Tax on Adsense in Australia?

Do you have to pay tax on Adsense income in Australia?
If yes than what is the tax rate ?

Yes you have to pay tax on your adsense income.

The rate is the same as for your other income - if it is a company receiving it then then it pays 30% and an individual pays whatever their marginal tax rate is since it is just a part of your income. For an individual you’d put it in as business income in your tax return.

Unless what you’re doing is classified as a hobby, then you don’t have to pay tax on revenue from it.

Where did you read that myth? Income from hobbies is taxable in Australia. It is the expenses from hobbies (where it exceeds the income) that is not deductible (unless certain criteria is met such as the total hobby income being over $20000).

As far as the ATO is concerned ALL of your income counts the same and you must pay tax on all of it. There is no such thing as a ‘hobby’ when it comes to income in Australia.

All you’d be able to do with respect to adsense income is to deduct the cost of running the web site from it. If the cost of the site is more than the income then you wouldn’t have to pay tax on that income.

If your activity constitutes a hobby or recreation:
any money you earn from this activity is generally not assessable income

From here.

That applies to a hobby where you might make very small amounts of irregular income, eg you collect stamps and occasionally offer a few of your hard to get duplicates for sale to other collectors. Generally to fall into this category the income you make from the hobby has to be a lot less than what the hobby costs you so that even if the income were taxable that you’d have sufficient expenses to negate the tax. As I said that law is primarily there to state that the excess expenses used to generate your hobby income cannot be deducted against other income. If you actually make a profit then it isn’t a hobby.

The key phrase on that page that applies with respect to advertising income is “Does your activity have a significant commercial purpose or character?” Advertising IS a commercial activity and therefore any advertising income you earn is taxable. The only purpose that the advertising serves is to generate income and therefore it is impossible for anyone to be able to argue that it is a hobby. If ‘making money’ were able to be claimed as a hobby then there wouldn’t be any income that would be subject to tax.

If you want your web site to be considered to be a hobby site then you need to remove the ads.

I think you’re over-complicating it more than the ATO does. Yes advertising is a comercial activity, but having Adsense on a blog you run as a hobby is not an activity with a “significant commercial purpose”.

The way i read it is if you buy domains, put websites on them, and place adsense on those websites for the explicit purpose of making money…then that’s not income “from a hobby” and you need to declare the income.

But if you run a website as a hobby, and you place advertising on it as a secondary activity, then that is income derived from a hobby, which you don’t have to pay income tax on.

thank you for your advice

Only because you can deduct the expenses of the hobby against it so as to negate the income. If the income ever becomes great enough to exceed the cost of the hobby then the excess is taxable.

I look after the web site for the Australian Model Railway Association where the ads are very incidental to the site (makes less than $100 a year) but where because the Association actually makes a profit (where all the income and expenses ARE related specifically to the hobby since the Association’s constitution is written to restrict where the money can go) the income on those ads is taxable (and also subject to GST).

If you make a profit from anything then it is excluded from being defined as a hobby. It is only while it is a loss that it will be considered to be a hobby (so as to not permit you to deduct the rest of the expenses against other income - if you expect that you will eventually make a profit and that it will therefore cease to qualify as a hobby you can include the income and expenses on your tax return so as to carry forward the losses to offset against future profits from that activity).