How to Start a Startup Side Hustle While Employed in Australia

At Allied Legal, we’ve worked with countless founders who launched their startup side hustle in Australia while holding down a full-time job. It’s a common and exciting path. Many people want to build something of their own but still rely on the stability of employment.

We wrote this article for those founders. If you’re thinking about starting a business on the side, there are a few important legal, tax and ethical considerations to get right from the outset. In this guide, we cover everything you need to know to kickstart your startup side hustle in Australia, along with practical tips and legal insights from our team.

1. Can You Really Start a Startup as a Side Hustle While Employed in Australia?

Yes, you can. It’s perfectly legal to start a business while employed, but there are several things to keep in mind. Whether you’re looking to launch a small e-commerce business, a consultancy, or an innovative tech startup, the path you take will depend on your job, your goals, and how you manage your time.

Legal Opinion: Employment Contracts Matter

One of the first things you should do is carefully read your employment contract. Many contracts contain clauses that could limit your ability to start a side business. Look for clauses related to:

• Non-compete: If your business competes with your employer, this could be an issue. It’s worth noting that Australian courts generally view non-compete clauses with scepticism and will only enforce them if they are considered “reasonable” to protect a legitimate business interest (e.g., trade secrets, client connections). They must be limited in scope (time, geographical area, nature of activity) but it is crucial to have this reviewed.
• Conflict of Interest: Starting a business that conflicts with your employer’s business or uses company time could lead to legal troubles.
• Intellectual Property (IP): If you’re working in a creative or technical role, your employer may have rights to any intellectual property you develop, even outside of work hours.

Tip: A lawyer’s opinion: Always seek legal advice to fully understand your contract and ensure that your side hustle doesn’t conflict with your job.

2. Tax Considerations for Your Startup as a Side Hustle

When you start a business, you’re going to have tax responsibilities. In Australia, your side hustle will be taxed as part of your overall income, so it’s essential to stay on top of these obligations.

Registering Your Business

If your side hustle is more than a hobby and generates income, you’ll need to register with the Australian Business Register (ABR) and get an Australian Business Number (ABN). This is required for invoicing customers, claiming deductions, and more.

Tax Obligations

All income from your startup will be combined with your salary from your full-time job and taxed at your applicable personal income tax rate. You’ll need to declare your business income in your annual tax return.

Lawyer’s Tip: From a lawyer’s perspective, it’s crucial to set up proper bookkeeping to distinguish your personal and business finances. This will make it easier come tax time and protect you from potential legal complications down the track.

3. Structuring Your Side Hustle: Choosing the Right Business Model

When it comes to a startup as a side hustle, one of the most important decisions you’ll make is choosing the right business structure. The right structure will depend on your business goals, scale, and potential growth.

Sole Trader

This is the simplest structure, where you operate as an individual, and all business profits are added to your personal income tax. It’s perfect for small businesses, freelancers, or consultants.

Partnership

If you’re teaming up with another individual, a partnership might be suitable. This structure allows you and your partner to share profits, losses, and responsibilities. However, both parties share personal liability.

Company

If you have plans for growth, a company structure could be a good fit. A company offers limited liability protection and has tax advantages, but it involves more complex reporting and governance requirements. You can read more about incorporating a company in Australia here.

Legal Opinion: It’s always wise to seek legal and accounting advice to ensure you choose the most appropriate structure for your startup goals. There are significant legal and tax implications with each structure.

4. How to Manage Your Time: Balancing Full-Time Employment with a Side Hustle

Balancing a full-time job with building a startup can be a juggling act. Time management will be key to your success.

Ethical Considerations: Don’t Let Your Side Hustle Affect Your Full-Time Job

You must maintain your work commitments and avoid any conflicts of interest. Here are some tips to avoid issues:

• Ensure your side hustle doesn’t interfere with your work hours or job responsibilities.
• Make sure you’re not using your employer’s resources (like equipment, software, or even time) for your business.
• Be transparent with your employer if your side hustle is in the same industry. It might be worthwhile to have an honest conversation to avoid any potential conflicts.

Lawyer’s Tip: Consult with a lawyer if you’re unsure whether your side hustle could cause a conflict of interest with your employer. Ethical and legal issues can arise if you’re not transparent about your activities.

Time-Saving Strategies

• Set Boundaries: Allocate specific hours during evenings or weekends for your side hustle. Treat it like a second job but avoid burnout.
• Outsource Tasks: As your side hustle grows, consider outsourcing tasks like marketing, bookkeeping, and website management to free up more time for strategy.
• Automate: Use software and automation tools to streamline processes like invoicing, inventory management, and customer service.

5. Protecting Your IP and Business Ideas

If your side hustle involves innovation, technology, or any creative work, intellectual property (IP) protection will be critical. Here’s what you need to know:

What is Intellectual Property?

IP includes things like trademarks, copyrights, patents, and trade secrets. As a business owner, you’ll want to ensure your creations are protected.

• Trademark: Consider registering a trademark for your business name, logo, and products to avoid infringement.
• Patent: If you have a novel product or invention, a patent could protect your idea from competitors.
• Copyright: Copyright automatically applies to original content like writing, artwork, and software.

Legal Opinion: Before launching your startup, especially if you’re working in a competitive field, consult with a lawyer to discuss the IP protection strategy for your business. Protecting your creations is an investment in your future.

6. Taking Care of Business: Key Tips for Startup Success

Here are some additional tips to set your startup as a side hustle up for success:

• Start Small, Think Big: Begin with a scalable idea that doesn’t require a huge upfront investment. Test your product or service on a small scale before expanding.
• Networking: Surround yourself with a network of other entrepreneurs, mentors, and professionals who can provide support and guidance.
• Keep Costs Low: One of the biggest mistakes new entrepreneurs make is overspending early on. Stick to lean principles and reinvest profits into growing your business.
• Legal Protections: Don’t forget to protect your personal assets. Consider getting professional legal advice to protect yourself from potential liabilities.

Lawyer’s Tip: It’s always advisable to have an exit strategy in mind for your startup. Whether you plan to sell your business, shut it down, or scale up, having a plan in place will help protect your interests in the long run.

7. Conclusion: Can a Startup as a Side Hustle Work for You?

Yes, starting a startup as a side hustle is absolutely possible in Australia, but it requires careful planning, legal awareness, and time management. By choosing the right business structure, staying on top of your tax obligations, and being transparent with your employer, you can successfully balance a full-time job while building your entrepreneurial venture.

While you’re considering the planning and compliance aspects of your startup side hustle, it’s worth taking a deeper look at what you can get ready during the early stages. Read more here: What Can You Get Ready During the Planning Stage of a Startup? for a helpful breakdown on what to prepare before you launch.

Remember that as a side hustler, the journey will require patience, discipline, and a strong support network. If you’re serious about growing your startup, consulting with legal and financial professionals is a smart move to protect yourself and your business from potential pitfalls. Got any questions? Hit us up and we’ll make sure you’re starting your startup side hustle compliantly and confidently.