GST, Customs and Business...

[Genesis]

Hey guys. As some of you may know I recently started up a business. Still getting everything sorted and it is a nightmare, can't wait to start trading. ANYWAYS! It occurred to me I don't know a great deal about taxation as I have never been taught it. Granted it may be stupid to start a business with no prior knowledge of how taxes work but I am trying my hardest to get savvy to it all.

I think I have the basics down. As I am trading as a Sole trader I don't need to register to pay GST untill my income reaches $64k a year (I think this is the figure off the top of my head).

This is all well and good but I intend to import clothing from the states (Customs has no restrictions on importing clothes as long as they arn't made from animals). The research I have done has led me to believe that I need to declare products I import if I intend to sell them as customs slaps on a tariff and taxes them when they come into the country.

"If importer's have an Australian Business Number(ABN) they will need to supply it to Customs when formally entering goods. Importers need to be registered for GST purposes and have an ABN in order to claim input tax credits or access the GST deferral scheme." http://www.customs.gov.au/site/page.cfm?u=4368

I know you fellas will be more savvy on this than I. Also if I register for GST then all my products need to be sold displaying GST, correct?

Sorry guys, lol. Cheers for any help...

Gen

[Undergrounder]

Sounds confusing to me (as it always does)..

My reading is that if the value is over $1000, no matter what you intend on doing with the goods, a) You need to lodge an import declaration and b ) You need to pay duty (5%) and GST (10%) . If you don't have a $64k business, and don't pay taxes, then too bad, you don't get your 10% GST credit.

If the value is under $1000, you pay nothing to customs.

That's my reading, but ive never imported over $1000 before..

You can always send customs an email, explain your situation in simple terms and see what they say. AQIS has always been very good returning and helping out with information, and their website is confusing as all hell.

Edited January 27, 2009 by Undergrounder

[Undergrounder]

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Edited January 27, 2009 by Undergrounder

[Torsten]

register for GST!!!! seriously, imagine you start trading and then half way through a year you realise you will be over the gst limit and now have to charge gst.

you lose nothing by registering for GST straight away, but you can save yourself a whole lot of trouble. it's a bit more paperwork, but really it's pretty much the same if you run your business properly.

I know people who are always on the lookout for cash dockets so they can claim on them. like at officeworks or post office. get someone else's docket for $110 and you've just earned an extra 10 bucks from the government.

[Torsten]

undergrounder, the $1000 customs value is only for differentiating between an informal import and a formal import. Informal imports you can basically do the duty over the phone and then pay at the post office on arrival. Formal imports have to have certain forms filled in and payment made direct to customs before goods are released.

In my experience anything under $400 skates through, although I have been taxed on things as little as $80. I hate formal imports and will often split orders up so they stay below the threshold.

[Undergrounder]

Torsten, so for all commercial imports you are taxed, $1000 over/under just changes the process. For private imports you're not taxed and do an informal import under $1000, and are taxed and do a formal import over $1000. Is that the way it works?

I've been importing live plants up to about $400 and have only had to deal with AQIS, no hassles from customs. I'm about to do an order for what will be about $1070. Already have permit for these goods, but only from AQIS. Does this mean i have to pay duty and GST and need to do the formal report through customs?

[gerbil]

Also it would be worth your while talking to the ATO.

They are very happy to help out, sending out lots of information as well as organising free personal meetings to help you understand the system, your obligations etc.

[Torsten]

Torsten, so for all commercial imports you are taxed, $1000 over/under just changes the process.

Pretty much, yes.

For private imports you're not taxed and do an informal import under $1000, and are taxed and do a formal import over $1000.

My dad once got taxed for a private import worth about $150, so I don't think the threshold is at $1000. However, I've had many private imports worth several hundred dollars and I can't recall being taxed on any of them.

I've been importing live plants up to about $400 and have only had to deal with AQIS, no hassles from customs. I'm about to do an order for what will be about $1070. Already have permit for these goods, but only from AQIS. Does this mean i have to pay duty and GST and need to do the formal report through customs?

If you import via post/ems then you are less likely to get taxed. But fedex/UPS will always tax.

[Genesis]

Undergrounder, your right... Its all head-fuck shit. Head-fuck shit I need to work out, lol. Cheers guys for the info, spesh Torsten.

You are probably right, I should register for GST. It can't hurt and I can claim tax credits. Might give the ATO a bell tomorrow and get it all worked out. Then customs and get myself confused :D

I'll let you know the verdict.

Also the guys I am going to be ordering off in the states only ship UPS so tax is a must I guess.

I remeber back in the day a mate and I ordered guitars from the states and customs stopped them, rang my mates mum and was like "We think your son is trying to import guns. WTF!?!?". Apparently guitars look like guns under X-ray, I don't see it. Anyways we had to pay to have them cleared or somthing, I wasn't happy...

Gen

[momomoto]

Speak to a business adviser - preferrably through a registered accounting firm (CPA or CA) ~ BTW any clown in a suit can call themself an accountant - but they gotta have the little letters after their name to count.

This is what my accounting lecturer from uni told us to do (first year business is mandatory to do accounting units) because so many businesses fail in under a year of of opening because business owners don't think they need help, or don't think good advice is worth it.

They might be an expense, but can help you heaps with what they know about the tax world, fringe benifits for example spring to mind.

There are tax advisors also, and import specialist, but a good all-rounder is what you need.

If you do choose to see somebody, remember to with accurate brief and concise information - 'cause they can charge in 10 minute blocks, which can be expensive if you don't get to the point. They may want to help you with a business plan and model - which will help for when you need to expand (as you're obviously doing now) and may need a loan from a banking institution. If you have this down pat already, just lay it out what you need to know and what else they can tell you from what you have told them.

I'm sure they will be understanding and very helpful if you explain that all you need is a little direction on start-up and a little help when situations change / big decisions pop up. They could probably show you a good accounting package which should be easy enough for you to learn to use, and work through with the online ATO BAS shit.

Best of luck to you - it's been a dream of mine to start a business - with the right market and a product I enjoy, someday maybe I will.

[Undergrounder]

I agree that a well-researched business plan is an absolute must, a marketing plan, feasibility study etc. will also be invaluable, but the cost of getting some professional help really is high.. i know i can't afford it.

Genesis prolly has all his shit sorted out but every extra day of research and planning is three weeks saved down the track. I'm sure with the number of helpful and somewhat experienced people here we could all help out with eachother's business ventures and still do OK.

[Torsten]

Genesis, don't bother talking to customs yet. Most of the time they just give wrong advice on theoreticals anyway. If you need to know anything then make sure you do it in writing. Customs is pretty good with emails and at least then you ahve something solid. Start small and they'll let you know when they want something. And always allow for some unexpected costs.

momomoto, business advisers are good if you have no idea, but in general for someone who has a little bit of a clue and is starting small, they are a waste of time. Ditto for many accountants. Most of my ATO and ASIC paperwork irrgularities are due to my first accountant and have taken 2 years to sort out. In a 2-accountant town that's pretty dismal, especially since the crappy one charges more.

That's not to say you should not seek and take advice though. The ATO has free advisers that can tell you all you need to know about tax, and if you are going to get an accountant anyway then talk to him before you start your bookkeeping as he can save you a lot of time and money [they save more than they cost usually]. Also, go to business. gov.au as this will give you all the checklists of what you need to be compliant.

[Neoshaman]

Genesis, don't bother talking to customs yet. Most of the time they just give wrong advice on theoreticals anyway. If you need to know anything then make sure you do it in writing. Customs is pretty good with emails and at least then you ahve something solid. Start small and they'll let you know when they want something. And always allow for some unexpected costs.

momomoto, business advisers are good if you have no idea, but in general for someone who has a little bit of a clue and is starting small, they are a waste of time. Ditto for many accountants. Most of my ATO and ASIC paperwork irrgularities are due to my first accountant and have taken 2 years to sort out. In a 2-accountant town that's pretty dismal, especially since the crappy one charges more.

That's not to say you should not seek and take advice though. The ATO has free advisers that can tell you all you need to know about tax, and if you are going to get an accountant anyway then talk to him before you start your bookkeeping as he can save you a lot of time and money [they save more than they cost usually]. Also, go to business. gov.au as this will give you all the checklists of what you need to be compliant.

Can I just add that yeah make sure you have an accountant who has a decent reputation , some the dodgy crap i've seen over the years working as one really shocks me Big Firms are not necessarily the best they just usually charge more I've worked for a few big ones here on the coast and all they do is charge you through the arse and don't provide any more real benefits then what some of the smaller firms can offer. It pays to ask around and find someone people you know have had a positive experience with

The ATO can be good for advice just sometimes it pays to ring back and speak with a second person to doublle check , have been provided with incorrect information a few times. ( of course i'm talking about the Tax agents service line rather then the Business one although i imagine they would both experience similar issues ).