topic Re: Do I need to pay GST and if so, can I avoid it? in Selling

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

marjak15 — Fri, 23 Sep 2016 10:49:25 GMT

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

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

imastawka — Fri, 23 Sep 2016 10:51:31 GMT

Surely you have an accountant?

That sort of turnover, you should

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

lyndal1838 — Fri, 23 Sep 2016 11:06:53 GMT

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.

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

marjak15 — Fri, 23 Sep 2016 11:15:44 GMT

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.

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

jensmanchester-australia — Fri, 23 Sep 2016 11:30:47 GMT

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.

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

marjak15 — Fri, 23 Sep 2016 12:16:35 GMT

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.

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

davewil1964 — Fri, 23 Sep 2016 12:21:41 GMT

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.

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

lyndal1838 — Fri, 23 Sep 2016 12:28:54 GMT

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?

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

lyndal1838 — Fri, 23 Sep 2016 12:48:59 GMT

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.

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

chameleon54 — Fri, 23 Sep 2016 13:13:17 GMT

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.

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

marjak15 — Fri, 23 Sep 2016 13:37:11 GMT

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

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

airshark3d — Fri, 23 Sep 2016 14:14:24 GMT

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.

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

k1ooo-slr-sales — Fri, 23 Sep 2016 16:04:51 GMT

@imastawka wrote:
Surely you have an accountant?

That sort of turnover, you should

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.

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

clarry100 — Fri, 23 Sep 2016 21:25:48 GMT

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.

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

lyndal1838 — Fri, 23 Sep 2016 22:16:10 GMT

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%.

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

clarry100 — Fri, 23 Sep 2016 22:33:24 GMT

@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%.

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?

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

jensmanchester-australia — Fri, 23 Sep 2016 22:55:07 GMT

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.

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

lyndal1838 — Fri, 23 Sep 2016 23:32:33 GMT

@clarry100 wrote:
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?

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.

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

marjak15 — Sat, 24 Sep 2016 01:37:57 GMT

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.

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

marjak15 — Sat, 24 Sep 2016 03:48:38 GMT

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.