It's undeniable; e-commerce is booming! Thousands of stores offer their products online nowadays, and many consumers shop through their mobile devices, too.
There are various important factors to consider regarding taxes and financial matters of an e-commerce store. For instance, some Australian online sellers have a hard time understanding AU sales tax and laws. Of course, it can be more confusing for international sellers.
We at The Ecommerce Accountant help online stores and influencers to better understand tax matters. Let's discuss the requirements on how Australia's residents will pay for sales tax and Amazon FBA.
The Fundamentals You Need to Know about Australia's Sales Tax
With the increasing number of online sellers in Amazon, tracking all the items that enter Australia becomes even more challenging. A manual inspection is no longer a viable option. To address this issue, the government implemented the application of "Goods and Services Tax (GST)" on all the products entering the country. This implementation is also part of the government's tax reform program.
More about GST
Most products and services sold in the country have an additional 10% GST. Items like food, housing, and healthcare are exempted.
Imports valued at AU$1000 or less are originally allowed to be shipped in Australia without requiring any taxes or duties.
Today, the 10% GST is applied to imported products with a customs value of AU$1000 or less. This is known as the "Low Value Imported Goods (LVIG)". In case the goods' customs value are higher than AU$1000, the amount of charges should be processed at the border.
A more comprehensive information about Australia's Low Value Imports GST can be found here.
How about AU's GST on Items Sold on Amazon?
Based on the law, Amazon is required to collect, calculate, and remit a GST amounting to 10% on any Low Valued Imported Goods sold by Amazon merchants. These include items that are shipped from other countries and will be sent to an Australian address.
When the customer makes a checkout and shows that the delivery address is within Australia, the 10% GST is to be applied to every taxable item on top of shipping. Then, the calculated tax will appear on the purchased item's total amount. The same process applies to charges including gift-wrapping and delivery, provided that the LVIG items are included in the order.
If an imported item has a customs value higher than AU$1000, Amazon will no longer include the 10% GST.
Other charges required by the carrier will still be subjected to customs inspection.
Important Points to Remember
If you have LVIG items in your inventory, the 10% GST will be computed, collected, and remitted by Amazon. This particular tax amount will be included in the product's total price and delivery charges, as specified in Seller Central for LVIG items.
Amazon, and not the seller, will be the one to remit the collected tax to ATO.
Amazon will use the "Ship From" address specified on your Seller account when calculating the GST.
Every seller must provide the accurate location and other information related to their Ship-From address. Once false information is entered, Amazon may terminate the Seller account. Products that will not follow the GST rules and requirements will be delayed or fined by the customs.
FBA sellers must not provide more information to AU customs since the packages will be handled and processed by Amazon. This differs from seller-fulfilled packages.
If you are a seller registered for GST and with an Australian Business Number (ABN), you will not be charged 10% GST on your Amazon seller fees. ABN is not required to sell products on Amazon Australia, but having it can provide you with some benefits.
Being part of the e-commerce industry requires you to be responsible for matters like taxes, inventories and other factors. If you're hesitant about the processes and would like to know how they work, you can get in touch with the professionals.
It would be an excellent strategy to contact an e-commerce accounting firm to help you with your online stores. At The Ecommerce Accountant, we provide services to online stores and influencers such as understanding financial figures, accounting and compliance, structuring advice and more. Book for a free strategy session today!