Do I need to pay GST and if so, can I avoid it?

[marjak15]

Hi, I've got a business on ebay where I can turnover over more than $75,000 (gst threshold), but my income from $75000 turnover is probably only around $20,000. The bulk of my turnover is in what I originally paid for the items I resell, and postage. 

I would like to make around $40,000 a year from my business, but paying gst might make my business not worthwhile. I would have to turnover $150,000 to make $40,000 a year and from what I've heard, the GST on that would be around $15,000 making it not worthwhile. 

Can I take postage off plus what I originally paid for the items when calculating my turnover? If I can't, are there any ways around paying GST ie. setting up multiple businesses etc? Are there possibly exceptions for my situation where I don't earn much compared to the turnover I make?

Thanks for any help

[imastawka]

Surely you have an accountant?

That sort of turnover, you should

[lyndal1838]

You have no choice....once your turnover reaches $75,000 you have a very limited time in which to register for GST.  It is based on a rolling 12 month period and once you hit the $75,000 you need to register very quickly.

GST is 10% but you can claim back any GST that you pay in running your business.

Selling on several ebay accounts does not get you out of your obligations....the turnover would be added together.  The only way you could get round it would be to have the businesses registered in your name and another family member, but that can cause other problems.

GST is based on total turnover but your income tax takes into account the running expenses for your business.....postage, stock costs, etc.

You really need to see an accountant if you have ever had a $75,000 turnover and are not yet registered for GST.

[marjak15]

thanks for the detailed reply. I haven't turned over 75,000 yet, but now that I'm approaching it I'm trying to work out what to do. 

[jensmanchester-australia]

I would like to make around $40,000 a year from my business, but paying gst might make my business not worthwhile. I would have to turnover $150,000 to make $40,000 a year and from what I've heard, the GST on that would be around $15,000 making it not worthwhile. 

Having to pay GST should never be the reason to stop a business from growing.

Although you pay GST on Sales you claim back all the GST input credits from your business expenses so on a $150,000 turnover the GST you end up paying might only work out to around $4,000 (based on a profit of around $40,000).

Allow your business to grow and be thankful that you are lucky enough to be paying taxes as that means you are making money and not losing money.

[marjak15]

Thanks for the reply. I can't claim any of the things buy to resell because they don't have GST on them. I'm guessing I can claim the GST on postage, but that's not enough for me (probably only 1-2000 dollars). I want to keep the business at the 150,000 turnover level because that's what I can manage and I don't want it to grow any more. It would be perfect for me if there was no GST. However, the GST on 150,000 means I am starting to work for a lot less money per hour than makes the business worthwhile. I am going to look at alternative businesses if I am really going to be charged that much GST. 

[davewil1964]

Increase your prices to allow for GST.

Quite frankly, if your business can't handle GST it's not really a business. It is 9% after all, so it is NOT a lot less money per hour unless your money per hour is already at ridiculously low levels.

[lyndal1838]

That is a defeatist attitude.

There are very few successful businesses who don't pay GST...just build it into you prices.

If you are not paying GST on your stock I assume it is because you are importing it from overseas in parcels worth less than $1000.  Do you realise that if Customs twig to this they can add the value of all your imports together and charge you on the combined total of the goods.

As of July next year all imports from overseas will have GST and import charges added so you will be caught out.

What sort of business do you think you could open and not be charged GST on a $75000+ turnover?

[lyndal1838]

BTW, do you realise that ebay sends a statement of your sales to the ATO when you have a turnover of more than $10000.  If you are not declaring it on your tax return the ATO will soon catch up with you.   You then claim as deductions your stock costs, postage and other business expenses before paying your tax.

They will very soon work out what your likely gross turnover is and that you should be paying GST.

[chameleon54]

You could have one store in your name selling $74,000 per 12 months and another store in a partners name also selling $74,000 per 12 months. Keep in mind this does not have to be in a calander or financial year. The GST registration requirement is based on $75,000 total sales in ANY 12 month period on a rolling basis. You can put your store in holiday mode if you look like selling more than $75,000 per store in a twelve month period. This system also allows income to be split for taxation purposes. ( This is all legal if done correctly )

If you go down this route,you would need to have seperate paypal accounts and seperate bank accounts in the name of the seperate individuals. Technically by law your partner would need to have signifigant input in thier ID store, but this could include advice to you on products sold, price points etc.( ie. management advice )

My wife and myself have this business structure. ( two stores, seperate names )  This system was set up and continues to run under the guidance of an experienced accountant.

If you consider this option it would be well worth chatting to your accountant before you do anything.