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Tax & Income
How is side income and freelance work taxed in Australia?
In Australia, all income you earn — whether from a side hustle, freelance work, gig platforms, or a second job — is taxable and must be declared in your tax return. It is added on top of your other income and taxed at your marginal rate. There is no separate, lower tax rate for side income, and the ATO actively cross-matches bank data and platform reports to find undeclared earnings.
What counts as taxable side income?
The ATO's rule is simple: if you receive money (or non-cash benefits) in exchange for goods or services, it is income. Common examples include:
- Freelance or consulting fees (design, writing, IT, trades)
- Gig economy earnings (Uber, AirTasker, Deliveroo, Fiverr)
- Income from selling goods you make or buy to resell
- Rental income (including Airbnb)
- Income from a second or casual job
- Royalties and licensing fees
Selling personal items you already owned (like furniture or clothes you no longer want) is generally not income — though if you do it regularly at a profit, the ATO may treat it as a business.
What tax rate will I pay on side income?
Your side income is stacked on top of your primary income. The combined total is taxed using Australia's progressive rate scale. This means the higher your total income, the higher the rate that applies to the top portion.
| Taxable income | Tax on this portion |
|---|---|
| $0 – $18,200 | Nil (tax-free threshold) |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 + 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 + 37c for each $1 over $135,000 |
| $190,001+ | $51,638 + 45c for each $1 over $190,000 |
Low Income Tax Offset (LITO): If your taxable income is under $66,667, you may be eligible for an offset up to $700 (maximum for incomes of $37,500 or less), phasing out to nil at $66,667.
Practical example: You earn $80,000 from your main job and $15,000 freelancing. Your total taxable income is $95,000. Your marginal rate on the freelance income is 32.5% (plus 2% Medicare levy) — so roughly $5,175 in extra tax on that $15,000. That does not include deductions you may be able to claim.
Do I need an ABN?
You need an Australian Business Number (ABN) if you are carrying on an enterprise — broadly, operating in a business-like way with a profit intention. Most freelancers and sole traders who work regularly fall into this category.
If you don't quote an ABN when invoicing, your client may be legally required to withhold 47% of your payment and send it to the ATO (the "no-ABN withholding" rule). Applying for an ABN is free through the Australian Business Register.
An ABN does not automatically mean you are running a business for tax purposes — the ATO also looks at whether your activity is a business or a hobby (see below).
Is my side hustle a business or a hobby?
The distinction matters because:
- A business can deduct expenses against its income, may need to register for GST, and must report income. Losses may (subject to rules) be offset against other income.
- A hobby does not need to report income to the ATO — but also cannot claim deductions.
The ATO looks at multiple factors: profit intention, commercial character, repetition, scale, and whether you operate in a business-like manner (records, business plan, separate bank account). There is no single test. The ATO has an online tool to help you work this out, and if there is any doubt, a registered tax agent can give you a definitive answer for your situation.
When do I need to register for GST?
Goods and Services Tax (GST) is separate from income tax. You must register for GST if your GST turnover — the total amount you invoice (not profit) — reaches or exceeds $75,000 in any 12-month period.
Once registered, you charge 10% GST on top of your prices, collect it from clients, and remit the net amount to the ATO quarterly (or as agreed). You can also claim GST credits on your business purchases.
Exception: If you drive for ride-share or taxi services, you must register for GST from your first dollar of income, regardless of turnover.
What can I claim as a deduction against side income?
You can deduct expenses that are directly related to earning your side income. Common deductions include:
- Equipment and tools — laptop, camera, tools of trade (immediate deduction or depreciation depending on cost and your business status)
- Software and subscriptions — design tools, accounting software, platform fees
- Home office costs — a portion of internet, phone, and utilities if you genuinely use your home as a place of business (not just for checking email)
- Marketing and advertising — website hosting, domain name, ads
- Professional services — accountant fees, legal advice related to the business
- Insurance — professional indemnity, business insurance
- Vehicle costs — if you use your car for business (logbook or cents-per-kilometre method)
- Training and education — courses that maintain or improve skills for your current work (not for entering a new field)
You cannot claim expenses that are private in nature, or that relate to earning income that is exempt from tax. If an expense has both private and business use, only the business portion is deductible.
Do I need to pay tax during the year, not just at tax time?
If your total tax on your business or investment income is likely to exceed $1,000 for the year, the ATO will generally put you on a Pay As You Go (PAYG) Instalments system. This means you pay tax on your side income quarterly throughout the year, rather than one large bill at tax time.
In your first year of side income, you usually pay everything when you lodge your return. From the following year, the ATO may enrol you in PAYG instalments automatically based on your previous return. You can also voluntarily enter the system if you want to avoid a large end-of-year bill.
What about superannuation on side income?
If you are self-employed (sole trader), there is no compulsory super obligation on your own earnings — unlike an employer who must pay super for employees. However, you can make voluntary contributions to your super fund and claim a tax deduction for them, up to the concessional contributions cap of $30,000 per year (from 1 July 2024).
If your side hustle employs other people (even casually), you must pay them Superannuation Guarantee contributions at 12% of ordinary time earnings (the rate from 1 July 2025).
How do I declare side income in my tax return?
How you report depends on your structure:
- Sole trader / individual with a side hustle: Complete the "Business and professional items" schedule in your individual tax return (myTax or via a tax agent). Report gross income and deduct business expenses to arrive at net profit, which flows into your assessable income.
- Second job (PAYG employee): Your employer withholds tax. You receive a PAYG Payment Summary (or income statement in myGov). This income is automatically included in myTax from your employer's STP reporting.
- Gig platforms: Some platforms provide an annual income summary. Keep your own records throughout the year regardless.
The ATO uses Single Touch Payroll, bank data matching, and data shared by platforms like Airbnb and Uber. Undeclared income is increasingly easy to detect.
Key record-keeping rules
You must keep records of all income earned and expenses claimed for a minimum of five years from the date you lodge the relevant return.
Good records include: invoices, bank statements, receipts, a mileage logbook (if claiming vehicle expenses), and a register of any assets you use in the business.
Not sure how this applies to your situation?
Everyone's income mix is different — your marginal rate, what you can deduct, and whether you need an ABN all depend on your full picture. That's exactly what we're building Zyloz for: helping you map your own financial situation with clarity, and connecting you with a licensed professional when you need one.
