When my grandma died she left me quite a generous inheritance back in the UK. I'm finally going to be able to get a decent car that doesn't break down all the time, and I know Gran would be happy about that! Now I just have to figure out how to get the money converted to Australia dollars and into my bank account here. It's more complicated than you think at first, and I'm sure learning a lot more than I expected about transferring money between countries. This blog is all about retrieving inheritances from other countries so that you can use the money.
Many online sellers of goods in Australia are not entirely clear on their tax obligations for their hobby come business. Luckily, with a few simple principles, you can keep an eye on your obligations and ensure that you can keep your business running successfully.
Do you owe income tax?
The Australian Tax Office (ATO) assesses an income generating hobby as one that has regular and repeatable business. So you can easily sell of some of the excess items in your shed and make a one-time windfall, but if you make a regular income from an online shop then you could be assessed on that income. The ATO will look at the size of the business (in terms of ongoing profitability) as well as the regularity of payments and the likelihood of the business continuing in its current form (i.e. are you selling items from a single deceased estate, or buying and selling items on an ongoing basis). The threshold is somewhat of a grey area, but if you are approaching a significant repeatable amount, you should track your sales in a bookkeeping software so that you have a record of your sales and any costs you incurred in getting these sales so that there is a record of your true profitability (income - costs incurred).
Do you owe Goods and Services Tax (GST)?
The threshold for GST is somewhat clearer, so once you are earning at least $75,000 in any 12-month period, you need to register for GST as a business. You have the option to register for GST before this point however whether this is worthwhile largely depends on your income tax liability. If the amount of GST you are paying out in costs has a significant impact on your profitability it can make sense to register for GST earlier. Note that this liability accrues even if you collect income in another currency, as is very common for online sales businesses. Keeping a track of your earnings in your base currency in your bookkeeping systems can simplify your financial matters, especially if you get audited at any point in years to come.
Having current and up-to-date bookkeeping records can be invaluable to document the time that you transition from a hobby into a full fledged business. As the ATO receives automatic updates from many of the popular payment platforms and money services, you need to ensure that your records align with the received transactions. Many bookkeeping systems can do this semi-automatically, but if you are unsure of ATO requirements, it can make sense to get advice from a professional bookkeeper.Share
22 January 2016