Ebay and tax

[bmwe46parts]

I am selling auto parts, importing from china and reselling here in australia on ebay, really i would still consider what i do as a hobby as i am still only able to make small orders and making very small profit at the moment but am ramping up and fully intent to continue dumping money into larger and larger orders getting those import cost's down per unit and maximising profit, we currently only have 4 products we import but selling pretty well at the moment last 60 days we have had $2000 aud go through our bank account with sales, so not a bad start but i am getting worried about tax and to go from here. 

Can i just continue to sell as i am and declare it at tax time as "other income", at some point i will register an abn and fully legitimise it but what over heads will this bring?, can someone tell me the pros and cons the 2 options, i currently have an order for 500 kilos of stock coming from china, once that comes i feel pretty comfortable to no longer consider it a "hobby", but is an abn and filing bas statements a bit overkill for now, can i not deduct all expenses and just pay tax on profit with out an abn just as i could with one?

[jellybirddesigns]

As far as I am aware, there are a few different "taxes".

The 10% "Netflix" tax will apply to the fees associated with a listing, eg FVF and shop fees. (ie: the digital side of selling)

For example, those of us with a $54 a month store will see an extra 10% fee, making our shops cost around $60pm.

On the other hand, GST is a seprate issue and is only due if your revenue goes over $75K annually (not sure if that is gross or nett).

Thirdly, you should always report your income to the ATO regardless of what you earn.

I have an ABN which I use for my ATO reporting and then I can claim any allowable deductions.

[collect247]

Other income is what you should put in at tax time.

But if you're intending to get an ABN then you are running a business and then it won't be considered a hobby.

If you intend on making it your primary income then you should get an ABN but that doesn't mean you need to register it with eBay unless you're going to make more than $75000 per annum then you will need to charge GST and there are then benifits that can be gained through eBay.

Ebay will send the income that you make to the ATO over $10000 but all income needs to be declared as other income anyway.

It's a fine line between a hobby and an income but you need to declare it at tax time an let the ATO decide.

[jellybirddesigns]

Eezi - anything that is bought for the specific purpose of resale is not a hobby.

It won't matter if his income is $500 or $50,000, he's not selling stuff from around his house on an ad hoc basis, so it's definitely a business.

OP - I suggest to get in touch with your accountant to figure this all out.

[collect247]

I understand what you are saying but you need to be selling a large amount of items and continually doing so.

If you sell only 4 items per year then it's not a business and as OP has stated that yes they are expanding to make more profit then yes they will be running a business no one disputes that.

Many factors need to be put together for you to be running a business and one of those are buying and then reselling to make a profit,but you also need to have a business plan and run it like it was a business.

I did state that you need to declare all income and let the ATO decide what you have.

Buying and then reselling for a profit is only one factor of many that indicates that you have a business and doesn't count as the only factor is the point I'm making.

Yes you need to pay tax on every $ made but it doesn't mean it's a business.

[lane-ends]

Call it hobby or business, if you are buying to sell it is an income and needs to be declared as an income. If you dont declare it with all the necessary evidence then ATO are not mind readers and can't say whether it is suffiicient to pay tax or not. Hobbies are really when you buy things for personal use then get rid of the surplus/unwanted. ie your hobby is not buying and selling for profit.

If you dont have the evidence then it is entirely possible that ATO could declare all sales as income. It is in your interest to go through all the accountig methods to reduce that figure as much as possible.

Aside from this it is better to get the systems in place while your activity is relatively low rather than wait untill you go full scale. It is by the way the best way to indicate to you whether you are making a worthwhile profit or not. Most of us are good at kidding ourselves.

[collect247]

I never said that any income shouldn't be declared I said all income should be declared as income.

We are arguing here about being a business or not?

Income is income but income is not necessarily a business unless it's an ongoing thing which makes a profit.

OP said they're heading in the direction of purchasing high volume stock and then reselling for a profit and are going to register as a business which we all agree is the right thing to do.

But the ATO do have a (Other Income) question which is perfectly ok to use in OPs case if their eBay selling isn't the only income they're earning until they permanently establish it into a business is what I'm saying.

And what if you sell things around your house all the time because you have 1000s and 1000s of items,is that just a hobby?

[collect247]

Where is tall bearder 1 when you need him lol

[lyndal1838]

Eezi, I have a very extensive coin collection started by my grandmother and continued by my mother and added to by me.

I was considering selling it and contacted the ATO to find out if it would be considered a business as it would raise a large amount of money. 

I was told that if I only sold one of a coin, not multiples, it would be considered my own items and not bought for resale.  If I had multiples of a coin it could be considered a business.

As the OP is definitely buying items for resale he is already a business.

In this case I would be contacting an accountant asap and getting advice before getting in too deep.

Registering an ABN and doing BAS returns is no big deal....it is only when you have to register for GST that the fun begins.

All items listed on ebay have to be GST inclusive in price....you cannot add the GST to an invoice after the sale.

[collect247]

Really the ATO told you that?

So selling a million one off coins that have been added to a collection and selling them and making $$$$$$$$$$$$$$ wouldn't be classed as an income? or a business?