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Do I ned to claim income from party plans?? And how do I do it??
Am I classified as self employed again? (that was a hassle!)
Do I call each fortnight and tell them what I made, and what happens when for the first few months all that profit goes back into getting stock??
confused.....
You will probably have to do profit and loss statements. The first one will have to be projected.
It doesn't matter what you do with your profits, you just have to report what they are.
ETA - you can run it as a hobby for the ATO if it earns under $5k per year (?), but for clink purposes its income.
Yep, we checked with the ato, its all good there.
The thought of the statements for centrelink again... arrgghhh.....
I know...it SUCKS but at least you are familiar with the routine I suppose! You will run at a loss for awhile anyway.
It's one of the reasons I am hesitant to go back into biz..I want to get away from Clink forever and it just tangles me back in....feelin ya pain!
i agree with Lulu - the profit and loss statements suck, but it's best to be completely upfront with them - you're registering as a business and need to be upfront about it. it will all go through a complex assessment officer who will be able to say whether you run at a profit or loss and then it willbe recorded on your file. not fun - but definitely better to do a bit of paperwork than to have them find out months down the track that you've started it and have nasty investigations...
Thanks BG.... I've been PMing Lulu, but would like your input too!!
We got the ABN in Adams name (long story).
According to the ATO guy, they only wanna know about the business if it earns over $50,000, otherwise its a hobby and not GST applicable. And centrelink only want to know if its taxable income, which ATO says it isn't.
But it doesn't sound right.
I know a lot of tupperware and avon ladies that just do there work and dont need to report it, but it still doesn't sound right....
it may be classed as a hobby for ATO purposes - not for centrelink - you're ALWAYS better off getting the initial paperwork submitted and assessed by the assessment officer rather than assuming it will be ok to not report it. it's better to have them assess it and say "yup, it's all ok" and not include it, than to NOT report and find out you should have. i would double check with ATO though (read the next bit!)
having the ABN in Ad's name just means it has to be reported as his business not your. given it's not a "standard" party plan, it's hard to say exactly how it will be assessed. company's like tupperware, bodyshop, partylite, avon - they all have a central "figurehead" company further up the food chain that is responsible for all taxation and things. you're essentially starting out a new "shop front" business working from your garage (if memory serves) - YOU are ultimately responsible for everything - there is no figurehead company that has to take responsibility for taxation. you are essentially a small business, NOT a party plan consultant - the buck stops with you. if something goes wrong, you are responsible. please make sure to check this out. do NOT label yourself as a partyplan consultant when starting out with ATO - talk to them about your business idea - from what i gather, you're going to stock nappies and sell from your garage. you're going to offer the opportunity for people to see your wares from the comfort of their home. but you're not a consultant for another company. it would be no different to you opening an IRL shop in town and then going from your shop to peoples homes to show things. you are still, ultimately, the "business" and are responsible for all aspects (stock, insurance of stock, public liability for your home to ensure safety if people attend your garage "shop front" etc). it's no different to the local lawn mowing company - they have to be registered properly and have to declare income and losses. PLUS if it's registered in Ad's name, and is run as a business, it may actually give you some tax breaks on his primary income (that's a maybe - if business is running at a loss, it might reduce his tax liability)
all stuff to keep in mind - i don't think the ATO have given your actual situation enough consideration - you're not a consultant for another figurehead company - you're a business in your own right using multiple sales techniques...
thanks hon!!!
For now, its strictly party plan... i need some profit to have stock "in store". But yep, its all different brands. I'm not a 'consultant" but a 'stockists" for each company. I take orders, pay wholesale, then sell at retail prices.
I explained this to the ato guy and he said unless Ad make over $50,000 or want to claim GST, then he doesn't have to do a BAS or tax return on the business. Its a "hobby".
Centrelink then said if he doesn't have to declare to them, then he doesn't have to declare to us.... when his tax return says the same as last years one, from his day job, my payments will be made accordingly...so stay the same...
I am trying to tell them what I'm doing so i do the right thing, but no one wants to know about it!!!:lol::lol:
ask centrelink to send out a new business profit and loss statement, or to make an appointment at the local office. it's not a standard partyplan and you don't want to be caught out - better to do a bit of extra paperwork than it is to not do it
and they can't say they will only class income as it is listed on his tax return if you're on PPP - that's a load of crud! it's gotta go on actual income for PPP purposes (before deductions!) so you need to be above board. maybe say you want an appointment with someone in relation to starting up a business but you don't want to do it over the phone. it's a pain, but you're better getting it all out in the open with someone that knows how it works with self-employment - and those on the phones are not self employment experts!
So true babe!!!
I dont get any PPP, Just FTB A & B... doest that make a difference??? Going into centrelink with the 3 kids wont be fun..... :lol:
if it's only ftb now (sorry, i thought you were still getting part ppp) then it all goes on what ATO said - it's only what is on the tax return
check with them about the ABN though - for most "hobbies" you don't need an ABN and can actually be penalised for having one and using it unless you have X amount of turn over... i know i do a partyplan and am not registered with an ABN as it's considered a hobby... not sure how that will work cos i guess we have that "figurehead" ABN though...
I really didn't want to bother with an ABN, but they wanted one to be able to sell to me wholesale...so I had to get it... :doh:
We've never had PPP, Ad earns about $80 over the threashold for minimum payment!!! :p
damn - i knew it had been mentioned in some context somewhere
at least you have reason for needing the ABN! i know a lot of hobby ABN's get taken away - but given you're buying wholesale it sounds like it's been worked out properly...
good luck getting started!
Thats why Ad got it this time... my ABN was cancelled for not being used for FDC... but I didn't have to pay tax, (under threshold) so wasn't claiming any back...
It was easier for him to get a new one, then for me to re apply... that procces is a massive pain!!! :rolleyes:
hehehe - nothing is ever easy hun!
wat the ATO guy said doesnt sound right $50,000 is a big amount for a HOBBY. i make around 15k at the most a yr and i have to do BAS and do GST. i would look into the ATO side of things more or you could be caught out big time. also when you do get advice make sure you get names and numbers so your not just saying well some guy told me i could do this and that.
What is a hobby is way much more complicated than a $$ threshold, it is on the ATO site what they take into account what is a hobby. $50,000 used to be the threshold before you had to register for GST, now it is $75,000. As for whether it is taxable income, well that is a different matter and better discussed with an accountant who knows you whole circumstances.
Thanks Astrid, your right, i double checked!!!
But I will have to call back anyway.....:rolleyes: As soon as I said its a party plan, similar to tupperware type thing, and tried to go on and explain, he cut me off, and said party plans are "hobbies" and unless I suddenly make a lot of money doing it, they dont need to know....:rolleyes:
So an hour wait again today I feel.....:doh:
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I was told it was classed as a hobby as long as you were selling under $50,000 worth of retail price product a year. Out of that $50,000 you'd declare 1/3 (or your commission, some pp have higher commission) of that as income.
I don't know about what you have to declare to Centrelink though.
Tax is such complicated stuff, it is really best to get a direct answer from the ATO or from an accountant (preferably CPA or CA) that takes into account your circumstances. People have to be really careful advising others on what $$ 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: