Business & Finance Tax help

[centrelink1]

So, I'm looking to start an online business soon, mainly using Ebay. Now, obviously I have to pay tax on my earnings. Just wondering what the deal is with GST on this sort of thing.

Help would be greatly appreciated.

I realise this doesn't contain a single question, but I am asking for help. Eh.

 

[AG]

It's optional until you have a $75,000+ turnover. I'd strongly recommened registering for GST if you're in the start-up phase because most likely you'll be starting at a loss for the first year or two, that way you can get a refund from the ATO on all of your purchases.

On the flipside you'd have to get an accountant to complete BAS statements for you, or you can do them yourself (they are fairly easy but some business owners hate them). You might be able to get away with using Excel to help calculate the figures because for the first stage since you probably won't have a high amount of transactions but accounting software like MYOB would be best.

So you'd be looking at 4 quarterly BAS statements (Mar, June, Sep and Dec) and a tax return as your accounting obligations. I'm not sure what the go is with online shopping in regards to licenses so you might have some obligation to produce financial reports but I doubt it.

EDIT: It forces you to keep on top of your business from a financial pov as well. If you're not registered for GST then there are no obligations to keep the accounting side of things organised. You need to be on top of everything if you own a business, especially as a sole trader, so being forced to comply with the ATO will give you extra motivation.

 

[Caesar]

Above is all good advice.

One thing I'd add is that if you're under the $75k threshold and you're reporting optionally, you don't have to do quarterly statements - you can do an annual GST return instead.

 

[centrelink1]

If I register for GST, won't I have to give up 10% of all sales?

 

[AG]

Yeah, I'm not sure how it works with ebay sales because it's more of an auction rather than a sale. Most business owners can set the prices of goods/services, so you still have control over what you charge. An online auction is different though because expectations might not be met and the 10% might seem more of a blow. So the GST decision is going to have to come down to if you are running at a profit or loss for the initial stage.

EDIT: I'm basing this on how a lot of the businesses I have read about go through the start-up phase. They have to go out and sell themselves and their idea. Getting clients is the hardest task of any business. If you are going through ebay then you pretty much skip that task, so you might be operating at a profit fairly quickly.

Are you looking at a loss for a while or are expenses fairly low for online sales through ebay?

 

[centrelink1]

Expenses are relatively low, but its really hard to get sales when you have such low feedback numbers. Will only ever be down say $200 in listing fees.

At the moment I'm yet to make a sale (have had 2 buyers cancel after committing... *****), so down roughly $50. Could potentially lose a little money when first starting up the website.

 

[AG]

What about the cost of the goods you want to sell?

 

[centrelink1]

Well, I don't actually pay for them until I've received payment from the sale. Then I contact the supplier, and have them send the item to the buyer, keeping the profit.

 

[AG]

Cool. I don't know enough about sales online but it sounds like a good system.

So if listing fees are the only issue with an ongoing loss then I wouldn't bother with GST.

 

[centrelink1]

Sweet, cheers.

 

[strengthwithin]

Well, I don't actually pay for them until I've received payment from the sale. Then I contact the supplier, and have them send the item to the buyer, keeping the profit.

Be careful with drop shipping, it's actually illegal to do so on eBay and they can suspend your account. Apparently they check your statements and see for every transaction you get in you straight away do one out.

 

[Cynic]

So, I'm looking to start an online business soon, mainly using Ebay. Now, obviously I have to pay tax on my earnings. Just wondering what the deal is with GST on this sort of thing.

Help would be greatly appreciated.

I realise this doesn't contain a single question, but I am asking for help. Eh.

If you'll be dealing international at all, whether buying or selling, and intend to register for GST go to an accountant and run through what you intend to do. GST on international transactions can be a bit ugly in terms of when/where the transaction takes place from what I remember.

 

[centrelink1]

Be careful with drop shipping, it's actually illegal to do so on eBay and they can suspend your account. Apparently they check your statements and see for every transaction you get in you straight away do one out.

I'm not buying off eBay, though? I just transfer the money from paypal to a bank account, and work from there.

If you'll be dealing international at all, whether buying or selling, and intend to register for GST go to an accountant and run through what you intend to do. GST on international transactions can be a bit ugly in terms of when/where the transaction takes place from what I remember.

Just had an offer from Israel. Hmm...

 

[dbcrow]

Probably best to speak to an accountant. Won't cost you that much for an hour or so of their time.

Rather than get your advice from BigFooty!!

 

[Freak Dodgeball Accident]

Sorry to hijack the thread, but I have a quick question about eBay and tax as well.

Am I able to claim for tools that I have purchased from both here and overseas on eBay? If so, how do you go about the tax invoice? Just print off the payment screen?

Back with the thread, do you mind if I ask what you're selling?

 

[Caesar]

You can only claim GST if it's charged. Stuff bought from overseas doesn't have GST included in the price.

If you're buying from a domestic vendor AND they are registered for the tax then GST will be included. Provided you are registered yourself, you can claim it. You can't claim it from the eBay payment screen however. The vendor needs to give you a separate tax invoice in the proper form (business name, ABN, itemising the GST split).