ATO - do earnings belong to the Ebay account owner or the Paypal account owner?

[what*alice*found]

Hello 🙂

My boyfriend and I sell on Ebay from both of our respective accounts, but both Ebay accounts are linked to my Paypal.

We are starting to do a decent amount of sales between the 2 accounts and will be reporting our income to the ATO to be safe.

BUT, I'm not sure if all the income is mine, because I own the Paypal account so the money actually goes to me, or if he earns what is sold from his account and vice versa.

Thank you in advance for you advice. 

[extra-keen]

This is a question for a good accountant. A good accountant is worth his/her weight in gold!!!

[zelly888]

You need to check who sold what and maybe highlight your partners income

[zelly888]

They belong to Ebay account owner because you can receive payments to your PayPal account from more than one source meaning all payments received are not necessarily form income.

[chameleon54]

This is a rather complex question. The tax office will look at who,s ebay account  earned the money and where it finally ended up as well as your relationship for business purposes. Do you and your partner each lodge individual tax returns, or do you have a joint partnership tax file number as well. If joint, the easiest way this time may be declare the income on the joint account. If individual only, you would need to record the sales from each ebay account and the costs from each ebay account. ( stock purchases, postage costs etc. ) This forms the basis for your lodgment. If each of you earned less than $20,000 total, the ATO may accept this information at face value. The problem you have, as you have indicated is that the paypal account is in your name only. Where you to be audited by the ATO ( unlikly unless your combined turnover is a lot more than $20,000 ) the ATO may declare all of the income as yours. The problem becomes even more complex when the question is asked, who finally recieved the income once dispersed from your paypal account. ? If your records are good and your partner can show his income eventually ended up in his bank account, and yours to your bank account it would make the ownership of the income clearer. Do you only have your own bank account linked to the paypal account ? Do each of you purchase goods from the paypal account balance ?. If it was me and the income for each ebay account was less than $20,000 I would use the figures from each ebay account as the basis for the two individual tax returns this year and cross my fingers that you will not be audited. It is essential that you both have your own paypal accounts for future transactions, each linked to bank accounts in your own names, ( unless you have a seperate joint partnership tax file number. ) The $20,000 figure is based on the fact that all ID,s with turnover of more than $20,000 have thier details forwarded to the ATO.  If the ATO can see that income was declared from ebay for the owner of the paypal account, they are less likley to audit the account than for some-one who turns over more than $20,000 and does not declare any ebay income at all.  I am not an accountant. The above advice is based on 30 years of multiple structure business ownership including currently having five tax file numbers and five seperate ATO lodgements between my wife and myself. You may be wise to speak to a trained accountant for confirmation of above advice and for future tax planning. The best advice I could give is SET UP SEPARATE PAYPAL ACCOUNTS linked to bank accounts in your own names, as a matter of urgency.

[lyndal1838]

It is the owner of the ebay account who is responsible for the income on that account.....it is the ebay account details that the ATO is interested in, not the paypal account.

By the way, you should be declaring all your income from ebay to the ATO, not just when you are making a decent income.  By the time you have calimed all the deductions you will probably find there is very little if any tax to be paid for the time being.

[chameleon54]

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@lyndal1838 wrote:

It is the owner of the ebay account who is responsible for the income on that account.....it is the ebay account details that the ATO is interested in, not the paypal account.

By the way, you should be declaring all your income from ebay to the ATO, not just when you are making a decent income.  By the time you have calimed all the deductions you will probably find there is very little if any tax to be paid for the time being.

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The problem comes if the paypal account is only linked to one persons bank account. If the income all ends up in one persons bank account, the tax office will have a record of this money mysteriously appearing ( all bank account details are forwarded to the ATO who run computer allgorythms across the information, looking for anomolies between income banked and income declared )

[zelly888]

Yes lyndal this is what I said in my previous post

[chameleon54]

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@zelly888 wrote:

They belong to Ebay account owner because you can receive payments to your PayPal account from more than one source meaning all payments received are not necessarily form income.

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Common sense says you should be correct. Unfortunatly common sense does not always alighn with the convoluted, highly complex  tax system. I would expect that the paypal account would be considered in the same light as a bank account for tax purposes. If all of the income from two parties is ending up in one parties paypal account, the tax office may decide to class it as income unless it can be proven otherwise. Sure the two people can provide the seperate ebay records as proof of income, but once the income ends up in one persons bank account this becomes very murky indeed and would be a very stressfull experience for all concerned. Much better to have two seperate paypal accounts for future transactions.

[lyndal1838]

But zelly is correct when she says that all funds coming into a paypal account are not necessarily income.

I have had a paypal account, linked to a joint bank account with my OH since long before it was called paypal and acquired by ebay.

My OH's family are in Canada and the USA and we have had many $$$$$s going through the account both in and out...it was easier to send money for all the usual gift that families send to each other.

We found that gifts to my MIL and FIL in Canada were invariably late so I contacted my SIL and arranged to send her the money and she would purchase a gift as near as possible to what I asked her to get.  I did the same from this end.  It was so much easier to paypal it then have to worry about cashing cheques and exchange rates.

Never in over 30 years has the ATO ever questioned the money going into our bank account from overseas.