also see the phrase "number of business activities" when dealing with ATO forms. In that context, it generally refers to how many distinct business activities were carried on during the relevant income year. It isn't about the number of invoices, sales, tasks, customers or services you performed.

For example, one online clothing store may sell many different items but still be one commercial operation. A designer may provide logos, brochures and social media assets as part of one design business. By contrast, a bookkeeping practice and a separate weekend food stall may be different activities because they involve different operations, customers, risks and records.

That said, tax return classification and lodgement are tax advice questions. If you're unsure whether activities should be split or combined for ATO purposes, speak with your accountant or registered tax agent before lodging. From a legal setup perspective, the key issue is whether each activity creates its own contracts, licences, consumer law risks, privacy obligations, employment needs or brand protection issues.

What To Do If You Have More Than One Business Activity

Many founders and sole traders test multiple income streams before settling on one. That's normal. The key is to keep the activities clear enough that you can meet your legal, tax and record-keeping obligations.

If you have more than one activity, consider the following practical steps.

1. Describe each activity separately: Use plain wording such as "marketing consultancy", "online clothing retail" or "mobile food vending".
2. Check the industry code: Your accountant can help you choose the most appropriate ATO business industry code for each activity.
3. Keep records by activity: Track income and expenses for each activity so your tax reporting and business decisions are clearer.
4. Review licences and permits: Different activities may trigger different local council, state or industry approvals.
5. Use the right customer terms: A service business, online store and food business may each need different terms, refund settings and risk wording.
6. Check whether one structure still suits you: A sole trader setup may be simple at the start, but multiple higher-risk activities may justify reviewing your structure.

You can run more than one business activity under the same ABN in some circumstances, but that doesn't mean one set of contracts, licences or compliance settings will cover everything. The legal risk depends on what each activity actually involves.

If you're deciding between sole trader, partnership and company structures, the business structure decision tool can help you think through the key commercial and legal factors before you get tailored advice.

Legal Obligations Once Your Activity Becomes A Business

Once your activity amounts to carrying on a business, you should treat it like one legally. The exact obligations depend on your industry, structure and growth plans, but these are the areas most Australian small businesses need to consider.

ABN And Business Structure

You'll usually need an Australian Business Number for invoicing and to avoid "no ABN" withholding on payments to you. If you're weighing it up, see the advantages and disadvantages of having an ABN.

You'll also need to decide whether to operate as a sole trader, partnership or company. A company can help with limited liability, bringing in co-founders, raising capital and separating the business from you personally, but it comes with ASIC obligations and governance requirements. If a company is on your radar, you can get support with your company set up.

Business Name

If you trade under a name that isn't your personal name or your company's exact legal name, you'll usually need to register that business name. A registered business name doesn't create a separate legal entity and doesn't give you trade mark rights. Here is how a business name vs company name works in practice.

Australian Consumer Law

If you sell goods or services to customers, the Australian Consumer Law applies. This covers misleading or deceptive conduct, consumer guarantees, refunds, warranties and unfair contract terms. Since the expanded unfair contract terms regime began applying from November 2023, using unfair terms in standard form small business or consumer contracts can attract significant penalties, so customer terms should be reviewed carefully.

For many service or product businesses, clear Terms of Trade set expectations around pricing, delivery, payment, cancellations, liability and refunds.

Privacy And Data

If you collect personal information, you should handle it securely and transparently. The Privacy Act 1988 generally applies to businesses with annual turnover of more than $3 million, and to some smaller businesses in specific categories such as health service providers, businesses that trade in personal information and some government contractors.

Even if you're under the threshold and not in an exception category, a clear Privacy Policy is often expected by customers, payment platforms, app stores and business partners.

Employment And Contractors

Hiring staff triggers employment and workplace obligations, including Fair Work obligations such as minimum pay, leave, records and payslips, as well as separate superannuation and workplace health and safety obligations. Recent Fair Work changes have also affected casual employment pathways and introduced a right to disconnect for many employees, so employers should keep contracts and policies current.

Use the right Employment Contract for each role and make sure contractor arrangements are genuinely independent contracting relationships, with a properly drafted contractor agreement.

Trade Marks And IP

Your business name, logo, content, software, designs and confidential information can become valuable assets. Check whether your brand is available early, and consider applying to register your trade mark so you have stronger rights to stop others using a confusingly similar brand.

Also make sure your contracts deal with IP ownership, especially if designers, developers, employees or contractors create work for your business.

GST, Tax And Records

Most businesses must register for GST when GST turnover reaches $75,000 in a 12-month period. Rideshare and taxi services generally need to register for GST regardless of turnover. Tax settings can also involve PAYG withholding when you hire staff, income reporting and record-keeping. Your accountant or registered tax agent can confirm the tax treatment while your legal documents and business setup are reviewed separately.

Step-By-Step Checklist To Formalise Your Business Activity

If your activity is starting to look like a business, it's better to formalise it early than fix gaps after a customer complaint, supplier dispute or compliance issue.

1. Write down what you do: Describe your products or services, customers, sales channels, location and whether you have one or multiple business activities.
2. Choose your structure: Decide whether a sole trader, partnership or company structure best fits your risk, ownership and growth plans.
3. Apply for an ABN: Get the right ABN details in place for invoicing, supplier onboarding and business records.
4. Register your business name if needed: Register any trading name that isn't your personal name or company's exact legal name.
5. Check licences and permits: Review local council, state and industry rules, especially for food, health, transport, childcare, building, financial services and regulated professions.
6. Set up your core contracts: Put customer terms, supplier agreements, contractor agreements and website terms in place before you scale.
7. Protect your brand: Search for similar names and consider trade mark registration before investing heavily in branding.
8. Prepare privacy and data processes: Decide what personal information you collect, why you collect it, how long you keep it and how customers can contact you.
9. Get employment documents ready before hiring: Use suitable employment contracts, policies and onboarding processes before your first employee starts.
10. Separate your records by activity: If you run more than one activity, keep income, expenses, contracts and licences organised for each one.

For a broader snapshot of your legal setup, the legal health check can help you identify which areas may need attention.

What Legal Documents Should A Business Have?

You won't necessarily need every document on day one, but most businesses benefit from having the key documents in place before they start taking on customers, suppliers, contractors or employees.

• Terms of Trade or Client Agreement: Sets the rules for scope, pricing, delivery, payment terms, cancellations, liability and refunds.
• Website Terms and Conditions: Sets acceptable use, IP ownership and liability limits for your website, online store or platform.
• Privacy Policy: Explains how you collect, use, disclose and store personal information.
• Supplier or Contractor Agreements: Locks in timelines, quality standards, payment, confidentiality and IP ownership.
• Employment Contracts and Policies: Covers duties, pay, leave, termination, confidentiality, IP and workplace expectations.
• Non-Disclosure Agreement: Protects confidential information shared with manufacturers, investors, partners or collaborators.
• Founders Documents: A Shareholders Agreement and Company Constitution can clarify ownership, decision-making, funding, exits and deadlocks.
• Trade Mark Application: Helps protect your brand name or logo as a business asset.

The right document set depends on how your business activity actually operates. For example, an online store needs strong e-commerce terms and privacy wording, while a consultancy may need a tailored services agreement, proposal process and IP clauses.

Key Takeaways

• A business activity is usually commercial, organised and connected to carrying on a business, even if it starts as a side hustle.
• An activity is more likely to be a business if it's repeated, marketed, recorded and intended to make a profit.
• The ATO may ask about the number of business activities, but tax return treatment should be confirmed with an accountant or registered tax agent.
• Once you're carrying on a business, consider your ABN, structure, business name, licences, contracts, privacy, consumer law and employment obligations.
• If you run genuinely different activities, keep records, contracts and compliance checks organised for each one.
• Most businesses register for GST at $75,000 GST turnover, but some activities, such as rideshare and taxi services, have special GST rules from the start.

If you'd like help with working out whether your activities amount to a business, choosing the right structure, setting up your contracts or protecting your brand, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.