Just another quick tax question

[kitty-kat-kollection]

Hi all,

I'm just reviewing my ebay sales spreadsheet to get it all ready for tax time, and I know I can't alter what ebay declares to the ATO, but some things I didn't actually make a profit on and was wondering what you all do...

Is my only option to just make them deductions?

1. I sold several items for my friend that totalled about $500 but she got the money, not me (less the postage and ebay / paypal fees of course).

2. Similarly, a neighbour gave me some clothes to sell for her.

3. Thirdly, several items were my own that I bought but didn't end up using or wanting, and technically sold at a loss as they were not bought intending to be sold.

Thank you!

[chameleon54]

It can get very messy, very quickly when you mix personal sales with business sales on the one selling account. It is always best to run a seperate selling ID for personal stuff.

Having said that, now that it is done, in answer to the first two issues, ( items sold for friends and neighbours ). One way might be to ask them for a purchase reciept equel to the price the items sold for, minus expenses. That way you can claim you purchased them for the same price you sold them, making them revenue neutral as far as tax is concerned. Its not perfect, but may be a workable answer for now.

[lyndal1838]

You do not just declare your profit to the ATO.....you declare your whole income and then use the deductions to reduce your assessible income.

Have you got proof of paying the proceeds to your friend?  That should be a tax deduction which would mean you have zero tax to pay on that transaction.

As for your own clothing sales.....if you have receipts for them you use that as your cost....if it shows as making a loss it will offset some of the tax payable on other sales.

I suggest a visit to an accountant may be in order.....you don't seem to understand your obligatons yet.

[kitty-kat-kollection]

Thank you both!

This is my first tax year with an ebay shop, and I've never had to deal with deductions before.

I don't have receipts for my own items I sold because some are literally 35 years old, some are 15 years old, and so on. Others are only 1-3 years old but I didn't keep the receipts as I assumed at the time that I'd be keeping them.

[lyndal1838]

Having an ebay shop has nothing to do with it.....you should have been declaring any ebay sales and then using the deductions to reduce or negate any tax payable.

I would definitely recommend a visit to an accountant before it all becomes too difficult to fix.

[joztamps]

You really do need to see an accountant, if only to sort whether any of the proceeds of sales of personal assets are taxable income because (and this is not professional advice) they may not be.

[eol-products]

The selling of personal items you have around the home is tax exempt but selling items you purchased for the sole purpose of resselling at a profit is not.

Your best to go to the ATO website and start reading with regards to running a business as a sole trader. The more you understand the less it will cost if you seek professional advice. 

If this is your only income then remember any profit under $18200 will not incur any tax but you still need to do a tax return. 

[digital*ghost]

I will echo others and preface the following by saying checking with an accountant is always the best way to go, but as I understand things, you don't need to declare the income made for sales on personal items, or items you sold for others, unless you charged them a commission, as the commission would count as part of your business income (don't forget to exclude the associated costs from your return, as well, like the eBay and PayPal fees). I will put the example the ATO use about what income needs to be declared in the spoiler below, it contains an example of someone carrying on a business, but also selling other items. 

eBay's report will never match a seller's, even if the seller declares everything they're supposed to, since eBay don't include refunds etc (as far as I know) - the ATO wouldn't (or shouldn't) expect numbers to match since businesses can get income / revenue from multiple sources, and can use eBay for multiple purposes, plus with data matching, having multiple accounts to sell different things won't differentiate things in terms of gross revenue. If Joe Bloggs has 3 accounts, all the sales made on those accounts are attributed to Joe Bloggs. (Again, as far as I understand it). What they would be interested in (mostly, but certainly not exclusively), is things like Joe Bloggs declaring $5000 and eBay saying they had a turnover of $50,000 (by which I mean to say they likely are looking for glaring inconsistencies, not a discrepancy of a few hundred dollars).

Spoiler

Example – Selling online as a business

Shari Belmont pays for a store online to sell antique items from her grandmother's estate after her death. This costs her $2,000 for the year.

As some of the items are quite valuable, the total value of the sales is $42,000.

During this time, Shari discovers she enjoys the activity and starts looking for other antiques to sell. She goes to garage sales, antique shops and op shops. She pays cash for the antiques, has them repaired if needed, and sells them on her online store.

Shari considers this is a hobby, as she only looks on the weekends and has a full- time job as an office worker.

Although she doesn't pay to advertise, she has more than a thousand visits per month to her website via a Facebook page she has set up, where she posts photos and details about the items for sale. Her Facebook page is shared by many people in the antique-buying community.

Apart from the sale of her grandmother's estate, Shari has total sales of $37,400 from 205 items sold during the financial year.

Shari is carrying on a business, even though her sales started off as a hobby. She should declare her online income because she:

has a specific online store for her antiques
advertises her antiques (although at no cost) through Facebook
repairs and resells them for a profit
makes repeated sales over an extended period of time.

The sales from her grandmother's estate do not need to be declared as income, but her other sales should be declared as income.

[jellybirddesigns]

Personally, I would have a second Ebay account for such transactions in future.

Much easier to keep separate from your main business endeavours.

From my understanding, you don't generally declare or pay income tax for selling things from around your own home - you will only pay tax on income where you have bought or made something specifically with the intention of selling it for profit.

The problem with processing those transactions through your main account is that you may have to declare them as part of your own income as the ATO has no way of separating them out from your regular profit-based sales. You should however, keep a tally of those figures and explain to your accountant that $XXX amount was processed on behalf of others as well as from selling some old items from your closet.

[kitty-kat-kollection]

Thank you again. Yes, my question was how best to separate my own personal items or those of others, and my buy-to-sell-for-profit items, since obviously ebay lumps them all in together.

And yes, I can see the ebay numbers won't match mine as there have been some refunds, 2 annoying chargebacks, and the other day I found an item in my sold section but I hadn't sold it! It was also in the active listings still and not a multiple qty! Weird. It had no details of the "sale" either.