Australian Tax Issues

I'm hoping for some feedback from other Aussie store owners on how you handle the tax issues.
There seems to be a couple hard to resolve issues for us.
Biggest issue seems to be, not putting off international buyers by displaying GST inclusive prices. I've read some info on the ATO web site that says we must display the GST included price AND have it say that it includes GST. (for aussie shoppers)
I have my cart set up with my taxes correctly in the admin and set it to display "Inc GST" but the problem is...
If my international test customer views a product while logged in but without US dollars selected they still see the Aus dollars price and the Inc GST postfix (? oppisite of prefix) Of course at check out they won't be charged the GST...but how do they know that?
Even if we could have them select a currancy prefrence when registerring, what about browsers. (people just looking, not saffari)
Of course we can incourage them to register, but they also need to select the correct currency. Forcing a "how to shop with us" lesson on them would be in bad taste (in my opinion)
I've seen suggestion of a dual set of prices on the product desc page. Could that generate the prices correctly and the correct Inc GST or not. It would also still be in Aussie dollars.

Can we get our zen cart to "know" where our shopper is comming from (via IP perhaps) and "set" the currancy automatically?
This would seem to solve the problem rather neatly.

The other problem is reporting at tax time.
Purchases under $1000 are handled differantly. Most of mine will be considerably smaller than that, but hopefully at the end of the year, total sales from international buyers will be significant enough to require reporting.

I found some info on the ATO web site, but it is in serious legalese.
Has any one delt with that issue? Any addvice on collecting the correct info before I realize my mistakes at the end of next tax year. Accountants (including mine) don't seem to know much about e-comerce.

The ATO page regarding electronic commerce (they don't abbriviate) is here http://www.ato.gov.au/businesses/pathway.asp?pc=001/003/049&mfp=001/003&mnu=44291#001_003_049
if anyone wants to take a look.

Any help or suggestions would be appreciated.
David
P.S.
If your even newer than me, here is the skinny for tax in aussie stores in a nut shell...
Products bought by Aussies get charged GST
Products shipped within Aus get charged GST on the price of the shipping. (regardless of the purcasers address)
No GST for products bought by customers outside of Aus and no GST on the cost of shipping to an international address (regardless of the purcasers address)

Here is a little more (hopefully clearer) info on what happens with the way things are set up on my cart.
I have a test buyer set up, with an American address.
If they select an item that has a price of 6 dollars this is what they will see on the product info page.

Not logged in... (Or a browser)
Aus dollars selected (default) $6.60 Inc GST
US dollars (they made the selction) $4.87

Logged in...
Aus dollars $6.00 Inc GST (zen knows their address)
US dollars $4.43

Yikes!!!
This is all about displaying the price, once they make a purchase all will be well as it seems to be calculating correctly at check out.

Thanks again, David

australican:

I'm hoping for some feedback from other Aussie store owners on how you handle the tax issues.
There seems to be a couple hard to resolve issues for us.

Perhaps.

australican:

Biggest issue seems to be, not putting off international buyers by displaying GST inclusive prices.

OK, this one is a little difficult to resolve.

australican:

I've read some info on the ATO web site that says we must display the GST included price AND have it say that it includes GST. (for aussie shoppers)

Not quite so. In the early days of GST it was permissible to display non GST prices with the text 'not including GST', or, alternatively we were able to display prices with GST along with the text 'GST included'.

Sometime over the last few years this was changed so that it is now no longer permissible to display non GST prices (to Australians), the implication being that all prices now displayed must include the GST component (where relevant), and as such the text "Including GST" became redundant, therefore there is no longer any requirement for it.

However, we can still show this text if we want so as to inform overseas customers that a tax has been applied to the price that they are exempt from paying.

australican:

I have my cart set up with my taxes correctly in the admin and set it to display "Inc GST" but the problem is...
If my international test customer views a product while logged in but without US dollars selected they still see the Aus dollars price and the Inc GST postfix (? oppisite of prefix) Of course at check out they won't be charged the GST...but how do they know that?

They'll see the non GST price during the checkout. They may not be aware of why they are getting it cheaper than the advertised price, but I've not seen anyone complain about it yet ;-)

You could add some text somewhere in your store (possibly front page) to indicate to them what is going on.

australican:

Even if we could have them select a currancy prefrence when registerring,

There is a zencart module called 'user currency' that ensures the user will have thier prefered currency displayed whenever they log in.

http://www.zen-cart.com/index.php?main_page=product_contrib_info&products_id=284

australican:

what about browsers. (people just looking, not saffari)
Of course we can incourage them to register, but they also need to select the correct currency. Forcing a "how to shop with us" lesson on them would be in bad taste (in my opinion)

I agree.

australican:

I've seen suggestion of a dual set of prices on the product desc page. Could that generate the prices correctly and the correct Inc GST or not. It would also still be in Aussie dollars.

I've not used this module, so I can't really comment on it.

australican:

Can we get our zen cart to "know" where our shopper is comming from (via IP perhaps) and "set" the currancy automatically?
This would seem to solve the problem rather neatly.

The problem with this idea is that IP addresses are not location specific ... for example, the 203.0.0.0 network is subnetted between Australia and China.
HOWEVER, several organisations have taken it upon themselves to 'map' IP address blocks to geographical locations, and although not always 100% accurate they do a pretty good job. GeoIP is one such example.

Even better news is that the 'user currency' module that I previously mentioned can/does take advantage of these mappings (for non logged in users) which tends to take care of the issue quite nicely (most of the time).

australican:

The other problem is reporting at tax time.
Purchases under $1000 are handled differantly.

Err, how and why?

australican:

Most of mine will be considerably smaller than that, but hopefully at the end of the year, total sales from international buyers will be significant enough to require reporting.

Oh, I guess we are no longer referring to GST, but Overseas income?

australican:

I found
some info on the ATO web site, but it is in serious legalese.
Has any one delt with that issue? Any addvice on collecting the correct info before I realize my mistakes at the end of next tax year. Accountants (including mine) don't seem to know much about e-comerce.

e-commerce shouldn't be treated any differently than any other transaction. The taxation and income rules don't change simply because sales are made via the web.

australican:

Any help or suggestions would be appreciated.

Firstly, are you actually registered for GST?
If your annual business GST turnover is less than $75k per year then there is no requirement for you to register for GST, and you will be doing youself a disservice by doing so. It simply means you are registering yourself to be an unpaid tax collector.

If you have registered to be an unpaid tax collector and your turnover is less than $75K I stongly suggest you de-register. You'll save yourself a lot of paperwork (and money), plus you won't need to worry about GST issues in zencart. All of your products will be GST free (in that YOU won't be collecting the GST) no matter where the purchaser resides.

australican:

If your even newer than me, here is the skinny for tax in aussie stores in a nut shell...
Products bought by Aussies get charged GST

Correct, but if your turnover is less than $75K and you are not registered for GST than you don't need to add the 10% to your products (you also won't be able to claim input tax credits on the items you purchase, but if you do the math you will be no worse off)

australican:

Products shipped within Aus get charged GST on the price of the shipping. (regardless of the purcasers address)

Not so. Postage costs on overseas items are GST free.
Postage costs on items sent within Australia are GST inclusive.

This is why the austpost/ozpost shipping module has the 'are you registered for GST option'. If you answer 'Yes' then the quotes for shipping on items destined for within Australia are adjusted down to the non GST price (which gets re-added by zencart as a taxable component). Item destined for overseas don't need this adjustment because the quoted prices are GST free.

If you answer 'No' to this option, then the quotes supplied are taken 'as is', namely, GST inclusive (you can't claim input credits) for Australian delivery and GST free (No input credits to claim anyway) for overseas delivery,

australican:

No GST for products bought by customers outside of Aus and no GST on the cost of shipping to an international address (regardless of the purcasers address)

See comments above (in regards to how the ozpost/Austpost shipping modules handle this.

Cheers
Rod

Disclaimer: I am not an accountant, nor an Australian taxation expert, but I was running a registered business when GST was first inroduced and ended up attending a couple of training seminars, as well as having access to various other materials and information that the government was kind enough to supply (heaps of books, videos' etc).

I have "sort of" kept up with GST legistation mainly in regards to the GST issues in regards to shipping costs.

Thanks for the detailed breakdown Rod. I was still under the assumtion that I had to include "incl. GST" on all prices and painstakingly added 'Incl Exl VAT' mod to do so.

1. So it is safe to remove that "Incl. GST" and just leave the prices as they are?

1.a "therefore there is no longer any requirement for it." If registered for GST, Is there still a requirement to include it on the invoice as a seperate line item?

1.b If not registered for GST, could I remove all tax classes from my products and sell them as is? (eg. A $100 widget is $100, no more and no less)

2. You mention "no worse off" but since I'm under $75k, if i deregister and don't claim input tax credits or charge gst wouldn't I be better off (additional 10% to bottom line)?

3. Similar to customers withholding tax when dealing with an unregistered (no ABN) business, can customers withhold any amount if one is not registered for gst?

Thanks mate

Regards,
Shaztesting

shaztesting:

1. So it is safe to remove that "Incl. GST" and just leave the prices as they are?

Yes. (as long as the advertised prices are the sale price. IOW, you can't add GST at the checkout)

shaztesting:

1.a "therefore there is no longer any requirement for it." If registered for GST, Is there still a requirement to include it on the invoice as a seperate line item?

If you are NOT registered for GST you can't give a "tax invoice" (you give a sales invoice instead), so GST is not applicable.

If you ARE registered for GST then a tax invoice is required (purchases over $50), and the GST component MUST be indicated. For purchases under $50 you only need supply a tax invoice on request. The GST component still needs to be listed).

shaztesting:

1.b If not registered for GST, could I remove all tax classes from my products and sell them as is? (eg. A $100 widget is $100, no more and no less)

Yes.

shaztesting:

2. You mention "no worse off" but since I'm under $75k, if i deregister and don't claim input tax credits or charge gst wouldn't I be better off (additional 10% to bottom line)?

That really depends on you.
You will be carrying the tax burden when you purchase your items for resale.
The input tax credits allow you to offset the GST you pay by passing it on to your customer (along with 10% of the profit you make on the sale).

Lets assume you buy an item for $110 and sell it for $220.

If you are registered for GST, you can claim $10 back in the form of input credits and you'll collect $20 GST from your customer. You end up paying $100 for the item, but you'll have collected $20 from your customer, which you'll have to pay the Tax office. You'll make $100 on the sale.

If you are not registered for GST, you'll pay $110 for the item with no input credits). To make your $100 profit you'll be selling the item for $210. End of story.

If you elect to make $110.00 profit on the sale then naturally you'll need to sell at $220.00, so yes, you will be 10% better off, BUT, you won't be able to give a tax invoice on your sales, and this will prevent many businesses and organisations from dealing with you, because they will want to claim the input credits, and without a tax invoice they can't do so.

shaztesting:

3. Similar to customers withholding tax when dealing with an unregistered (no ABN) business, can customers withhold any amount if one is not registered for gst?

No. They cannot withhold anything, but as mentioned, if they are a GST registered business they probably won't want to deal with you because they won't be able to claim their input credits, unless you can convince them that your selling price is at least 10% cheaper than a GST registered business, which then means you'll be needing to sell your $220 item at $200, therefore taking a $10 loss in your profit margin in order to be competitive with a GST registered business. (Keeping in mind that your GST registered customer will be be able to claim back $20 on a $220 sale from a GST registered business).

So to summarise, you may end up 10% better off, ior you may end up 10% worse off, it really depends on who you are dealing with and how competitive your pricing structure is.

Cheers
Rod.

Disclaimer: I am not a tax professional. All information supplied is based on my own personal understanding of the GST system. Please consult a professional before making any decisions based on the text provided.

Rod, so we meet again my bearded freind...

RodG:

the text "Including GST" became redundant, therefore there is no longer any requirement for it.

I reread the article on the ATO web site and your exactly correct on this. (of cource)

However, we can still show this text if we want so as to inform overseas customers that a tax has been applied to the price that they are exempt from paying.
You could add some text somewhere in your store (possibly front page) to indicate to them what is going on.

I might end up doing both of these.
"Inc GST" to remind them if they havn't logged in that they are not veiwing "their" price.
Also a quick note on the front page with a "more info" text link.
My front page will eventually be a "Caltogue cover" type of page. Pretty and inviting without a lot of buisness info. This is why I hate to write "instructions" on it.

There is a zencart module called 'user currency' that ensures the user will have thier prefered currency displayed whenever they log in.

http://www.zen-cart.com/index.php?main_page=product_contrib_info&products_id=284

Thanks for the tip. I installed this and it works great.

I've not used this module, so I can't really comment on it.

Your above quote was in referance to my comment about displaying dual prices on the product page.
I know I'm not always clear... It wasn't a mod that I was refering to. Someone just suggested displaying two seperate prices.
Would probably take a little coding to accomplish that.
(Just thinking as I write, perhaps displaying small text under prices on products page "10% less for non-Australians". A bit long winded but might be nicer than a front page disclaimer and also keep it fresh in their minds while they shop.)

The problem with this idea is that IP addresses are not location specific ... for example, the 203.0.0.0 network is subnetted between Australia and China.
HOWEVER, several organisations have taken it upon themselves to 'map' IP address blocks to geographical locations, and although not always 100% accurate they do a pretty good job. GeoIP is one such example.

Even better news is that the 'user currency' module that I previously mentioned can/does take advantage of these mappings (for non logged in users) which tends to take care of the issue quite nicely (most of the time).
If it works "most of the time", it's close enough for me. Even if they slip under the wire, they'll still get the right price at check out.

Err, how and why?

The differance in purchases over $1000 (the way I read it) was that there is more info required about what and to whom you sold a GST exclusive item to. That is, the info you need to supply when doing taxes.
Again, I'm not the greatest at making myself clear, so anyone wanting more info, refer to the ATO web site link in my previuos post.

Firstly, are you actually registered for GST?

At this point no. We were, when we first went into business two years ago. (We have a gift shop in Rosedale, the kind you can walk into.)
Then we did the math, and promptly de-registered.
Thing is, I'd like to have all these things figured out ahead of time. I'm being very opptimistic, but if my e-store doubles our yearly NET income, we would reach the 75K NET mark.

(Excuse me while I get up on this soapbox here. I think it sucks that the stipulation is set a net income. We are in a small country town. Our dicision to sell at a low mark up has brought us regular customers from 50k away and further. Along with the overheads involed with a physical shop, this gives us a low bottom end. With the xmas rush (we sell giftware) we could easily reach the NET requirement without having the profit the a high mark up business might have.)
Please excuse my outburst, but I feel better now.

Not so. Postage costs on overseas items are GST free.
Postage costs on items sent within Australia are GST inclusive.
Again that's right, I just didn't word my comment well.
(So much for me giving advice.)

Thanks for the tips and advice,
David

australican:

I know I'm not always clear... It wasn't a mod that I was refering to. Someone just suggested displaying two seperate prices.
Would probably take a little coding to accomplish that.

As far as I'm aware, the dual price mod does just what you are suggesting, so the coding has already been done.

australican:

(Excuse me while I get up on this soapbox here. I think it sucks that the stipulation is set a net income.
<snip>
Please excuse my outburst, but I feel better now.

My sentiments exactly.

Cheers
Rod