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woveon · 5 years

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Sale Tax 101: Guide for eCommerce Companies

Tax Implications - The growth of eCommerce in AustraliaSales tax issues for eCommerce businessesSome tax implications specific to the eCommerce industry

No matter what type of business you own, a sales tax is applied to it in some way or another. Whether your sales tax implications are looked after by your accountants or whether you do it yourself, you need to hold good understanding of the obligations, the risks attached, and the ways to improve the effectiveness of business in terms of tax.

For a business, selling to its international customers may be easier than making domestic sales. This is because these businesses often don’t need to charge tax when they sell the services to international customers.

In Australia, sale tax regulations have been shaken up by the eCommerce industry. But they are still a bit confusing due to various location issues. When it comes to selling your product or service through eCommerce channels though, businesses are free from geographical limitations and their customer base is built of people visiting their online store from all over the world. The customers who make purchases online are usually from different states, and even countries.

Related: eCommerce Conversational Customer Support Software CTR Benchmarks for the e-Commerce Industry

Considering the current economic situation and the many opportunities that are created by eCommerce growth, Australian eCommerce sales are likely to exceed $45 billion, with worldwide sales being over $1 Trillion. Year over year, the Australian eCommerce is growing at the fastest rate i.e. at an excess of almost 20% in addition to the mobile eCommerce industry, which is growing by 40% annually.

While there is still a lot of room for the growth of eCommerce in Australia, let us have a look at some important aspects of sales tax implications for the eCommerce industry.

Interestingly, the sales tax implications in Australia vary significantly with the presented budget each year. While these sale tax implications are different as per the legal structure of a business, in Australia, in terms of GST, the owner of eCommerce must think, if the business is subject to GST. This is because there are a few exceptions to it.

If your eCommerce business is required to fulfil GST requirements, you will have to get yourself registered for it. Similarly, if your business is not registered to pay GST, you might not get credit over the claimed GST for the expenditures you incur.

There are a couple of things about sales tax that are worth pointing out when we speak of sales tax implications in Australia. The foremost analysis that any online business owner must make is to identify if the business is an established venture or just another hobby.

To identify this, there is an effortless list of questions provided by ATO. Once you answer these questions, you will be in a better position to identify the nature of your business and how far you will be taking it, in the near future.

Along with that, you should also ensure that the online records of your business are capable of collecting GST, and some other financial data, so that you may then include it into the tax returns.

Another unusual aspect that people must always be aware of is that if their website is actually housed in a data centre that is offshore, then they may become subject to tax implications. Businesses unwittingly become tax subjected in a foreign country, especially when the sales are primarily affected by the website.

Therefore, you must understand from where the website, in particular, is being hosted and where the contracts are being formed. This is to ensure that you do not expose yourself to the risk. The best approach, however, is to talk to your legal advisors about such situations, and especially when it’s time to set up the website, or subsequently, if it’s already there.

As per current tax implications:

Coming into effect on July 1st, overseas businesses that have annual turnover of around $75,000 or even more, are required to register themselves with the ATO in order to collect GST on all the goods being sold. These also include the purchases under the low value (current) threshold of $1,000.

Self-assessment as per Australia’s Taxation System

The taxation system in Australia is based on a well-designed self-assessment model. In this system, the taxpayer is considered responsible to lodge their tax returns on their own. Companies and individuals are equally required to file an Income Tax Return on an annual basis, whereas other entities may have some more requirements in terms of GST.

Audit of Tax Returns

Not every filed tax return is actually audited or reviewed by the ATO. Instead, the assessment of every taxpayer is considered to be true. But at times, the ATO does audit the companies’ and individuals’ tax returns in order to ensure that the self-assessment of the tax payer is consistent with the actual tax affairs.

In the bottom line, if you too, are starting an online business in Australia, then you must first understand the obligations of sales tax to avoid any legal repercussions.

#eCommerce #Audit of Tax Returns #australia taxation

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rumfreemanart · 5 years

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