How eBay sales are reported on income tax?

[prime.gadgets]

Hi,

How do we have to declare our eBay sales and paypal income to ATO?

Recently Paypal verified my details as my paypal balance was over 1000$ and they said it is ATO requirement.

I'm selling without an eBay store and personal paypal account, no TFN or ABN linked to either account.. 

Does anyone have experience on dealing with tax on ebay sales?

Many thanks in advance..

[lyndal1838 · Accepted solution]

The paypal requirement is not so much for income reporting  as for complying with money laundering laws.

However, you do have to report all your ebay income on your tax return even if it is not a taxable amount by the time you have utilised your deductions.   It does not matter if you have a store or an ABN and your TFN has nothing to do with it.

I suggest you have a talk to an accountant to find out what your tax obligations are before tax time rolls around again.

[jellybirddesigns · Accepted solution]

Any time you purchase something with the intention of reselling it for a profit, you need to declare that income, whether it is $20, or $2000. Whilst Ebay will send a "formal" notice to the ATO once you've reached $10,000 per year (I think), the onus is still on you to declare everything you earn.

Personally, I run an Excel workbook and download the expanded Ebay reports on a monthly basis as it gives a good breakdown.

I run a monthly tally of FVF fees, store subscription fees, PP fees etc.

I also have columns for different suppliers from which I've purchased anything that relates to my sales (and keep the receipts)

Finally I have a column where I input my sale figure for the month.

This makes it very easy to give my accountant everything when tax time is due.

It doesn't matter whether you're selling as a business, or just from a personal account - the ATO is extremly good at data matching what you declare on your tax returns, so it's always best to keep it honest with them. 

[kitty-kat-kollection]

Um...for some reason, my ebay earnings from July 2018 to June 2019 weren't reported to the ATO by ebay. I was curious as to what would be reported, and upon seeing it was nothing, was wondering why this was, as my gross ebay earnings were over $10,000.

Maybe I'm stupid, but I reported them anyway, with many deductions.

[lyndal1838]

I believe the ebay reporting period is a year behind the tax year.  Check what year was reported.....it may have been 17-18.   I do know that ebay reports your whole turnover without  taking into account returns, unpaid items etc.

You did the right thing by declaring your ebay income.....if you had enough deductions you probably had no tax liability anyway.

If you had not declared the income and the ATO found out they would come down on you like a ton of bricks.

Many years ago my OH had an investment bank account with a fair amount in it waiting to pay for shopfittings for a new business.  The money was withdrawn and the bank book put aside for tax time.  Somehow it fell down behind the drawer and was missed.  I found it just before the next tax year and took it to the accountant who put in an amended tax return for the previous year.

The ATO in their wisdom hit us with penalty tax for failure to declare income, late lodgement of a tax return as well as the original amount that should have been paid.  By the time the accountant was paid it actually cost us more than the amount of interest that had been missed.  As the accountant said, we should have just held it for a few weeks and declared it in the next tax return....nobody would have been any the wiser.

[kitty-kat-kollection]

Oh, how annoying!!!! You do the right thing and then this happens! ☹

In my case, I upped the deductions enough so there was no tax payable, but I hadn't really sold anything on ebay prior to July 2018 so there would be nothing ever reported before that.

[lyndal1838]

The ATO sets the reporting level.   It started out quite high but has gradually fallen to the current $10000.   it is doubtful if it will fall further but it will be announced by ebay nearer to tax time.

Many sellers get a shock when they find their details have been reported but it is not surprising when you realise ebay reports ALL income without taking into account returns and unpaid items.

Don't get too creative with your deductions.....you need to be able to prove it if you are audited.

[prime.gadgets]

I saw in an article, the turnover limit is 12000$ in few years ago. Maybe now they have increased it a little bit with the time.

[brerrabbit585]

It's never been 12K. It was 20K and then they reduced it to 10K. I can't see them reducing it.

[lyndal1838]

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@prime.gadgets wrote:

I saw in an article, the turnover limit is 12000$ in few years ago. Maybe now they have increased it a little bit with the time.

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I have only ever seen it as $20000 which reduced to $10000.

It is most unlikely to increase again although it could well reduce further.....the ATO is trying to encourage the disclosure of ALL income so will not make it easy to hide any income.