topic Re: help with GST, my understanding. in Selling

help with GST, my understanding.

dont_waste_dollars — Wed, 30 Jul 2014 03:06:24 GMT

Hi, i think my business will turnover more than 75 this financial year, when should i register for gst? and can you tell me if my understanding is correct

if i bought an item and it included $10.17 GST and i sold it for $139.95 paying $14 GST would that mean i pay the difference between the two figures? which would be $3.83

OR do i pay the whole 14 dollars now but come tax time i get alot back?

Just not sure how the whole thing works like when it is paid, how it is calculated etc. Any help would be great thankyou

Re: help with GST, my understanding.

lyndal1838 — Wed, 30 Jul 2014 03:40:59 GMT

My advice would be to see an accountant before you do anything else as you really have no idea how GST works.

If you are a registered business with an ABN you would be filling in a BAS every month/quarter. That is where you should be declaring and paying your GST, less the amount that you are claiming back. It is a 2 step process in the BAS but has the effect of you paying just the difference between the 2 amounts.

I would advise not registering for the GST any sooner than you need to as it involves a lot of monthly paperwork that is not necessary unless you have to. You have 21? days to register after you turn over $75,000.

BTW, the GST included in a sale of $139.95 is $12.72, not $14.00...another reason to see an accountant to make sure you understand your liabilities.

Re: help with GST, my understanding.

dont_waste_dollars — Wed, 30 Jul 2014 13:58:33 GMT

I thought GST was 10%? how did you get that figure?

and if i did reach 75,000 and registered would that mean i only start paying gets from that point on or i have to pay on everything ive made up until that point

Re: help with GST, my understanding.

digital*ghost — Wed, 30 Jul 2014 14:14:13 GMT

@dontwastedollarss wrote:
I thought GST was 10%? how did you get that figure?

It is 10%, but the equation is price + 10% GST = sale price, not 10% of sale price = GST.

GST is added on to a base price to get a GST inclusive amount. eg if we didn't have GST inclusive prices on eBay and I sold something for $20, then GST was added to the sale afterwards, it would be 10% of $20; which is $2, so final price is $22. You can see that 10% of $22 is $2.20, though, but if you divide the final price by 11, you get 2, the GST component.

When $139.95 is the GST inclusive price, it's $139.95 divided by 11 = $12.72

Re: help with GST, my understanding.

chameleon54 — Wed, 30 Jul 2014 14:19:58 GMT

You add 10% to your selling price to allow for the GST. To find out how much GST is included in the total sale price you need to divide the sale price by 11. In the example of $ 139.95 the original price would have been $127.23 add $12.72 ( 10% of sale price ) this gives $139.95 total GST incl. The GST system is complex untill you get your head around it and a pain in the butt after you have it worked out. As Lyndall has advised it is essential you speak to an accountant.

Re: help with GST, my understanding.

chameleon54 — Wed, 30 Jul 2014 14:21:19 GMT

Touche DG !!!

Re: help with GST, my understanding.

digital*ghost — Wed, 30 Jul 2014 14:30:44 GMT

@chameleon54 wrote:
Touche DG !!!

I'm oddly attracted to maths in threads o_O . Even if I know nothing else about a thread's subject, I'll be all like

Re: help with GST, my understanding.

dont_waste_dollars — Wed, 30 Jul 2014 14:34:42 GMT

oh wow, so obvious now haha. Alright awesome!

ive already put a formula in my spreadsheet to calculate the gst on my sold item and my bought item and the difference aka what ill have to pay.

Well gst isn't really that bad after all.. when i first realised i might have to pay it i thought **bleep**... ebay fees/paypal 10% .. plus GST 10% im ruined... good to know its not quite that bad!

it was mentioned about filling out a BAS every quarter or month... could anyone give me an idea about what that is? And yes speaking to an accountant would answer the question but id like to pay them as little as possible... infact ill be doing my tax in etax next financial year.. just keeping all receipts etc.. i don't see why i should pay a guy to file my tax when..

IT IS HUMANLY POSSIBLE OVER THE NEXT YEAR TO GOOGLE AND ASK ENOUGH QUESTIONS TO KNOW ABSOLUTELY EVERYTHING I NEED TO KNOW AND DONT SAY IT ISNT 😄

Re: help with GST, my understanding.

cherry*135 — Wed, 30 Jul 2014 14:51:33 GMT

You have to lodge a BAS statement every quarter and pay any tax you may owe ( diff between GST paid and GST collected).

You need to get a computerised account program and enter all your transactions and that will provide you with details to complete your BAS. (GST reports)

You can get a fairly basic program if there is no payroll involved.

Re: help with GST, my understanding.

cherry*135 — Wed, 30 Jul 2014 14:54:52 GMT

"IT IS HUMANLY POSSIBLE OVER THE NEXT YEAR TO GOOGLE AND ASK ENOUGH QUESTIONS TO KNOW ABSOLUTELY EVERYTHING I NEED TO KNOW AND DONT SAY IT ISNT "

If that was true there would be no need for bookkeepers and accountants. Accountants are good for tax minimisation advice as well.

Re: help with GST, my understanding.

dont_waste_dollars — Wed, 30 Jul 2014 15:00:23 GMT

Re: help with GST, my understanding.

digital*ghost — Wed, 30 Jul 2014 15:08:56 GMT

@am*3 wrote:
"IT IS HUMANLY POSSIBLE OVER THE NEXT YEAR TO GOOGLE AND ASK ENOUGH QUESTIONS TO KNOW ABSOLUTELY EVERYTHING I NEED TO KNOW AND DONT SAY IT ISNT "

If that was true there would be no need for bookkeepers and accountants. Accountants are good for tax minimisation advice as well.

Not every service industry is based on the impossibility for the average person to do something. Many are based on the unwillingness of the average person to do something. 😉

Re: help with GST, my understanding.

chameleon54 — Thu, 31 Jul 2014 00:08:55 GMT

You dont automatically need to employ an accountant to do your BAS & GST lodgements. Many businesses here on ebay lodge their own details with the ATO. The difficulty is at the start when you know absolutly nothing about the system and dont know where to begin. I was lucky enough ??? to be involved in business when the GST was introduced and attended one of the free courses the ATO was running throughout the country to teach people how the system worked and also attended business management classes where it was covered in detail. . An accountant would assist in getting your systems in place and getting you started, but you could try to do it on your own, with assistance from guides published by the ATO ( online or paper type ) and help from the forums. Ebay businesses are very simple and straightforward compared to most, so with a good software programme it should not be too hard once you get started. I still have a GST registration for a non ebay business, but have undertaken strategies to avoid a second registration for my ebay business, as I just havnt got the time to keep up with it all. There are legal strategies that can be employed for ebay businesses turning over $75,000 - $150,000 to avoid registration in some circumstances. Personally my accountant is like gold and worth every cent of the money I pay her each year. Its up to you, but If it was me I would be speaking to an accountant experienced in small business.

Re: help with GST, my understanding.

lane-ends — Thu, 31 Jul 2014 00:40:57 GMT

It is better to turnover just under than just over so you dont need to register. As Ebay does not allow you to actually charge more for GST than if you dont have to include it, this means you pay an extra 10% of your profits in tax every quater.

Doing a quaterley BAS does have the advantage that your end of year tax is easier because you have been forced to do most of the bookwork each quater. Helps give you a profit snapshop every quarter,

The principle of GST with its deduction system is that you are only charged 10% of the value you added to the item (profit margin)

Re: help with GST, my understanding.

chameleon54 — Thu, 31 Jul 2014 01:40:14 GMT

Lane-ends, You raise a very important point in that the 10% GST you pay the ATO, usually comes straight off the top of your profit, ( assuming you are charging the maximum you can already for your product. ) This can make the difference between remainig competative with other sellers or going under. If your actual profit is 20% of the total sales price you would have to sell twice as much ( $150,000 as opposed to $75,000 ) to make the same profit as before if you start paying 10% ( half of your profit ) in GST. This does not take into account all of the extra costs such as labour, stock on hand, storage costs etc. to handle twice the number of sales. I assume many businesses on ebay would be marking up by more than 20% , but it is still concievable that you would need to sell perhaps $100,000 - $120,000 worth of stock PA to make the same profit as selling $75,000 ex GST. ( not including handling costs on extra sales ). This is a vital piece of information sellers need to get thier head around before launching into the GST system. The maths used here for examples is simplified as things are complicated by input tax credits etc.

Having said that, I have found in several businesses I have owned over the years that they just seem to take on a life of their own and grow like topsy, so there are times when you need to bite the bullet, take on the GST and let the business growth run.

Re: help with GST, my understanding.

lyndal1838 — Thu, 31 Jul 2014 01:54:51 GMT

@dontwastedollarss wrote:

it was mentioned about filling out a BAS every quarter or month... could anyone give me an idea about what that is? And yes speaking to an accountant would answer the question but id like to pay them as little as possible... infact ill be doing my tax in etax next financial year.. just keeping all receipts etc.. i don't see why i should pay a guy to file my tax when..

IT IS HUMANLY POSSIBLE OVER THE NEXT YEAR TO GOOGLE AND ASK ENOUGH QUESTIONS TO KNOW ABSOLUTELY EVERYTHING I NEED TO KNOW AND DONT SAY IT ISNT 😄

Oh boy.....you need help from an accountant ASAP.

I (erroneously) thought as you were talking about a business possibly needing to pay GST that you were talking about a registered business with an ABN.

You have to have an ABN before you can register for GST.....the whole system works on your ABN (Australian Business Number)

The BAS (Business Activity Statement) is connected to your ABN.

You really need advice on the best business structure for your circumstances. The simplest is a Sole Trader using your own name, or a Sole Trader using a business name (Your Name trading as Your Registered Business Name).

Or you can trade simply as a Registered Business Name.....or you can go the whole hog and register as a PTY LTD company.

Do you really fancy Googling all those options and trying to decide which is the best for you when an accountant could tell you in a few minutes?

I was a Sole Trader with a Business Name when the GST first came in and was able to get quite a bit of help understanding the system. Since then I have registered 2 incorporated (Pty Ltd) companies and it doesn't get any easier.

In the first instance we had a choice of accounting for GST quarterly or annually. When I registered the first Company we had to pay it quarterly, but when I registered the second company about 18 months ago it had to be done monthly.

I do the BAS for both companies but I hand the tax returns to the accountant as he is up to date with the changes to what we can claim for depreciation and deductions.

I must admit I like the monthly accounting...it takes me about 5 minutes to do and submit. Admitedly it is a Service based company with weekly income from one source and weekly wages so not huge columns of small amounts of money to add up.

But my point is.....see an accountant and don't rely on Google to set your business up in the most efficient and tax effective way for your circumstances.