When does eBay report our earnings to the ATO?

[kitty-kat-kollection]

Meaning, I heard that once you earn over a certain amount, eBay automatically reports your income to the ATO.

That's fine, but I can't find anywhere that specifies what the amount is. I thought it was $10,000 but then I heard it was $20,000.

Also, do they report your gross earnings, before things like postage costs and fees are deducted? I assume they do and then you're responsible for declaring the postage, stock costs and fees as tax deductions?

Thank you! (I only opened my store in late July)

[chameleon54]

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@lyndal1838 wrote:

Just because it was $10000 in the past it does not follow that it will be that level this year.  It can be any level the ATO decides to make it and you only know what it is when you receive the notification from ebay.

Also, that is not the level at which you have to declare your ebay activity.   You are supposed to declare from the first dollar.   When your turnover is low it is quite possible/probable that there will be no tax payable but it must be declared.

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I would have thought you could sell your own private stuff without declaring it as income, provided it was not claimed as a tax deduction when first purchased, or originally purchased with a view to making a profit.

An example would be a pushbike purchased when you decided to get fit. You use it for 6 months and decide it is too hard to ride, so you sell it on ebay. I doubt that the ATO want to know about that.

If you purchased the pushbike cheap at an auction, thinking you could sell it on ebay for a lot more than you paid, it becomes assesable income and should then be declared to the ATO.

[chameleon54]

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@kitty-kat-kollection wrote:
Ahhhh, I didn't know that either. Thank you. I thought for tax purposes, eBay money under whatever threshhold they decided could be classed as "hobby income" so would not require declaration.

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It was that thought process that had a lot of ebayers scrambling when the ATO announced it had reduced the threshold from $20k to $10K. Many sellers had not kept records of their sales and where in all sorts of trouble trying to find out how much they had sold etc. as the ebay records where long gone by then. Some sellers had split their sales amongst several id,s, thinking if each id was under the 20k threshold they could " get away with it ".

When the ATO demanded records of ip addresses, names, residential or postal adresses etc. it all got a bit messy. The ATO have a helpful guide on understanding whether you are running a business on their website, with a number of simple pointers. Could be worth a look.

[chameleon54]

FROM THE ATO WEBSITE

How do I know if it's a business or a hobby?

It's important to understand the differences between a hobby and a business for tax, insurance and legal purposes.

Key questions to consider:

• Is the activity being undertaken for commercial reasons?
• Is your main intention, purpose or prospect to make a profit?
• Do you regularly and repeatedly undertake your activity?
• Is your activity planned, organised and carried out in a businesslike manner?

If you answered yes to most of these questions, you're likely to be running a business, although it depends on your individual circumstances. The ATO website provides further questions, information and examples to help you understand the differences between a hobby and a business.

[chameleon54]

AND THIS< ALSO FROM THE ATO WEBSITE

Selling online

The questions below can help you understand whether your online selling is a hobby or a business. Every 'yes' answer increases the likelihood you are carrying on a business - but you need to consider all of your answers to gain a complete picture of your situation.

Did you set up your online sales with the intention of being a business?

If you set up a 'shop' on an online trading or auction site, you are likely to be carrying on a business - especially if you paid fees to operate this 'shop'.

Do you pay for your online-selling presence?

If the online space looks like a shop, has a brand name, proper business name or any other signs that people would likely to expect from a business, you are likely to be carrying on a business - especially if you paid fees for this to occur.

Is your main intention to make a profit?

If you sell items online because you intend to make a profit, then you are likely to be carrying on a business. For example, if you deliberately buy items to sell online for more money than you paid, then you are likely to be carrying on a business.

However if you sell household goods or possessions that you don't want anymore, although you may get a 'good' price it is unlikely to be a business.

Do you make repeated or regular sales?

If you sell items online on a regular basis, you are likely to be carrying on a business.

These sales could be to the same customer, or a number of different customers.

If you make the items you sell online, do you charge more than they cost you to make?

If you charge more for items than they cost you, then you are likely to be carrying on a business.

For example, if you make or buy an item cheaply and then sell it online for significantly more than you paid for it, then you have made a profit and might need to declare that income. If you do this regularly, you are more likely to be carrying on a business.

Do you manage your online-selling activity as if it was a business?

If you do any of the following, you are likely to be carrying on a business:

• your online-selling activity is organised and has systems and processes in place
• you advertise your online space
• you keep some or all of your records
• you have a business plan.

If you sell items in the same way and timeframe as a business in the same industry, then you may be carrying on a business.

Is what you are selling online similar or the same as what might be sold in a 'bricks and mortar' business?

If the items or services you are selling are commonly available or reasonably easy to find in a physical store, then you are likely to be carrying on a business.

Example – Selling online as a hobby

Marika wishes to clear an excess of clothing from her wardrobe.

She lists them on the internet for individual sale. Some of the items sell for more than her buying price, some for less.

She charges the buyers postage and receives a total of $2,075.

Marika is not carrying on a business because she:

• did nothing to improve the value of the items
• does not sell any more items for a long time
• does not pay the online auction site for a 'shop' space
• generally receives less than the original purchase price of the clothes
• has no intention to sell clothes online as a business.

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.

End of example

If you're an artist, creative or maker and receiving or plan to receive money from creating things such as jewellery, paintings or baked goods, you can use the Hobby or Business tool on business.gov.au to work it out.

[kitty-kat-kollection]

Perfect. That all makes perfect sense now, thank you.

[lyndal1838]

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@chameleon54 wrote:

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@lyndal1838 wrote:

Just because it was $10000 in the past it does not follow that it will be that level this year.  It can be any level the ATO decides to make it and you only know what it is when you receive the notification from ebay.

Also, that is not the level at which you have to declare your ebay activity.   You are supposed to declare from the first dollar.   When your turnover is low it is quite possible/probable that there will be no tax payable but it must be declared.

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I would have thought you could sell your own private stuff without declaring it as income, provided it was not claimed as a tax deduction when first purchased, or originally purchased with a view to making a profit.

An example would be a pushbike purchased when you decided to get fit. You use it for 6 months and decide it is too hard to ride, so you sell it on ebay. I doubt that the ATO want to know about that.

If you purchased the pushbike cheap at an auction, thinking you could sell it on ebay for a lot more than you paid, it becomes assesable income and should then be declared to the ATO.

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Partly correct chameleon but in the OPs case it would not cut the mustard with the ATO.

She has a store and is selling clothing in many different sizes so it is unliely that they are all just lying around her home.

[daydreams_12]

I guess that this is not your position OP but for sellers who are also claiming any type of Centrelink benefits earnings need to be declared there as well.  There have been many people over the years who had benefits cut for not declaring on line sales as earning.  If they dont get you one way they get you another....

[kitty-kat-kollection]

Yep, they do indeed! And yes, definitely true. My ebay stuff is all intended for profit and a business, though very small.

I sell some things occasionally on FB and Gumtree but they're like, my old phone (to offset the cost of a new one), my old bedding suite (again to offset the cost of the new one), so that's a different story.

[k1ooo-slr-sales]

another mistake many members make is thinking only about how much profit they make when they need to be thinking about turnover.

From turnover you can claim expenses, but never think about only declaring profit as that may get you audited.

You might have $10,000 in turnover and only $1,000 in profit . . . . . . it’s that turnover that will attract the attention of the ATO.

eBay can tally your turnover, but have no clue how much profit you make.

[kitty-kat-kollection]

Yes, so we are supposed to declare our ebay calculated earnings (turnover, or gross income) to the ATO and then claim deductions back off our tax like cost of stock, ebay store fees, postage costs, final credit fees, paypal fees, and even stuff like the cost of storing our stock? (I bought 15 big tubs from Kmart to keep most of my items in, for instance).