Does your eBay activity make you liable for GST?

The ATO is increasing the focus of Audits to include GST. If you are selling items on Ebay and your annual sales exceed $75,000, then you will be targeted by the ATO.

The ATO has the power to compel Ebay to provide details of your total sales activity for any period, and in a recent case, was successful in prosecuting a tax payer for failure to declare Ebay income.

In the recent case Cronan and Commissioner of Taxation [2014] AATA 745, the issue of whether or not eBay users are liable for GST was raised. Since the taxpayer’s activities constituted an enterprise it was held that they were liable for GST (and also for income tax).

The decision is said to be a reminder for those who transact with any sort of regularity on a site such as eBay, as reflected in the following observations of the Tribunal:

"It seems the Applicant has misunderstood the legal position in regard to his circumstances. In particular the Applicant has allowed the situation regarding his eBay activities to proceed without giving proper consideration as to whether he is subject to income tax with respect to the profits on his trading and GST on his sales.

These are fundamental matters which anyone who transacts with even a small degree of regularity must turn their minds to."

Source: Chris Sievers

The Tribunal drew its conclusions based on the following "critical factors":

  • the applicant had a clear commercial objective to make a profit
  • it could not be said that the trading activities were of a recreational pursuit or hobby
  • the contention that the applicant lost money on many items sold does not preclude a finding that he was engaged in carrying on a business
  • that he did not pay "wholesale" prices offered to dealers does not denote that he was not carrying a business
  • the trading activities were carried on in a commercial or business-like manner
  • the trading activities were characterised by repetition and regularity
  • the activities were carried out on a commercial scale

We would also like to remind clients to retain documents and records if you undergo regular activity on eBay. In this case, the Commissioner issued default assessments based on industry benchmarks, but in the absence of contemporaneous records the applicant was unable to show what the actual assessments should be.

If you have concerns regarding tax implications you may be subject to, phone us now on 02 9299 7044 or send an email to admin@lockwood.com.au for further advice.

Author: Lily Lockwood

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