Tax & postage

[decoretrocollectables]

I'm confused..

The postage I charge buyers - which is exactly what Aus Post charges me... Is this considered a profit to me? This doesn't make sense.. Is this just for this financial year or the previous one as well..

[asporty]

Basics have not changed as ATO considers all your earnings as income, whether derived from sales or postage.

From what I undertsand, the change is that ebay used to report to ATO only your sales and not the postage income. Starting May 6 this year, they are now adding postage to your sales and report the total to ATO.

[chameleon54]

Postage is considered as part of your income for tax purposes, but it is also a tax deduction. ( assuming you are running an ebay business and declare your ebay sales to the ATO.)  If you charge the exact postage cost, it will all balance itself out and so you wont have to actually pay any tax on postage income recieved. Packaging costs such as bubble wrap, envelopes etc. are also tax deductable. If you only sell personal things from around the home and dont buy things to sell at a profit, you should not need to declare your sales to the ATO. ( assuming your personel possesions are not valuable items originaly purchased as investments, such as art works, rare coins etc. )

[chameleon54]

I just checked your listings and it looks like a business to me. VERY NICE items you have too. I love the retro stuff and have a shed full of it. You've got some superb pieces there.

[decoretrocollectables]

I don't charge handling or packaging fees, my accountant tells me - just rang him, that it is not considered as profit or part of my sales price...

Oh Dear..

[jensmanchester-australia]

Postage comes under other income and is considered part of your total business turnover.

You claim the actual postage costs you paid out (which will need to proved with receipts from Australia Post) as an expensive against the income.

So the accountant is correct in that it is not part of the sales price and is not profit however the figures still need to be included.

A lot of accountants have very little or no experience with online businesses which may be the case with your accountant.

[lane-ends]

Its part of total turnover or Gross business profit. Net profit is Gross profit minus business cost (eg postage). Net profit is your business income. Add this to any other income you may have then deduct general deductions (eg accountants fees, super contributions if deducting, and any other deductions not directly related to business). This will give you your taxable income.

[chameleon54]

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@decoretrocollectables wrote:

I don't charge handling or packaging fees, my accountant tells me - just rang him, that it is not considered as profit or part of my sales price...

Oh Dear..

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I charge postage seperately to my sale price. Like you I only charge actual post price and dont profit from my postage. I have two main selling accounts in different names so that I can keep under the $75,000 GST registration limit, ( so postage income is not an issue with GST registration limits ). I keep all of my PO reciepts in case of ATO audit, but dont do all of the shenaningans of adding them to my turnover figures and then deducting them from profit. Basically I ignore post costs for profit declared to the ATO. If I had to keep track of all of the postage costs it would be a huge increase in paper work for no difference to outcome. My accountant treats postage as a fee that belongs to the purchaser which I manage for them, ( by buying postage services for them ) but dont actually keep. If postage was included in sale price ( free postage ) this would be completely out the question. If other forum posters information that ebay will include postage in its sales figures it reports to ebay are correct, this system will probably not dot all of the i's and cross the tees for the ATO. The FVF on postage is going to add another layer of complexity. If it is not built into the postage cost, but into the item sale price, it should be a tax deduction. I include it in my postage price 95% of the time so it wouldnt make much difference to my profit / loss staements for ATO. Basically I treat postage in the way your accountant suggests, but have reservations that it will be 100% correct in future in view of ebays latest changes.

[jensmanchester-australia]

An accountant can do whatever they want but at the end of the day they hold no responsibility if the tax department decides to do an audit. The onus is on the taxpayer to ensure the information submitted to the ATO is correct.

With all the facilities the ATO now have to cross check bank accounts etc if what is going through your bank accounts/paypal accounts doesn't match up with the figures provided to the ATO then it could raise alarm bells.

I would be seeking clarification from the ATO on this and also on opening different accounts to avoid having to register for GST rather than relying on an accountant.

[chameleon54]

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@jensmanchester wrote:

With all the facilities the ATO now have to cross check bank accounts etc if what is going through your bank accounts/paypal accounts doesn't match up with the figures provided to the ATO then it could raise alarm bells.

I would be seeking clarification from the ATO on this and also on opening different accounts to avoid having to register for GST rather than relying on an accountant.

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Agreed 100 % with your first statement. The way ebay are now treating postage, changes things quite a bit. Hence my concerns that what has worked in the past may no longer suffice.

In response to the second statement. My wife and I have one ebay account in my name and one in hers. We have seperate paypal accounts and the bank accounts linked to the paypal accounts are in our own individual names. Profits from each store is declared to the ATO on each individuals annual return.( income splitting )  My wife has signifigant input in the management of her account, deciding what products are sold, business policies, sales prices etc. All perfectly legal and normal business practice. I have had much more complex business ownership structures than this in the past with up to five seperate tax file numbers, family trust ownership structures of assets and multiple ownership tax arrangements , multiple ABN accounts etc. This system is very simple, legal and normal practice in the business community. I have already lodged annual returns to the ATO with this system without problem.