Home – New Forums Money matters Need advice on paying affiliates from tax point of view

  • This topic has 8 replies, 2 voices, and was last updated 4 months ago by KriJ.
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  • #995250
    KriJ
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    Hi everyone!

    I am launching am new business and considering recruiting affiliates to sell the service for a commission as part of my marketing.

    My question is, how to pay affiliates from a tax point of view?

    Usually, when contracting someone the contractor will invoice me with their details and ABN. However in the affiliate marketing world, it’s possible to have customers as affiliates and people from around the world as affiliates, most of these people don’t have an ABN and are not part of a business. So from a tax point of view how do I pay the affiliates and how do I claim on that when they are not generating an invoice and do not have an ABN or business name? Hope that makes sense. I’m considering using Refersion as my affiliate platform.

    Thanks!

    #1200824
    Taxopia
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    KriJ, post: 237941, member: 82794 wrote:
    Hi everyone!

    I am launching am new business and considering recruiting affiliates to sell the service for a commission as part of my marketing.

    My question is, how to pay affiliates from a tax point of view?

    Usually, when contracting someone the contractor will invoice me with their details and ABN. However in the affiliate marketing world, it’s possible to have customers as affiliates and people from around the world as affiliates, most of these people don’t have an ABN and are not part of a business. So from a tax point of view how do I pay the affiliates and how do I claim on that when they are not generating an invoice and do not have an ABN or business name? Hope that makes sense. I’m considering using Refersion as my affiliate platform.

    Thanks!

    If the supplier is not carrying on an enterprise in Australia (ie generally when their business is not located here but can be locals as well) then the ABN withholding rules do not apply.

    #1200825
    KriJ
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    Thanks Taxopia :)

    Can you walk me through it? So if I sell books for $20. A student signs up as an affiliate. I have no idea if the student has an ABN or even if he has a TFN or not. The only details I have of him are his name, contact details and bank details. The student sells a book and I transfer 50% ($10) to his bank account.

    How do I write this up for tax purposes? Do I need to generate an invoice on the student’s behalf? How do I write this up so I can claim on it as marketing expenses? Or legally is there additional information I need to gather from my affiliates?

    Then I guess it’s not my issue how the student does his tax return is it? That’s completely his business is that correct?

    Thanks very much

    #1200826
    Taxopia
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    If the total payment you make to the supplier is less than $75 then there is no ABN withholding requirement either. So if they bill you individually and are not do high volume that is another exemption to make your life easier.

    There are lots of potential variables in this which probably go beyond free forum advice. Feel free to sign up with Taxopia and we will be sure to assist.

    Cheers
    Alex

    #1200827
    Dave Gillen – Former FS Concierge
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    Hi [USER=82794]@KriJ[/USER] If your payments go through your affiliate platform, then it should be straight forward. You’ll have a record of all affiliate payments made, and declare them as an expense (cost of sale / sales agent / referral fees).

    If your payments are made manually, you should still be able to generate a record from your affiliate platform (even if it’s a printed page or screenshot) to match up with your payment (bank) records, if it’s ever queried by the ATO.

    Dave

    #1200828
    coko
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    Dave – FS Concierge, post: 237976, member: 49676 wrote:
    Hi [USER=82794]@KriJ[/USER] If your payments go through your affiliate platform, then it should be straight forward. You’ll have a record of all affiliate payments made, and declare them as an expense (cost of sale / sales agent / referral fees).

    If your payments are made manually, you should still be able to generate a record from your affiliate platform (even if it’s a printed page or screenshot) to match up with your payment (bank) records, if it’s ever queried by the ATO.

    Dave

    Hi Dave,
    thank you for your reply, I am just starting a business and not generating enough income at the moment to justify investing in an affiliate platform. I am happy to manage the payment to affiliates myself. My income is below $75K and not registered for GST, hence I am unable to use RCTI to create invoice for the affiliate on their behalf.

    My current plan is to provide each affiliate with an individual code that will have to be inputted for each sales or perhaps an individual link.

    What should I provide to the affiliate when I pay them their commission (I preferable would not want the affiliate to send me an invoice before I pay them), and given that i don’t have an invoice, is the individual code that will be shown in each sales a sufficient proof if I get queried by the ATO to claim the commission as marketing cost?

    Do i have to ask the affiliate to have an ABN before i ‘hire’ them?

    Many thanks,
    Coko

    #1200829
    Dave Gillen – Former FS Concierge
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    Hi Coko,

    If you mean paying them via bank transfer…

    I would use the description in a consistent way (use the the word “affiliate” or “referral” or “commission”), and use a transaction number so each payment can be tied to a sale.

    If the ATO queries, then you can show it’s a cost of sale (the description says so, and the dates match up, and the percentages work out).

    You’ll have a spreadsheet too, ideally, that documents all this in one snapshot :)

    Hope that helps!
    Dave

    #1200830
    coko
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    Dave – FS Concierge, post: 269759, member: 49676 wrote:
    Hi Coko,

    If you mean paying them via bank transfer…

    I would use the description in a consistent way (use the the word “affiliate” or “referral” or “commission”), and use a transaction number so each payment can be tied to a sale.

    If the ATO queries, then you can show it’s a cost of sale (the description says so, and the dates match up, and the percentages work out).

    You’ll have a spreadsheet too, ideally, that documents all this in one snapshot :)

    Hope that helps!
    Dave

    Thank you Dave for the quick reply and yes it helps :)

    #1232571
    Friday Rack
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    Thanks for sharing valuable information.

    #1233695
    Emywilson
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    Thanks for this thread, Its very Informative (Like)

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