There’s no magic dollar figure. In New Zealand you’re “in business” when you sell regularly, aim to make a profit and put real time and money in, whether that’s $3,000 a year or $300,000. Inland Revenue says plainly that there’s “no minimum income level to be in business”. Clearing out your wardrobe on Trade Me is fine. Buying vintage denim to flip every weekend is a business.
That’s the short version. The longer version matters more than most side hustlers think, because the same paperwork IRD wants is the paperwork a lender asks for the day you want to grow.
So where is the line between a hobby and a business?
IRD doesn’t use one test. It looks at the whole picture. On its hobby or business page, the signs of a business include whether you:
- intend to make a profit
- put a lot of time, money and effort into it
- sell to customers on a regular basis
- keep records to keep an eye on how it’s going
- run it much like other people in the same trade would
- plan to keep doing it long term
- rely on it to help pay your living costs
Tick a few of those and you’re leaning business. Tick most of them and there’s not much debate.
For online sellers specifically, IRD’s online trading page boils it down to a handful of questions. Did you buy goods intending to resell them? Did you plan to make a profit? Do you sell goods or services online regularly? Answer yes to some or all, and you’ll likely need to declare what you earn.
Here’s a quick gut-check:
| You’re probably a hobby if… | You’re probably a business if… |
|---|---|
| You sell your own stuff you no longer need | You buy stock to resell |
| Sales are one-offs or a yearly clear-out | You list new items every week |
| You make things for fun and sell the odd one | You make things specifically to sell, at a price that covers costs |
| You don’t really track costs | You’ve got a spreadsheet, a brand name and an Instagram account |
| You’d keep going even if it lost money | You’d stop if it lost money |
One more thing worth knowing: IRD lists “selling things you make occasionally at markets” as a classic hobby. “Occasionally” is doing the heavy lifting in that sentence. A monthly stall plus an online store is a different story.
Does Trade Me, Etsy or Instagram tell IRD what you sell?
This is the question everyone actually wants answered, so let’s be precise.
Since 1 January 2024, NZ-resident online marketplaces have had to collect seller information and report it to IRD each year, with reports due by 7 February for the previous calendar year. But those rules cover short-stay and property rentals and personal services such as ride-sharing, food delivery and graphic or web design. IRD says the optional extension to selling goods “has not been implemented but may be considered in the future” (IRD: information reporting overview).
So, today, a marketplace selling your handmade candles isn’t filing a seller report about you under those rules. Before anyone gets excited, though:
- IRD says it monitors online transactions. That’s in black and white on its online trading page.
- Your bank account tells the story anyway. Regular deposits from Shopify, Stripe, PayPal or a stream of bank transfers look like trading, because they are.
- IRD expects to receive information from other tax authorities about New Zealanders earning through overseas marketplaces.
- If you sell design, editing or other services through a platform, you may already be inside the reporting rules.
The honest takeaway: “they won’t find out” is a bad business plan. The better question is what declaring the income actually costs you, and often the answer is less than you’d expect.
What changes once you’re a business?
Less than people fear, honestly. Here’s the practical list.
1. Your profit goes in your tax return. As a sole trader you’ll file an IR3 and pay income tax on profit, not on sales. That’s the upside nobody mentions: as a hobby you can’t claim anything, but as a business you can claim the costs of earning the income. Stock, packaging, courier costs, platform and payment fees, ad spend, a share of your phone and internet. IRD is clear that a hobby can’t claim expenses or losses at all.
2. You keep records. IRD wants seven years of tax records once you’re in business (IRD: when your hobby becomes a business). A separate bank account and a basic bookkeeping app will do most of the work.
3. GST is a separate test. You must register once turnover goes over $60,000 in a 12-month period, or you expect it to. Plenty of side hustles never get there. Our GST threshold guide explains the forward-looking part that catches people.
4. Provisional tax might show up in year two. If your end-of-year tax bill (residual income tax) goes over $5,000, IRD expects provisional tax payments the following year. It’s the “paying for this year while finishing last year” squeeze, covered in our first-year provisional tax guide.
5. Consumer law applies. Under the Fair Trading Act, people selling as a business have to say so wherever customers can buy online. The Commerce Commission says that on Trade Me, you do it with the “in trade” label (Commerce Commission: selling online). It’s a two-minute fix, and a seller who skipped it across more than 1,300 listings ended up with a $5,000 fine.
A worked example: two sellers, same platform
Illustrative only. Not real people.
Sione clears out his garage before moving flats. He lists 40 items on Trade Me over two months: an old bike, a couch, some gaming gear. He sells most of them for less than he paid. Hobby (really, just personal sales). Nothing to declare.
Ruby runs a little resin jewellery brand from her Kirikiriroa flat. She buys materials in bulk, posts new drops on Instagram every fortnight, sells through a Shopify store and the odd market, and has started paying for boosted posts. Over the year she turns over about $22,000 and spends about $9,000 on materials, packaging, postage, fees and ads.
Ruby is clearly in business. The good news for her:
- She’s taxed on roughly $13,000 of profit, not $22,000 of sales.
- She’s well under the $60,000 GST threshold, so no GST registration yet.
- Because she’s kept every receipt and uses a separate account, her accountant sorts the return quickly.
Now jump ahead six months. A gift store chain wants 400 pieces for Christmas, paid 30 days after delivery. Ruby needs about $8,000 of materials and packaging up front. Because her sales run through one clean account and her income is declared, a lender can read her trading history in minutes. If she’d been running it through her personal everyday account and leaving it off her return, she’d have a much harder story to tell.
That’s the real reason to sort out the hobby-or-business question early. It’s not just about IRD. It’s about being fundable when the big order lands.
If you’re already at Ruby’s stage and the stock bill is the only thing in the way, see what you could qualify for. It takes about a minute.
Already been selling a while without declaring it?
You’re not the first, and it’s fixable. Don’t panic, and don’t just quietly start declaring this year and hope the past disappears.
- Get your numbers together. Download your platform sales reports, payment processor statements and bank statements, then add up your costs.
- Talk to an accountant. They’ll work out which years count as a business and what’s owed.
- Look at a voluntary disclosure. IRD can cut shortfall penalties by 75 to 100% if you tell it before you’re notified of an audit or investigation. Wait until after you’ve been notified and the reduction drops to 40% (IRD: lowering your shortfall penalty).
- Plan for the bill. If the catch-up tax is more than you’ve got in the bank, IRD will often agree an instalment arrangement. Our guide to IRD tax debt options covers how that works.
Coming forward early is cheaper, calmer and keeps your record clean for when you need funding.
Why does any of this matter to a lender?
Because lenders fund businesses, not hobbies, and they need proof of which one you are.
For unsecured funding, lenders generally want around six months of trading and will spend most of their time in your bank statements. Clear, regular sales deposits in a dedicated account are gold. A personal account where Shopify payouts sit between flatmate rent and Uber Eats is hard to read. We break down exactly what they look for in what lenders read in your bank statements.
For bigger amounts, or if you’re under six months, a property-secured loan of $20,000 to $1m against NZ property you or a supporting party own can work from day one, because it relies less on a long trading record.
Either way, a few habits make you look like the business you are:
- Open a separate business bank account and run every sale and cost through it.
- Declare your income. Some lenders ask for tax returns or financials, and income that never made it to IRD is hard to count.
- Keep IRD up to date. Lenders ask about tax debt, so deal with any catch-up bill early.
- Pick a structure on purpose. Sole trader is simplest to start. If you’re growing fast, compare it with a company in our sole trader or company guide.
Thinking about going full time? Our side hustle to full time guide walks through when the numbers say jump.
Your hobby’s a business now. Want to fund what comes next?
Admitting your side project is a real business is a bit of a milestone. It also usually means you’ve hit the point where growth costs money first: a bigger stock order, better equipment, a proper photo shoot, or a marketing push that you know converts. Plenty of the founders we talk to were “just doing it for fun” a year ago.
Here’s how we work:
- The enquiry takes about 60 seconds, and asking won’t touch your credit file. There’s no credit check when you first enquire.
- We don’t fire your details off to a pile of lenders. No surprise calls from companies you’ve never heard of.
- A real person looks at your situation, including how long you’ve been trading and how your sales come in, then gives you a call.
- Please fill the form in accurately, with your real turnover and trading time, so we can line up the right option first go.
Selling as a sole trader? Have a look at sole trader loans. Running an online store? See e-commerce business loans. Or skip ahead: