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Posts Tagged ‘Australian Business Number’

Selling goods without a physical presence in Australia

Posted on: November 21st, 2017 No Comments

If you are looking to sell goods or services into Australia then you need to consider the taxation consequences, particularly where you are selling from a treaty country such as the USA, UK etc.

Selling from a treaty country without a physical presence in Australia

This section applies to you if:

  • you are a resident entity of a country that has a tax treaty with Australia
  • you export goods to Australia without having a physical presence in Australia, such as an agent, subsidiary or permanent establishment, and
  • you don’t employ staff in Australia.

Under these circumstances you will have the following tax obligations:

  • Income tax – You will not be liable to pay Australian income tax. Income tax only applies if you have an Australian permanent establishment.
  • Capital gains tax (CGT) – You will not be liable to pay CGT. CGT only applies to assets that are taxable Australian assets.
  • Goods and services tax (GST) – You may be liable for GST. GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
  • Superannuation, PAYG withholding and fringe benefits tax (FBT) – As you don’t have employees, you won’t have any of these obligations.
  • Other tax obligations – If you are exporting goods to Australia by selling to an Australian resident entity on a free on board (FOB) basis, this may be considered an importation by the Australian entity. This means you may not have any Australian tax obligations – rather, your Australian customer will have tax obligations relating to the importation.

You will need to register for an Australian Business number (ABN).

Selling from a non-treaty country without a physical presence in Australia

This section applies to you if:

  • you are a resident entity of a country that does not have a tax treaty with Australia
  • you export goods to Australia without having a physical presence in Australia, such as an agent, subsidiary or permanent establishment
  • you don’t employ staff in Australia.

Under these circumstances, you will have the following tax obligations:

  • Income tax – You may be liable to pay income tax. You need to work out the source of your income, as this will determined how you are taxed.
  • Goods and services tax (GST) – You may be liable for GST. GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
  • Superannuation, PAYG withholding and fringe benefits tax (FBT) – As you don’t have employees, you won’t have any of these obligations.
  • Other tax obligations – If you are exporting goods to Australia by selling to an Australian resident entity on a FOB basis, this may be considered an importation by the Australian entity. This means you may not have Australian tax obligations – rather, your Australian customer will have tax obligations relating to the importation.

You will need to register for an Australian Business number (ABN).

Am I Running a Direct Selling / MLM Business?

Posted on: June 24th, 2017 No Comments

With the ATO reviewing a number of direct selling / MLM business to access whether their independent contractors/associates are entitled to an Australian Business Number (ABN), our firm has compiled some general information to help explain the criteria in determining ABN entitlements. That is, am I running a business?

The intention of the taxpayer in engaging in the activity is a relevant indicator. However, there needs to also be an activity. (see Brennan J in Inglis v. FC of T 80 ATC 4001 at 4004-4005; (1979) 10 ATR 493 at 496-497).

“The extent of activity determines whether a business is being carried on”

Factors which are relevant to demonstrating whether you are running a business include:

  • You have consulted with an accountant or business advisor;
  • You are advertising through social media or a webpage;
  • You have obtained the required business insurance (such as public liability);
  • You are undertaking activities of significant size and scale;
  • You have a business plan which demonstrates an intention to make a profit;
  • Your activities are systematic, repetitive and organised;
  • You are keeping records of activities and receipts of expenses;
  • You have the relevant knowledge or skill to operate the business.

Table 1 below can help determine if you are running a business or whether the activity can better be described as a hobby (which is a form of recreation or a sporting activity).

Table 1: Am I Operating a Business?

Indicators which suggest a business exists Indicators which suggest a business doesn’t exist
A significant commercial activity Not a significant commercial activity
Intention to carry on a business activity No intention to carry on a business activity
Intention to make a profit from the activity No intention to make a profit from the activity
The activity is or will be profitable The activity is inherently unprofitable
Repetition and regularity of activity Little repetition or regularity of activity
The activity is organised and carried on in a businesslike manner and records are kept The activity is not organised or carried on in a businesslike manner and no records are kept
Significant size and scale of the activity Small size and scale of activity
Not a hobby, recreation or sporting activity Is a hobby, recreation or sporting activity
A business plan exists There is no business plan
Commercial sales of product Sale of products to relatives and friends
You have the relevant knowledge or skill You lack the relevant knowledge or skill

It is a question of overall impression, rather than how many of the factors exist.

see http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR9711/NAT/ATO/00001

Direct Selling / MLM and ABN Requirements

Posted on: December 2nd, 2016 No Comments

abn

The Australian Taxation Office (ATO) is reviewing several Australian Business Number (ABN) registrations of Independent Salespeople within the direct selling /MLM industry. The ATO is becoming increasingly concerned that many people who believe they are conducting a commercial enterprise are in fact only engaging in a hobby or part time recreational activity.

The Australian business landscape is complicated and it is not enough to simply register for an ABN and then rely on that ABN as proof of your commercial enterprise. The ATO’s view is that a business consists of many characteristics including: repeated transactions, a thought-out business plan, a separate office space and an intention to generate a profit, etc.

Our firm sees difficulties for both the Direct Selling / MLM firms and their Independent Salespeople where no ABN is provided by the Independent Salesperson. Particularly as the ATO requires that 49% of the commissions be withheld from the Independent Salesperson and reported and paid by the Direct Selling / MLM firm to the ATO.

However, our firm has been successful in getting exemptions from the requirement to withholding 49% of the commissions where no ABN is provided, up to $10,000 a year in commission. This has proved very helpful for our clients and their sales teams.