How does GST on PayPal payments work for Australian Taxation?

Question

I am an Australian sole trader and I have recently started publishing eLearning videos to view online at a .com website that pays into my PayPal account.

Purchases are in USD and my share is paid into my PayPal account. The eLearning platform is run by Australians and so far all purchasers have been Australians but it is expected that they will more and more become international purchases.

My plan is to convert all money received from USD in PayPal to my Australian bank accounts just before the end of each quarter that it arrives in so that I can keep my tax simple, and I am assuming that whatever money I transfer into my Australian bank account will be taxable income.

Would Goods and Services Tax (GST) be payable to the Australian Tax Office on the above?

Answer 1

TL;DR - my understanding of the rules is that if you are required to register for GST (earning more than $75k per annum), you would be required to pay GST on these items.

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To clarify firstly: taxable income, and goods and services tax, are two different things.

Any income you receive needs to be considered for income tax purposes - whether or not it ends up being taxable income would be too much to go into here, but generally you would take your expenses, and any deductions, away from your income to arrive at what would generally be the taxable amount. An accountant will help you do this.

Income tax is paid by anyone who earns income over the tax free threshold.

By contrast, goods and services tax is a tax paid by business (of which you are running one). Of course, this is passed on to the consumer, but it's the business that remits the payment to the tax office. However, GST isn't required to be charged and paid in all cases:

• It's not required for sales not connected with Australia
• It's not required on 'GST-free items'
• A business is not required to register for GST at all unless they earn more than $75,000 per year, although you can still voluntarily register if you wish
• Other cases as documented from time to time by the ATO

The key in your situation is first determining whether you need to register for GST (or whether indeed you already have). If you earn less than $75,000 per year - no need to register.

If you do earn more than that through your business, or you have registered anyway, then the next question is whether your items are GST-free. The ATO says that "some education courses [and] course materials" are GST-free. Whether this applies to you or not I'm obviously not going to be able to comment on, so I would advise getting an accountant's advice on this (or at the very least, call the ATO or browse their legal database).

Thirdly, are your sales connected with Australia? The ATO says that "A sale of something other than goods or property is connected with Australia if ... the thing is done in Australia [or] the seller makes the sale through a business they carry on in Australia". Both of these appear to be true in your case.

So in summary: if you are required to register for GST, you would be required to pay GST on these items.

I am not a financial advisor or a tax accountant and this is not financial advice.

Answer 2

Regardless of whether or not you are registered for GST, you are legally required to include a GST total on every invoice sent to an Australian customer.

This GST total must be 10% of the payment amount if you are registered for GST, or it must be $0.00 if you are not registered for GST.

Since all GST transactions with the government are in Australian dollars, this amount on the invoice also needs to be in AUD, or else it's impossible for you and your customer to both be working off the same GST amount.

This means you need to transfer your money from USD to AUD in PayPal's "Manage Currencies" area before you can send a tax invoice to the customer, so that you can provide the correct amount in AUD based on the actual exchange rate for the day (and you are required to send invoices promptly).

Alternatively, you can collect payments in AUD using PayPal or use a different payment service that collects payments in USD but immediately converts them to AUD for sending an invoice (Australian PayPal competitors often provide this service).