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Re: Sole trader just under the GST threshold, have international sales over 75k linked to my ABN

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Hi everyone. Im a graphic designer sole trader and had a question regarding my FY20-21 tax return. 

 

For my FY20-21 financial year, $72,100 income was done for Australian clients for Australian use via my ABN. $43,000 income were sales that I believe not connected to Australia - international graphic art sales designed and sold to overseas clients for overseas use. It fulfilled these items 

 

  • that the recipient is not in Australia when the services are supplied or performed (this condition includes consideration of whether the recipient has any offices in Australia and if so the nature of those offices);

Yes. The recipient of those services does not exist in Australia whatsoever.

 

  • that the effective use or enjoyment must occur outside Australia (this condition includes considering whether employees of the recipient making use of the services provided are in Australia at the time of making use of those services);

Yes. The recipient is overseas and the "effective use or enjoyment" (what a vague term!?!) has occurred 100% overseas, as it has had not use or distribution in Australia 

 

  • that the supply of services is not for work performed on any tangible personal property based in Australia; and

The supply of services was done on a computer overseas and in australia and sent to the client accordingly. What does this mean?? because it was designed on a MacBook in Australia now all of a sudden its required for me to start paying massive gst for those international sales?

 

 

  • that the supply is not connected with real property in Australia.

 

I don't understand this last point. the supply are digital PNG and jpg and digital format files. it was done in the digital realm 

 

 

 

 

I am not currently registered for GST. My understanding is that I have not hit the threshold as only $72,100 of my income is classified as sales connected to Australia. the remaining income were digital art products sold to international clients for international overseas use, and  therefore that $43,000 portion is classified as sales not connected to Australia. Is this correct? Or am i wrong, thank you for your help I'm so stressed about how to do my tax and don't want a gst bill as it doesn't seem right. 

 

 

 

 

 

 

 

 

(This is what I found on another answer in this forum, to use as my reference point 

When working out turnover for GST for the supply of a service to an overseas client you need to determine if your service is connected with Australia, and if your service is not connected with Australia then it is not included in the GST turnover calculation.

 

GST turnover is calculated on your gross business income (not your profit), excluding any:

  • GST you included in sales to your customers
  • sales that are not for payment and are not taxable
  • sales not connected with an enterprise you run
  • input-taxed sales you make
  • sales not connected with Australia

for more information on turnover refer ATO website :  GST turnover

 

 

The supply of a service for consumption outside of Australia may be GST-free if certain criteria are met. The conditions which must be satisfied include:

  • that the recipient is not in Australia when the services are supplied or performed (this condition includes consideration of whether the recipient has any offices in Australia and if so the nature of those offices);
  • that the effective use or enjoyment must occur outside Australia (this condition includes considering whether employees of the recipient making use of the services provided are in Australia at the time of making use of those services);
  • that the supply of services is not for work performed on any tangible personal property based in Australia; and
  • that the supply is not connected with real property in Australia.

 

Supplies of services connected with Australia are covered in GST ruling: GSTR2000/31  have a good read of paragraphs 23 to 26  and 65 to 70

 ) 

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Taxicorn Registered Tax Practitioner

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Registering for GST  =  https://www.ato.gov.au/non-profit/your-organisation/gst/gst-registration/

 

Some income is excluded from the turnover test for $ 75 K, but exports are not shown as an item to be excluded.

 

So, looks like sole trader needs to be registered for GST from the month that total sales exceeded $ 75 K

  -  that month + previous 11 months.

 

Even though no GST is payable on exports.

 

7 REPLIES 7

Initiate

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I hope my question came through okay and clearly. If anyone has any questions or assistance it would mean the world to me thank you 

Enthusiast

Replies 3

Good question. Reading your post i tend to agree with you that the sale isnt connected with Australia. The only thing i'd query though is the income is coming into Aus.... Would be good to get the ATO view on this one... maybe @Bruce4Tax can help out?

 

Looking at the website it doesnt mention this as something that would classify it as connected to aus. Don't stress they'll be a way to work this all out. The other thing to consider is what platform you're using to make the sales? 

 

Sales connected with Australia

GST applies to sales that are connected with Australia, whether they are goods, property or other things.

Goods

A sale of goods is connected with Australia if the goods are any of the following:

  • delivered or made available in Australia to the purchaser
  • removed from Australia
  • brought to Australia – provided the seller either imports the goods or installs or assembles the goods in Australia.
  • from 1 July 2018, supplies of low value imported goods to a consumer in Australia

Exports of goods and services from Australia are generally GST-free, even though the sale is connected with Australia. For more information, see Exports; GST on low value imported goods

Most helpful response

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Taxicorn Registered Tax Practitioner

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Registering for GST  =  https://www.ato.gov.au/non-profit/your-organisation/gst/gst-registration/

 

Some income is excluded from the turnover test for $ 75 K, but exports are not shown as an item to be excluded.

 

So, looks like sole trader needs to be registered for GST from the month that total sales exceeded $ 75 K

  -  that month + previous 11 months.

 

Even though no GST is payable on exports.

 

Initiate

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Hi Bruce, your response is so helpful and makes sense thank you. one question, forwarded from me to the ato to you as well

 

:

Thank you everyone. You are so incredibly helpful. Another question here for reference please for future regarding this line 

 

If a client orders a design, but the design is wholly produced and sent from a subcontractor freelancer from another country (eg. Phillipines or America), that means that the service is then wholly disconnected as none of its performed in Australia, only the invoicing is performed in Australia to an Australian company and therefore would not be counted part of that GST threshold? Some of the work involves purely international subcontracting and delivery (we are just the middleman that receives payment and pays the freelancer their labour costs)  so just want to clarify, if this is correct? So that portion wouldn't be contributed for in that 75k threshold for this financial year? 

 

"A service that is exported overseas maybe GST-free however generally its still connected with Australia if its performed in Australia. If you perform your services here then its connected to Australia so you'll be required to register."

 

"

Initiate

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@Tacotuesday  thank you for your help and bringing ATO/Bruce for further assistance, so so appreciated Smiley Happy 

ATO Community Support

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Hi @JAB11

 

Further on to what @Bruce4Tax has advised.

 

A service that is exported overseas maybe GST-free however generally its still connected with Australia if its performed in Australia. If you perform your services here then its connected to Australia so you'll be required to register. It will mean once registered then your export of services will be GST-free.

 

You can find more details about Taxable sales and Sales connected with Australia on our website

Initiate

Replies 0

Thank you everyone. You are so incredibly helpful. Another question here for reference please for future regarding this line 

 

If a client orders a design, but the design is wholly produced and sent from a subcontractor freelancer from another country (eg. Phillipines or America), that means that the service is then wholly disconnected as none of its performed in Australia, only the invoicing is performed in Australia to an Australian company and therefore would not be counted part of that GST threshold? Some of the work involves purely international subcontracting and delivery (we are just the middleman that receives payment and pays the freelancer their labour costs)  so just want to clarify, if this is correct? So that portion wouldn't be contributed for in that 75k threshold for this financial year? 

 

"A service that is exported overseas maybe GST-free however generally its still connected with Australia if its performed in Australia. If you perform your services here then its connected to Australia so you'll be required to register."