With the cost-of-living biting and many of us tightening the belt, more and more people around the region are turning their skills into side hustles – home baking, fencing jobs, craft stalls, gardening, small repairs. It usually starts the same way – someone asks, you say yes, and before long you’re receiving regular orders and Facebook messages that never really stop.
That’s where it pays to be a little bit boring (in the best possible way). Ask yourself whether what you’re doing is still a hobby, or whether it’s become a business for tax purposes. IRD doesn’t make this decision based on what you call it, they look at what you actually do; how often you sell, how organised you are, and whether you’re trying to make a profit. If it’s a business, you’ll generally need to declare the income and keep good records.
IRD provide examples of what it would usually classify as a hobby:
- Selling things you make occasionally, mainly for enjoyment, to family and friends;
- Selling items you occasionally make, at markets;
- Children or young people earning less than $2,340.
IRD may see your side hustle as a business if a few of these sound familiar:
- You’re aiming to make a profit;
- You’re putting in significant time, money and effort;
- You’re selling goods or services to customers on a regular basis;
- You keep records and keep an eye on how it’s tracking financially;
- You’re earning income from it;
- You run it in a similar way to other businesses;
- You plan to keep going long term;
- You rely on the income to help cover living costs.
Because we’re all in local community groups these days, if you’re promoting your side hustle on Facebook (or anywhere public), remember that those posts are visible beyond your immediate circle. That’s great for reaching potential customers, but it also means the information is there for anyone to see, including IRD compliance staff, if they’re checking whether an activity looks like it’s being run as a business.
If your “hobby” is bringing in regular money, you’re advertising, taking bookings, or upgrading equipment so you can do more, it’s a good time to pause and get things set up properly. Getting it right from the beginning can save a lot of stress down the track, especially around record-keeping and what income you need to declare.
At MCI & Associates, we welcome new businesses and genuinely enjoy helping people take that first step, from choosing the right structure, to putting simple systems in place so you can get on with the work you love. Feel free to reach out to us for support in this area.