Business taxation is a complicated topic and susceptible to frequent change as tax codes are modified and updated. E commerce tax adds an additional layer of complexity to this already opaque subject but is something that any business that deals in internet related transactions must be aware of. We offer this article as a primer to help the reader to become more familiar with e commerce taxation. But for new companies just starting out, professional assistance is the best option for ensuring the business is properly fulfilling tax obligations.
Taggart & Partners will help you stay informed about tax rates, compliance obligations and available deductions – we are the small business accountant on your side, taking the stress and mystery out of tax preparation. Contact us today to learn more about tax planning and to schedule a consultation by calling 07 3391 1188 or by filling out our online form.
E Commerce Tax Basics for the Small Business
Any new business will need to register with the Australian Taxation Office (ATO) and is required to file business activity statements (BAS) on a annually, quarterly or monthly basis. The BAS is used to report tax obligations, including income tax withholdings (also known as pay as you go withholdings) and goods and services tax. The business must also lodge a yearly income tax return to the ATO.
Goods and Services Tax
GST is charged on most goods and services sold in Australia either through a physical store or an ecommerce website and is taxed at a rate of 10%. An enterprise will be required to register for GST if its GST turnover exceed the GST turnover threshold, which is currently (as of 2024) $150,000 per year for non-profit businesses and $75,000 per year for other business entities. All businesses, including ecommerce firms, must pay any GST collected through business transactions, and this information is reported in the business activity statement (BAS). It is possible for a business to claim GST credits for things purchases to be used in the business as long as the suppliers are registered for GST, and this information will also be recorded in the BAS.
International Transactions
Many ecommerce sales involve the import or export of goods and there are ecommerce tax rules that cover these transactions. Any proceeds on the export of a good or service are subject to income tax, as taxable income includes world-wide income. Most exported goods are GST-free if they are exported with 60 days of the supplier receiving a payment or issuing an invoice. Paying GST is required for most imported goods, but there is an allowance for the importation of low value goods with a value below $1000. As with most e commerce taxation rules, there are exceptions and assistance from a licenced professional is recommended.
Record Keeping
This is last on our list, but it all starts with thorough and accurate record keeping – this is essential for an ecommerce business to be ready for tax reporting. Income receipts and expense records related to supplies purchased, acquisitions, wages paid, and any supporting documentation need to be maintained, and the ATO has a requirement that these records be kept for 5 years. All original physical documents need to be stored and accessible even if digital records are kept. There are software packages that help in the record keeping, but there is no substitute for a qualified small business tax consultant to help make sure you are following all of the ecommerce tax rules so that you won’t have any nasty surprises come reporting time.
Taggart & Partners for E Commerce Tax Assistance
It can be a challenge for any business to navigate the framework of taxation laws, but this is especially true for an ecommerce business. Don’t go it alone – Taggart & Partners offer small business tax planning to help with compliance and effective tax management in the rapidly evolving digital economy. Contact us today for a consultation and to discuss your unique situation. Call 07 3391 1188 or reach out via the online form.