Everyone’s dream is to turn their hobby into a business. But at what point does the hobby become a business? What’s the differences between a hobby and a business? The answer may seem obvious, however, it is important to be sure as each has its own tax, insurance and legal requirements.
According to the Australian Tax Office (ATO), “A hobby is a pastime or leisure activity you do in your spare time for pleasure” and business is “...if your activity, as a whole, is commercial with an aim to make a profit.” You technically can have a hobby that is profitable, if you’re intention is only of enjoyment or as fun rather than to make money.
This is probably the case for most people. We all have hobbies or activities that we enjoy doing, might earn a few extra dollars on the side, but are not concerned about them becoming profitable.
Of course, as musicians, we do what we do because we love it. That said many musicians and bands want to turn their passion into a career and start earning an income. If that’s the case then the hobby or band needs to be set up as a business, since the intention is to profit.
The first thing to do is set up an Australian Business Number or ABN. You may want to list all band members as associates or partners. It’s not uncommon to have just the core members on the paperwork and other members paid by session or gig. The band/business name will need to be registered unless your operating under a first and last name and nothing else. Remember too, that if you want to own the name then you will also need to register it as a trademark separately.
It’s also a good idea to consider your online presence is consistent with your business identity. Double-check that your domain name for your website is available for registering. You’ll also want to set up a bank account for the business and think about having a contract between all parties, so everyone is legally on the same page.
Doing all these things is certainly a great start but the road doesn’t quite end here
There are a few organisations that offer comprehensive advice on the details of completing registrations and other legalities. For example, the ATO has a great online tool that can help musicians and other creatives determine whether they are running a hobby or a business.
There’s also ABLIS which allows you to search and request information about what’s required to operate under the banner of ‘musician’ or ‘band.’
So is your band a hobby or a business? It’s an exciting moment when the band to starts making money. Don’t let the paperwork discourage you. Some if not most of it can be completed online and relatively painlessly. Who knows where all your hard work now will land you.
Words by Charlotte Mwaba