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I was told it was classed as a hobby as long as you were selling under $50,000 worth of retail price product a year. Out of that $50,000 you'd declare 1/3 (or your commission, some pp have higher commission) of that as income.
I don't know about what you have to declare to Centrelink though.
Tax is such complicated stuff, it is really best to get a direct answer from the ATO or from an accountant (preferably CPA or CA) that takes into account your circumstances. People have to be really careful advising others on what $$ figures are needed to declare to the ATO. Whether something is a business or not is very complicated.
Ok, to quote Lulu, I am now pulling rank. My background 10 years in accounts and finance, an almost finished accounting degree (stopped due to kids), years of payroll, Assistant financial accountant at a publicly listed company. My own bookkeeping business for small businesses and helped run my husbands business. I do not believe that the average person should be giving any tax advice, unless they are just quoting information off the ATO site or pointing someone towards there. Accountants are there for a reason, use them to find out what is the best circumstance for your family. It may be that once you start earning a reasonable income that you may need to set up a family trust for example, but someone else earning the same money may be advised something else.
Yes accountants cost money, but they are worth it, they do years of study and keep up that training (esp CA, CPA's & NIA). 10 minutes on the phone to that ATO cannot come anywhere near to matching their experience. Just call them and you might find there is no charge to come in for a brief chat.
Part of running a business is knowing when someone else is better at doing a task than what you are. Think of every minute, hour etc spent on the phone, internet etc trying to find out this information, when you can just go in and talk to someone for 1/2 hour. Running a business is about best use of time and resources.
thanks for jumpin in Astrid - i know the centrelink side of things, but did think it sounded a little on the dodgy side to be told not to declare the info to ATO as it's classed as a hobby. i know the first year i did partyplan i took all the details to the accountant at tax time - i let him decide if i needed it. have done the same each time i've started a different party plan (and i've been through a few - it's an awesome way to get what i wanted cheaper! lol)
definitely with any small business get proper financial advice. just because something is going to be run "like partyplan" doesn't mean the same rulings will apply...
Well I guess I'll need to go see someone... this is getting to be more hassle than its worth!!! :doh:
I tried the ATO again, to see if different people will tell me different things... got the same story again....
As long as its not my own product, and I'm just passing products through, like tupperware, it doesn't matter how many companies products I'm selling. Just as if i sold Avon and Tupperware. Provided I dont set up 'shop" or earn over $50,000 selling other peoples products, its a hobby. I can keep my ABN if its required, with 2 pieces of documentation stating I have to have one. 3 nappy places have already requested I have one, so all good there...
But you are both spot on... I need a pro's help here!!!! ;)
I just wanna sell some fluff!!!! :lol:
Gee $50,000 of sales is a lot. I know with my party plan I would be bringing home around $1800, that is not taking into account expenses, but they would be offset by any income received from my downline. At that level of sales I would probably also have a car and would need to be close to working 20+ hours per week to achieve it (that is party time, planning, ordering, supporting my downline, training, meetings etc). So to me it is a very substantial figure and I am sure if I was earning it the tax office would want to know.
I think what they are doing is stopping people who are earning a very small income from party plan declaring it as it would then enable them to claim expenses, which could then in turn actually reduce their overall taxable income. I know there is a lot I would be claiming once I get to a taxable level ;) On my calcs $50,000 just seems way to high, I think closer to $20,000 would be more accurate.
Astrid - i think it's 50k TURNOVER, not 50k income. so 50k retail value not just commission...
found this on the ATO website and it might help you PB:
all the ones i've bolded are ones that i believe apply to you. it may have been limited market research, but you did do some locally and on BB. you wil advertise. not sure on business plan but i'm guessing you may have had to supply a business plan of sorts to your suppliers and you will be putting a fair bit of capital into it to get it started:
These are examples of questions that the Tax Office may consider in determining whether your activity constitutes a business:
Do you have a business plan?
Do you use specialised knowledge or skills?
Have you had prior experience in this area?
How much capital have you invested in the activity?
Have you done market research?
How much time do you spend on the activity?
Is the activity a part-time `side-line' or your main income earning activity?
Do you give quotes and supply invoices?
Do you advertise?
there is also the INTENTION of setting up an IRL shop for people to see your wares (unless that has changed) - you were talking of using your garage in a similar manner to a shop front until you can afford to move into permanent shopfront - so it is definitely more a business than a hobby.
i'd definitely be getting proper sound advice hun
Thats what I think!!!
I will earn no where that though, unfortunatly!!! :lol:
I think the idea is if you "earnt" under that $50,000 and dont claim tax, they dont have to give you a refund..meaning you inccur all the costs too,( meaning income could actually really be very low) if you earn over, and therefore pay tax, you are also entitled to claim the costs back.... which can work out to be heaps!! Elec, ph, petrol, stationary etc. ( I done it for FDC, and all earnings ended up tax free anyway, from a full time job!)
So damn confusing.....
Need an app with a pro for sure I think....;)
I was using retail figures. My commission on something like that is substantial. Would take 8 good parties a month, so 2 a week, preferably 3 to ensure good figures with catalogue sales to bump up the dud ones. I would be getting over $20k a year just in personal commission.:
Thanks BG!!!
It so hard... I apply to some of those..
I dont have "capital" invested, i buy a start up kit, just like tupperware and Nutrimetics, to show off the product. Demo's only. They are actually a "party plan" package from the companies. So far the 3 I'm selling all have their own.
All invoices come from the company, and warranties, I just pass them along with their purchases...
I will advertise, but we have similar parties advertised in the papers up here anyway....
Definately have the intention to eventually set up shop, if all goes well...:think:
Trust me to pick a damn partyplan that is such a grey area... :rolleyes: So much for bright ideas!!!! :lol: