When does a hobby turn into a business? My neighbour services or rebuilds V8 engine cars. Their hours and days vary — but once went to 1:30am. Their shed workshop is literally next to our bedroom. What do we do? We live in a Canberra suburb.
Sounds like the issue is driving you mad! (Sorry, couldn't resist).
When is a hobby a business is probably best answered by the ATO. But I can answer whether your neighbour's hobusiness (bushobby?) is a nuisance.
Nuisance law is grounded in the idea of "give and take" — everyone is expected to endure the usual, everyday activities of their neighbours, and vice versa. But where we are located will have an impact on what we are expected to put up with. If we're living in the inner city, we would reasonably be expected to put up with different types of noise, than if we chose to live in a rural area.
If you're living in a residential area and with essentially a car workshop next to your bedroom window, that could be problematic with, I imagine, the regular noise and smells associated with it. The ongoing and sometimes late-night workshop activities, which are interfering with sleep, are definitely an issue where the law of nuisance is concerned.
The best thing to do, as always, if you haven't already, is to approach your neighbours and let them know there's a problem and try to come to a solution. They may not be aware there's an issue.
If they aren't amenable, then seeking mediation would be your next step. (And if your neighbour is truly running a business, check with your local council that they have permission to be running that business from home.)