Thursday, 15 December 2011 02:40

Is your hobby tax deductible?

A question we receive from time to time is how can I make my hobby tax deductible!!



As with any tax question it might be a short question but it is usually going to be a much longer answer!! In short it ‘can’ be possible depending on your hobby/interest/sport/etc. and in other instances it just plain out and out isn’t possible.


It is sometimes easiest to simply go back to the Income tax Assessment Act 1997 to set out the positive limbs of the basic general deduction provision (stay with me through this, it will make sense!!).


S.8-1(1) says that a deduction will be allowed for all loses and outgoings to the extent to which they;

(1)  are incurred gaining or producing assessable income, or

(2) are necessarily incurred in carrying on a business for the purpose of gaining or producing such income


So in plain English what that part of the section is really saying is that if you spend a $ to help you earn a $ then there is a fair chance it may be tax deductible. There are also more specific provisions but for the purpose of this conversation this is sufficient.


The reason, is that it sets the framework for why you hobby may or may not be able to be linked to how you earn an income or not and thus whether you may be able to claim a full or partial deduction for it. If we go to extremes let’s say you are a Nuclear physicist whose hobby is catching butterflies. It is going to be very hard to draw a nexus (connection) between your income earning activity and your hobby. Conversely if you are a personal trainer then the purchase of exercise equipment, even if a little over the top for your needs, is going to have a good chance of being deductible.


Then there are other instances such as if you use your bike for transport between clients/customers (but not home to work) travel then there is a good chance a portion of it may be deductible.


In the end it comes back to S8.1 above and that fact, can we draw a link between your hobby/interest expenditure and how you earn your income? If we can then it is time to be the law allows!!





Leave a comment

Make sure you enter the (*) required information where indicated.