I am an Aussie living in the US on an E-3, I have been here since late 2006. I have side income ($AUS coming into my Australian bank account) from an eBay business located in Australia, and I believe I must report this for my 2007 US tax return.

Where and how would I report this on the 1040? Do I report it as net income, or must I separate income from expenses etc.

There does not seem to be anything written about this anywhere. Any help would be appreciated

Thanks!

See schedule C of Form 1040. The net income will show up on line 12 of Form 1040.

Yes, if you are fining a resident tax return, you will report the self employed income on schedule C (Form 1040) and also deduct your business related expenses on schedule C. The net income on schedule C is subject to SE tax, even if it is from a foreign business.

The treatment is just like if you get a 1099-Misc in the U.S.
Read: Your U.S. Tax Return: W2 or 1099: Employee or Independent Contractor.