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

[marjak15]

Thanks a lot, that's very helpful and I'll talk to my accountant about it. 

[airshark3d]

You can avoid paying GST if you split the earnings into two separate entities...and it will be legal.

BUT...You need to pay an accountant more just to organise everything, unless you are savvy with numbers yourself and have more than enough spare time. Also, what happens if you exceed 150k? Find a third partner? That will just be more complicated.

I was in your shoes a couple of years ago. My advice, just register for GST and build it in your price.

Also, when I import I don't utilize the "less than $1000 exemption" anymore. I actually make more when I bring imports in due to the discount in freight.

Last shipment I brought in costs almost $8,000(includes shipping/courier) and technically I only was out of pocket by $365(Broker $275, $90 COO). I didn't have to pay duties because of the FTA, and was able to use the GST as credits. If I brought it in the "free" way, It would've cost me more than 10k.

My point here is, GST isn't actually a "bad" thing.

Mind you, the fine for not collecting GST is roughly quadrouple the amount of GST payable...just keep that in mind. 

[k1ooo-slr-sales]

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@imastawka wrote:

Surely you have an accountant?

That sort of turnover, you should

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stawka's post says all that needs to be said.  Seeking this sort of financial advice from members of a public forum is fraught with danger for you.  The title of this thread, seeking advice on whether you can avoid GST when it is payable says a lot about your your ignorance of business responsibilities.  You can't use the old "but I was told I didn't have to pay GST on the eBay discussion boards" when the tax office knocks on your door.

[clarry100]

My wife and I are set up exactly as Chameleon has described.

This was done at the advice and guidance of our tax accountant. I recommend you speak closely with yours.

We each have our own separate ABN and operate different named stores although selling pretty near the same kind of products.

We each have our own separate annual tax returns, although neither of us have reached the $75K in sales GST threshold as yet.

But if/when we separately do then we will need to independently register for GST and start collecting/paying it. We will then need to adjust our prices accordingly but it will not be 10% as you can claim input tax credits for GST you have paid on business related expenses. So the actual increase is likely to be somewhere around 4-5%.

We hope to reach this threshold one day as even tho we would be paying GST our profits will be higher as sales volume will be up.

[lyndal1838]

The GST is quite generous for businesses selling actual items....several of you have mentioned only paying about 5-6% to the government.

Take pity on those of us who are in the Service industry.....in our case we hand over something like 8-9%.

[clarry100]

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@lyndal1838 wrote:

The GST is quite generous for businesses selling actual items....several of you have mentioned only paying about 5-6% to the government.

Take pity on those of us who are in the Service industry.....in our case we hand over something like 8-9%.

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Having not been into GST as yet I don't fully understand it either.

Why is that Lyndal?

Is it becasue you don't have the same level of input tax credits available to minimize what you have to hand over?

[jensmanchester-australia]

We hope to reach this threshold one day as even tho we would be paying GST our profits will be higher as sales volume will be up.

Yes - this is what businesses should be aiming for. It makes no sense to stifle the growth of a business just so you can avoid paying GST particularly as a $40,000 income today is not going to be the worth the same in 10 years time.

[lyndal1838]

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@clarry100 wrote:

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Why is that Lyndal?

Is it becasue you don't have the same level of input tax credits available to minimize what you have to hand over?

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Yes Clarry, that is correct.

Just looking at the figures for August we collected $1022 in GST but only had credits of $118.  That was  bit better than some months as we had a $58 credit on a Workers Comp payment and a $32 credit on a service on the Van.  Our only regular credits are on fuel and vehicle comprehensive insurance which I pay monthly.

[marjak15]

I am aware of what GST is. I have not approached it yet. I am looking for another opinion alongside my accountant's on how to avoid it or minimise it legally. 

[marjak15]

I don't think what you're saying applies to me. I can't get gst credits on any of my stock. In some situations you would want to stifle the growth of a business. Keeping under GST threshold means I won't pay 7500 in tax. Turning over 74499 and keeping the 7500 is much better for me than turning over say 85,000 and paying 8500 in gst. All the extra work for 10,000 extra turnover, then paying 7500 to have that extra 10000 (which is not all income, just turnover) seems bad in my situation. That's my understanding of how GST works, but I may be wrong.