As an ecommerce store owner, you’ve got a lot on your plate. From sourcing products, driving traffic to your store, answering customer enquiries, and more, it can feel like you’re working 10 jobs at once! But there’s another important job that often gets pushed to the side… managing finances and of course, doing your taxes!
Understanding your tax obligations is a crucial part of running any successful business, and ecommerce is certainly no different. Staying on top of your accounting and taxes not only keeps your business on the right side of the ATO, it can also help you save money at tax time.
If you’re wondering how to file your taxes for your ecommerce business in Australia, here’s the run-down of what you need to know.
How do taxes for an ecommerce business work?
Any income you generate from your ecommerce store may be subject to income tax. The amount of tax you may need to pay depends on a few factors, including:
– How your business is set up (sole trader, company or trust),
– The amount of taxable income you’re declaring (profit), and
– The allowable deductions you have claimed for that financial year.
What can I claim on tax for my ecommerce store?
Here’s a shortlist of some common tax deductions for ecommerce businesses –
- Advertising: Google or Facebook ads, print materials, and influencer partnerships
- Website: Design and development, maintenance and hosting costs
- Payments: Paypal and Stripe transaction fees
- Subscriptions: Industry publications
- Education: Trainings directly related to running your business
- Inventory: Cost of goods, shipping and handling, and import duties
- Employees: Salaries, superannuation contributions
- Bookkeeping software: such as MYOB, QuickBooks or Xero
- Accounting: Tax return and BAS fees through a registered tax agent
Income tax deductions for ecommerce stores can get complex, particularly if you source materials or trade internationally.
That’s why working with an ecommerce tax accountant is a great idea for making sure you’re taking full advantage of your benefits, and reducing your income tax liability.
How to pay tax for an ecommerce business
If you’re running your ecommerce business as a sole trader, you will need to declare your store’s income along with any other personal earnings you have received that financial year.
If you’re running your business as a company, you will need to lodge a business tax return for the company. The company’s income is separate from your personal income.
Do I need to register my ecommerce business for GST?
Australia’s goods and services tax (GST) is a tax of 10% on most goods and services sold in Australia. Businesses that are registered for the GST have to collect GST from its customers on behalf of the ATO, and pay that money back to the ATO.
If you’re registered for the GST, you’ll receive quarterly Business Activity Statements (BAS) where you report on the amount of GST you’ve collected, and also any GST you’ve paid in business expenses. The balance of the GST you’ve collected minus the GST you’ve paid (your GST credits) is due back to the ATO.
When your ecommerce business earns $75,000 or more in gross income in a single year, GST registration is mandatory. But if your business is new and you’re not expecting to earn $75,000 in a year, you may choose not to register for the GST.
That means you won’t collect GST or have to participate in BAS reporting. But it also means that you cannot be reimbursed by the ATO for GST that your business has paid to other businesses for materials you’ve used.
Depending on your business, you’ll need to work out which method is right for you.
Do I need an ecommerce tax accountant?
Running an ecommerce store is a juggling act on its own. So why add accounting and tax to your to-do list when you can simply outsource it to professionals?
Not only does an ecommerce accountant handle the paperwork of managing and filing your taxes in Australia, but they can also provide you with valuable advice on how to organise your business’ finances to free up more cash flow and generate more profit.
Ecommerce tax agents like the team at National Accounts have in-depth knowledge of the tax obligations you must meet as a store owner, including deductions you can claim to reduce your tax liability and pay less to the ATO.
If you’re ready to leave the time-consuming headache of tax to us, so you can get on with growing your store, hit us up below for a confidential chat. We’d love to get to know you.
