Hobby vs Business

By Drum Digital
08 November 2013

Many people use their hobby to earn extra money. But SARS determines whether it is a “business” if you make a profit.

Since you’re supposed to report all income, this means that if you’re making money doing anything — whether that’s selling on the side — the tax authorities will want their cut.

If you’re just starting out and are likely to lose money this year, your project can still count as a business if you can show that the primary goal is to make a profit. Here the SARS will apply a subjective standard to determine if you have a profit motive, by looking at things like: •Do you keep financial records for your business? •Do you have a separate bank account for your business? •Do you have a separate name for your business, or a business structure? •Are you able to devote substantial time and effort to the business?

In short, if you can demonstrate that you are involved in the activity with the expectation of making money from it, SARS will consider it a business.

- DRUM Reporter

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