You've decided to create an online shop. You have the products, and the marketing strategy is ready to deploy, but before you go any further, you need to consider taxes. If you run your own internet shop, you are responsible for declaring your business income annually and paying any associated taxes. Here are some of the things you need to know:
1. Sole Trader
If you exclusively own and operate your business, you are considered a sole trader. That means that when you file taxes at the end of the year, you report all of the money you collected as a result of your business. Then, you subtract your expenses or deductions from that figure.
The result is your profit, and as a sole trader, you declare that amount as personal income.
2. Contract Workers and Employees
However, if you have people helping you, you may not be able to declare taxes as a sole trader. Instead, you will need to declare your company as a business and carry all of the necessary insurance for your employees.
In some cases, you can avoid this by paying contract workers. For example, if someone helps you setup your website but doesn't come into the office and work for you everyday, you can pay them for the task. Then, at tax time, you simply deduct the value of that payment as a business expense.
3. Goods and Sales Taxes
Whether you have employees or contractors helping you, if you are selling goods and services you may need to charge tax on those items. All service providers and salespeople in the country must charge GST and register a GST account with the Australian Taxation Office.
However, some internet sites are not required to charge GST, and the government is constantly talking about revising these requirements. Talk with an accountant about whether or not you are required to charge GST on your sales.
4.Tax Exemptions or Requirements for Foreign Sales
Unfortunately, learning about Australian GST requirements is only part of the process. If you sell goods or services from your website to customers in other countries, you have to learn all about those tax requirements. In some cases, you may be required to charge Australian GST. In other cases, you may need to send taxes to the other country's government.
Running an internet business has all of the accounting challenges that any other company has. You have to think about profits, deductions, employees, super funds and a range of other issues. However, running a web shop also brings other complicated issues to the table such as GST and foreign taxation. Contact a tax accountant to help you figure out the best direction forward.