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Paypal Grey Zone

Discussion in 'Money matters' started by seocourse, Mar 31, 2010.

  1. seocourse

    seocourse Well-Known Member

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    Anyone making any revenue from paypal... how does the ATO feels about Paypal exactly?

    Does the money become "Australian income" when?
    When arrives to my Paypal in the US...
    or when I spend it? ;)
    or when I withdraw the money?

    Any heavy paypal users here?
  2. Chris Bates

    Chris Bates Member

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    As a highly qualified accountant... If you invoice someone / give someone a receipt, would it then not be classed as income - regardless of where the money is.

    I'd take it like doing cash work, money received is still income. Just with cash I believe it's more "optional income" LOL j/k ;)

    I'm sure Janna or Anna could probably answer this question. Now if only we could tag them and get their attention - @FletcherTax *shines his catwoman light into the sky*
  3. KarenC

    KarenC Well-Known Member

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    I asked the same question back in 2009, and here is the solution found after talking with the ATO.

    SOLUTION FOUND

    I just spoke to 3 lovely people at the ATO. www.ato.gov.au

    Any overseas service transactions are considered export of services and attract no GST. In the BAS they are C1 and C2 (nothing from 1a).

    Example:
    I sell a artwork service to an international customer in US dollars for USD100.
    If I choose to keep the payment in US dollars in my PayPal account, I have to choose a regular date to make an estimate to Australian dollars. eg on the day, or end of month etc. But always make it consistent and have something to show how I made the calculation. It does not attract GST.

    They also referred to rulings GSTR 1001/2 and GSTR2000/31 to read more.

    The only two currencies I deal with are Australian dollars and US dollars so that actually is easier to understand for me.

    I ended up making the conversion at the end of each month whenever I had US dollar sales and keeping a PDF showing the conversion in PayPal. PayPal gives you the estimate conversion for that date so it's easy to keep a record.
  4. Chris Bates

    Chris Bates Member

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    Ok, Karens response put mine to shame! Although mine never did have much credibility, haha :D
  5. peppie

    peppie Active Member

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    Karen, you state that example specifically as being a service, do you know then how it would apply if it were a product you were selling in this way? (Whether the goods originated in Aust. or the USA?)

    I know the ATO can get VERY particullar in their definitions. For instance, I only fairly recently realised that they saw a major software purchase for a business as not being a depreciable "tool", even though I may use it as an indispensable aid to making an income. Computers are depreciable, the software in them is not!

    So, do they see overseas income from a service in the same way as selling goods?
  6. Intuitive

    Intuitive Member

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    Thanks Karen

    Good to know
  7. Melinda B

    Melinda B Member

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    I treat my paypal account as a bank account and include it in my BAS etc. I sell from my website in USD, but my paypal account is set to AUD - so all transactions convert to AUD.

    Australian clients get a tax invoice emailed with GST included in the price and I declare the GST.

    I know if you start having a lot of transactions on your business paypal account they well ask you to verify the account in some way - hasn't happened to me yet although I know people who have.

    Note that I've never spoken to the tax office about paypal accounts, this just seemed to be the best way to handle it for me.
  8. KarenC

    KarenC Well-Known Member

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    I agree with Melinda - I also have my PayPal account set up as a bank account in MYOB. It's much easier to start off that way and then the accountant and ATO know you've been trying to do it right from the beginning.

    I think Melinda's idea is good ...
    'I treat my paypal account as a bank account and include it in my BAS etc. I sell from my website in USD, but my paypal account is set to AUD - so all transactions convert to AUD.'

    I print off statements - itemise anything that was personal instead of business and keep that with my other bank statements for the year.
  9. King

    King Well-Known Member

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    If your customer is offshore and not an Australian, then GST exempt.
    Yes I always regard my paypal account as just another account and include on the BAS. I don't do any regular conversions, just when I have too much I withdraw it into my AU bank account.
  10. Melinda B

    Melinda B Member

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    I meant that Paypal converts the USD into AUD so it makes it easy for me to account for it. I only withdraw it to my bank account when I need to.
  11. KarenC

    KarenC Well-Known Member

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    King - re PayPal conversions - the ATO says that an estimate must be done at the same time each month and you must record it somewhere. You don't have to convert it to your bank account in AUD then. But you must show that you have made an estimate and put it into your accounts.
    Try to keep PDF files or screen grabs of your conversion estimate in PayPal as it shows there.

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