Hobby, Side Hustle, Passive Income – Reinvesting the funds

Assigning an alternative label to an activity, engaging in something as a secondary pursuit, or considering a non-routine job does not negate its status as income. The Inland Revenue Department (IRD) may view a hobby as a source of income. Consequently, it is essential to proactively report such earnings to the IRD.

The IRD have been looking into ‘Hobbies’ since well before the internet was around. They are active in checking if a hobby can be income. If you have the intention to make money from this activity and are spending time on making a platform, then the funds you receive from it are very likely to be income.1

This is the same for calling something a side hustle or passive income, normally your income has the taxes already sorted. Your 9 to 5 job has PAYE already sorted before you get the payment in your bank account. However, funds from your content creating activities need to be declared separately to the IRD to ensure you do pay taxes on them and the correct taxes on it. Also, there may be a perception that the money from videos is passive as you may get money from a video well after you have created it, feeling like you did nothing to earn that money. But there is a good chance that is income that you are required to declare.

And another misunderstanding can be from the fact that you are reinvesting the funds back into the activity, you don’t actually have any cash left over for you to use. When you look at the money you have received and the money you have spent it totals nil. This does not mean you do not need to declare the income to the IRD. There may be different factors involved and different treatments for the items you have purchased. You need to pay tax on the funds you have received less any deductible expenses, this is your net income. You cannot claim purchases of assets, in this calculation. What’s an asset? Generally, this is something that will last longer than a year and is over $1,000, so it could be your Van or camera, but you can claim the depreciation of these items.

If you are not sure whether your hobby or side hustle should be declared to the IRD, or you are confused as to what you can claim or not claim towards costs in the business, please get in touch today.

1Grieve v CIR (1984) 6 NZTC 61,682 (CA) – The Judge introduced two important points: the nature of the activities carried on and the intention of the taxpayer in engaging in those activities.