View Full Version : GST is doing my head in
We don't have any local accountants to speak of so I though I'd ask around first.
I'm working on an advertising network, with a catchline of "connecting advertisers and publishers" among other things. Very standard stuff. I'm planning to skim 30% brokerage fee off whatever the advertisers pay the publishers, which is also very standard.
What I can't for the life of me work out is where I put the GST? There seems too many different ways to do it.
95%+ of my customers are likely to be in the US or UK, so I can't just put GST on everything as I thought it was just for transactions within Australia.
Do I charge Australian advertisers 10% more across the board? Or make Australian publisher's space 10% more expensive for Australian advertisers? Or include 10% GST on my brokerage fee for Australian publishers ... or is that just on the brokerage fee for Australian ads on Australian pages? Or do I add 10% to same not include it? Do I need to require ABNs of all Australian publishers? It gets worse when an Australian builds up a balance as a publisher and then spends it as an advertiser, because there is a potential for stacking GST.
Or do I go register my business in Nevada or somewhere and escape GST entirely.
Aaaargh!
willbliye
30-12-10, 08:57 PM
GST should be easy for your business not something that brings you down. You need a good accountant to set you up on MYOB and its really simple. Apart from the data you have to put in it, each quarter you just click a couple of buttons and you get all the stats to put into your BAS,
Willbliye, that has got to be the least helpful advice I've *ever* had ... did you even read what I wrote?
I don't know where or on what or to who I charge the GST. Once I work that out, sure, then I can just use MYOB.
In the meantime, a recommendation of a good accountant who knows the ins and outs of dealing with Australians while exporting a service via micropayments would be fantastic, but I live in the country so can't use my local accountant.
My easiest solution to the problem is simply refuse Australians access to my service, which I'd like to avoid if at all possible. Its not like any of my expenses for this business are going to incur GST that I can claim back, it will be hosted offshore and virtually all the customers will be offshore too.
I need to know this reasonably soon as I am about to start coding this, so I need to know if I have to have extra data columns for Australian or everyone else, and if I need to charge GST on the micropayments themselves I won't be able to use 1/1000th of a cent as my smallest unit of measurement, I'll have to go smaller.
Twizzle
04-01-11, 09:38 PM
Have you tried phoning the ATO and asking them? I spoke to them to work out whether or not I needed to register for GST and they were very helpful. You only need to register for GST if you are turning over more than $75,000. If most of your clients are offshore, it might be helpful asking them if them if that $75,000 only includes transactions within Australia, in which case if you are going to turn over less than that in Australia, you might not need to bother.
AlexCim
09-01-11, 10:55 PM
The concept of GST is very simply. If they are in Australia, you charge them 10% GST.
For websites, generally you can set something like a "zone", so if the person if from a particular zone (as per their registration/delivery address/etc), you apply a different tax structure of their sale.
The same goes for entering it into your books. You should have some type of settings when assigning a tax rule of a sales receipt. There should be something that includes GST and something that is GST-free.
The best way to go about this would be to set all your prices GST free and make a mention that Australian customers will get charged 10% GST on top. If you major customer base is export, best not to confuse them first and foremost and then deal with Australians 2nd.
Yeah, I think I might need to phone the ATO. My partner was explaining this to me and it looks like all my Australian publishers might need to register with an ABN or I have to withhold more than 10% for them. It is a horrible situation because I'm so unsure of what my product actually *is* in this case.
It would be simple if I was just selling something - 10% extra for Australian buyers, too easy - but I'm not selling anything at all, I'm brokering deals between other parties and taking a percentage of the sale. When the sale is between an Australian seller and an American buyer and there is no GST on the sale I expect I still need to charge GST because I'm an Australian broker, so the Australian seller loses money on their sale.
The 'simple' explanation I've had for this is horribly complicated and means every freakin microtransaction I make has to do a check for country on it, I need ABN details of publishers which massively disadvantages Australians, Australians are going to earn less from this than any other country, and I'm sure when I pay Australians someone is going to want me to call them employees and take off super or something stupid like that.
So while the GST concept is simple, the actual implementation here is still doing my head in. You think the ATO will even have a clue? Centrelink and banks in this country can't even cope with foreign income (self-employed income doesn't exist apparently if you don't have BAS statements), what's to say the tax office knows anything they don't? This isn't straightforward and I'd have to explain my entire business model to them first.
Also if I just charge Australian buyers who will be spending 90% of their money offshore (assuming I even get any to start with) it smacks of ripoff. I only keep 30% of what they spend, so if I charge them 10% GST, but I only need to pay 10% GST myself, the vast majority of that initial 10% GST never finds its way to the Goverment but mostly ends up in my pocket.
This is the easiest way to deal with it but tax wise, the most unfair and I could see Australian buyers getting mightily pissed if I charge 10% GST not 3%. Or I guess for Australians I could be the only advertising network to date that actually breaks up the spend into components, which is just unheard of ... I mean, revealing your profit margin to the customer upfront? Freakishly weird.
AlexCim
10-01-11, 09:09 AM
Also if I just charge Australian buyers who will be spending 90% of their money offshore (assuming I even get any to start with) it smacks of ripoff. I only keep 30% of what they spend, so if I charge them 10% GST, but I only need to pay 10% GST myself, the vast majority of that initial 10% GST never finds its way to the Goverment but mostly ends up in my pocket.
This is the easiest way to deal with it but tax wise, the most unfair and I could see Australian buyers getting mightily pissed if I charge 10% GST not 3%. Or I guess for Australians I could be the only advertising network to date that actually breaks up the spend into components, which is just unheard of ... I mean, revealing your profit margin to the customer upfront? Freakishly weird.
Why would you not pay it all to the government? The only people that actually pay GST in Australia are end consumers; not businesses. GST is basically irrelevant in B2B sales. Whatever your customer pays you in GST they enter as GST input credit, which offsets their GST that they collected from their customers and would normally have to pay the ATO.
You have to charge GST on the entire transaction if its an Australian-Australian transaction (which is always is, because even though you are "connecting" people, the end customer is paying you, an Australian business).
Like I said earlier, the best way to do this is to have all your pricing GST exclusive and mention that you will charge Australians a 10% GST on top (and you might want to mention that they claim is back anyway).
This is why some businesses quote prices in GST exclusive terms, because the tax component, even though paid, is not really affecting either party.
Why would you not pay it all to the government?.
Because, if you read what I wrote, I am writing a BROKERAGE service. If a buyer pays for $100 worth of advertising, I take $30 of that and give $70 to the publisher. So, should I charge GST on the $100, the $30, or let the publisher mark up their own price by 10% within the $70 if they are in Australia and deal with the GST in their own accounting system (in which case I have to be specific which ads they sold were to Australians).
I don't know what an "entire transaction" IS to charge GST on it, because I take only a *part* of the transaction. Do I charge it on my part or the full amount? The full amount sounds unfair.
The closest analogy I can think of is eBay. Buyers and sellers all over the world trading to each other. Ebay itself takes a piece out of each sale. But in eBay the fees have no GST on them because they are in the US and the seller themselves has to deal with GST, which is a lot easier because the volume of money in each transaction is so much larger. Edit: in eBay you might sell an item a day. In my system you could be selling thousands upon thousands per day, and only a few of those might be between Australians so any GST might only add to half a cent or something.
I don't set the prices so I can't quote pricing GST exclusive. The publishers set their own prices, I take 30% of the full transaction value, totally excluding GST. Refer back to my previous posts for the problem.
You have to charge GST on the entire transaction if its an Australian-Australian transaction (which is always is, because even though you are "connecting" people, the end customer is paying you, an Australian business).
Say what ... that doesn't make sense ... so if eBay was run by Australians, every single buyer and seller would need to charge GST? I would have thought only Australians would need to charge GST to other Australians?
The end customer - an Advertiser - is buying advertising space on a Publisher's website. They are paying me to connect them.
There's my problem you just summed up - am I selling advertising space or am I selling the brokering fee? They are two completely different products with completely different GST considerations. Personally I think of it as a brokering service, since I don't own the advertising space. The advertising space is owned, operated, paid for and administered by Publishers. I have no expenses or ownership rights at all relating to that space thus I am not selling it. I am merely selling the connection service. You are reading it as if I am selling the advertising space itself.
Oh, and if it makes it easier to think about, assume I'm charging a 5% fee not 30%. Then if I charged 10% GST on the entire transaction I would be running at a massive, massive LOSS because my 5% would need to cover my hosting, merchant fees and GST.
30% is just the standard fee you see on advertising networks, I had to ask around to find it out because the world's largest advertising network (Google) isn't very transparent with the amount it gives to the publishers. They show it now, they give you 68%.
There: cut and paste from Google's fine print:
AdSense for Content: ca-pub-XXXXX 68 % publisher revenue share AdSense for Search: partner-pub-XXXXX 51 % publisher revenue share
AlexCim
10-01-11, 09:39 AM
Because, if you read what I wrote, I am writing a BROKERAGE service. If a buyer pays for $100 worth of advertising, I take $30 of that and give $70 to the publisher. So, should I charge GST on the $100, the $30, or let the publisher mark up their own price by 10% within the $70 if they are in Australia and deal with the GST in their own accounting system (in which case I have to be specific which ads they sold were to Australians).
I don't know what an "entire transaction" IS to charge GST on it, because I take only a *part* of the transaction. Do I charge it on my part or the full amount? The full amount sounds unfair.
The closest analogy I can think of is eBay. Buyers and sellers all over the world trading to each other. Ebay itself takes a piece out of each sale. But in eBay the fees have no GST on them because they are in the US and the seller themselves has to deal with GST, which is a lot easier because the volume of money in each transaction is so much larger. Edit: in eBay you might sell an item a day. In my system you could be selling thousands upon thousands per day, and only a few of those might be between Australians so any GST might only add to half a cent or something.
I don't set the prices so I can't quote pricing GST exclusive. The publishers set their own prices, I take 30% of the full transaction value, totally excluding GST. Refer back to my previous posts for the problem.
I have read every word you've written, several times even.
The key is who pays you? The Australian company or the (for examples sake) UK company? It all depends who is paying who.
If you just take a cut and that is paid to you from the UK company, it works as below.
Example 1: Export UK company refund
Connection - $100
Brokerage % - 30%
Your cut (paid to you from the UK company after they get paid from the Australian company (who won't pay GST because they are buying international) - $30
No GST here at all.
If you just take a cut and that is paid to you from the AU company, it works as below.
Example 1: Export + Domestic sale in one
Connection - $100
Brokerage % - 30%
Your cut (paid to you from the AU company) - $30 + 10% GST = $33
This situation will result in two tax invoices for your end customer. 1 from the UK company they are paying and 1 from you, the broker.
If you collect the whole lot, then pay the UK company their price, then keep your fee, it works as below
Example 1: 100% Domestic sale
Connection - $100
Brokerage % - 30%
Total you charge customer - $100 + GST = $110
Your cut (paid to you from the AU company) - $30 + 10% GST = $33
You pay UK - $70
You pay ATO at BAS time - $13
Leaves you with $30 brokerage fee.
One tax invoice here, from you to your end customer. Like I said, GST must be charged on the entire transaction value.
Say what ... that doesn't make sense ... so if eBay was run by Australians, every single buyer and seller would need to charge GST? I would have thought only Australians would need to charge GST to other Australians?
The end customer - an Advertiser - is buying advertising space on a Publisher's website. They are paying me to connect them.
There's my problem you just summed up - am I selling advertising space or am I selling the brokering fee? They are two completely different products with completely different GST considerations. Personally I think of it as a brokering service, since I don't own the advertising space. The advertising space is owned, operated, paid for and administered by Publishers. I have no expenses or ownership rights at all relating to that space thus I am not selling it. I am merely selling the connection service. You are reading it as if I am selling the advertising space itself.
Well it really depends which of the above scenarios you choose to adopt. They are all valid scenarios in the eyes of the ATO.
Heres another example. You go to Coles, buy an apple... from China. Do you pay GST on just Coles's profit on the apple, or the entire apple? Well, you pay it on the whole thing, thats what I mean you charge GST on the entire transaction value. You COULD pay GST on only Coles's profit, but then as I said, you'd need one invoice from the Chinese supplier, and one from Coles. The Chinese one would be GST free, but the Australian one wouldn't be. But then there'd be two payments, etc etc etc. But again, this would be an unneccesary effort as GST in B2B sales in Australia is basically irrelevant as everyone sorts all that out at BAS time with the ATO.
Your business wouldn't be different depending on the model you choose. Are you selling the "package" or just the brokerage? Based on that, adopt an above model. I make the assumption that your business model will be scenario #3, the same as Coles selling an apple.
You're going with the easiest option (which is probably what I will implement) of just charging an Australian buyer 10% across the board on the brokerage.
The issue is, say, a UK company gives me $100 but $2 of that money gets spent on an Australian website. Is there GST on that $2? This is the bit that confuses the proverbials out of me.
Sounds like I can do sort of mostly what I want, the easiest of easy options being to charge 3% GST (10% of 30%) on the entire transaction to Australian advertisers and let Australian publishers do what Google makes you do, which is pay income tax to the Australian government on the 70%.
Does that sound legit and not taxy evady paperwork hell? Because if I can do it this way I can actually start coding up the financial side of this (I'm a programmer not an accountant, can you tell?) and not have to add an entire freakin column to all my database tables and my stats collection program to keep track of countries, which is what my partner was making me think I had to do.
AlexCim
10-01-11, 10:03 AM
It's all about who's paying who what. Actual transactions, not behind the scenes stuff. If the UK company is paying the Australian company anything, that's not your issues. It's all about who YOU are transacting with.
Any payment to/from you to outside the country, is GST free. Any payment to you from customers in AU are charged 10% GST. Not 3%, not 1.92% but 10%. If you charge anything other than 10%, you will be providing invalid tax invoices to your customers and there might be associated penalties/headaches etc.
Dammit, had a post written yesterday and obviously drove to Pt Augusta and back without hitting submit lol
I must say, charging ONLY Australian advertisers at point of purchasing credits is way, way easier than what my partner had me thinking I need to do. I was thinking I had to do a country->country check on each transaction (serving an ad) and given that the ad serving app is going to run to millions if not hundreds of millions of transactions a day very quickly, any extra processing is actually a major consideration.
The one thing I do need to change in my database design is keeping ad and publisher credits separate and adding something to transfer between them that will calculate GST for Australians when you transfer to the advertising balance. I was wanting to keep only one balance and let people recycle their earnings to spend on advertising if they wanted, like some other ad networks do.
I must say, thank you VERY much for clearing my head on this, although I'm still going to need to look into the 10% of 30% vs 10% of 100% a bit more since I'm only charging for brokerage but I'm still holding the payment for the publisher.
A big challenge is going to be finding a merchant provider. Paypal looks the best at the moment. I had a look at ANZs merchant terms and conditions and there were things like must have prices in Australian dollars and so forth that seem a bit iffy. The thing I need most is a way to pay people overseas, and if I can't find an Australian bank that is easy to deal with a 99% export business then Paypal it is. Paypal has a bulk payment API.
Jason Bishop
13-01-11, 04:12 PM
GST is nothing, wait until the GFC REALLY HITS (http://www.SevenFigureMastermindTeam.com/JaseBishop/goto/elevationgroup)
Jase
Partner has confused the hell out of me again and again I'm on the verge of refusing to register this business in Australia.
He says I can't charge GST on point of sale with an advertiser because that is store credit, I can only charge it when it is spent.
He also says that when I pay an Australian I need their ABN and will have to withhold a large chunk of the payment if they don't provide it. I really, really, really do not want to force random Australians to provide me with an ABN just to use this service.
If this is the case (especially the second point) I simply refuse to have this as an Australian business as it is going to be an accounting nightmare.
Does anyone know a good GST accountant anywhere in South Australia they can refer me to to clear this up?
AlexCim
28-01-11, 12:25 AM
Here is a leaf from my life; Only listen to people who are more knowledgeable than you in whatever field they are giving you advice in. Unless your partner is an accountant, stop listening to them.
If you want to give me more details about the business model, I'll see what reply I can give you. Otherwise at this stage I don't know what more to suggest to you.
I don't know any GST accountants in SA, but they'll tell you the same thing I have. Any transaction with an Australian you will have to charge 10% GST. Even if that cash goes straight into your business, then straight overseas, you charge GST on the full amount transacted (remember I said earlier its all about transactions, who pays who, etc) and everyone sorts everything out at BAS time.
Charging Australian advertisers is the easy part ... but what happens when I pay my Australian publishers? Agency sales seem extremely complicated.
After talking to accountants (only online though) and then seeing the OMGWTF cost of trying to have a merchant account (some have minimum balances of $50k!!!) there is no way I'm going to run this site as an Australian business. Its not worth it.
Seems to be quite cheap to incorporate in Delaware, then I can get a US bank account and address and all these horrible expensive problems go away.
xmasdeer
10-06-11, 02:12 PM
wow, I hope you take into consideration the fact that if you charge an extra 10% for GST to Australian Businesses that they will also be claiming it back in their expenses, which means they pay the same price as everyone else overseas you deal with.
But remember, the best way to deal with people is with honey, not acid.
Already have enough of an answer on this to know I'm not running it in .au, to avoid having to make everyone who signs up have an ABN or I have to withhold tax. I really really don't want to make every user in au have an abn. The more I looked into this the worse it got, it is so complicated it is insane. We've even got GST laws restricting advance payments being stored in a holding account before they are used. The tax law for brokerage style services paid in advance is beyond me.
Much simpler doing this with no GST, no ABNs, without needing to convert currency. Just do the whole thing on a .com in USD overseas from a USD bank account. Simpler for expenses too since 100% of my expenses will be in USD, and much much lower overheads in the US.
Never did get a recommendation of an accountant either, I did talk to one in PM but all they did was confirm all the stuff I wanted to avoid.
Unfortunately I STILL don't have the funds to put this website online because I've been stuffed around by banks for the last 6 months and haven't been able to sell my house yet.
pink_briefcase
11-07-11, 08:19 PM
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