The recent launch of Amazon in Australia has opened a significant opportunity for Amazon retailers to expand their online business operations into Australia’s high growth online retail market.
There are, however, many factors to consider to before selling goods through Amazon Australia.
All goods sold in Australia are subject to a 10% Goods and Services Tax (GST). Sellers are required to collect GST on behalf of the Australian Government and submit GST on a quarterly basis through a Business Activity Statement (BAS). If your current or projected GST turnover is A$75,000 or greater per year, businesses are required to register for GST. Sellers should consider GST, and its impact on Customs Duty and fees before selling goods through Amazon Australia.
To conduct business activities Australia, all businesses should be registered with Australian Securities and Investment Commission (ASIC). This also includes foreign businesses selling goods to Australian consumers through Amazon, who will receive an Australian Registered Body Number (ARBN) upon registration, and the appointment of a local agent.
Income Tax in Australia should also be considered when selling goods online in Australia. Australia has Double Taxation Agreements (DTA) with over forty countries, which will mean for most International Sellers on Amazon Australia, the presence of a DTA will either mitigate or eliminate the liability to pay income tax in Australia.
Finally, retailers should consider their product safety, quality, and labelling when selling goods to Australian consumers. All goods sold in Australia are subject to Australian Consumer Law (ACL) regulations and sellers may be subject to penalties for breaching requirements of the ACL.
Australia has a population of over 24.8 million People, with the majority of the population residing in three major cities on the East Coast: Sydney, Melbourne, and Brisbane. The populations of these cities are 5.6 million, 5 million, and 2.4 million respectively as of the end of 2017
The capital city is Canberra, which is located in the Australian Capital Territory, between Sydney and Melbourne. Canberra has a population of over 406,000 people.
Australia has the longest running uninterrupted GDP growth in the developed world, with 26 consecutive years since the last recession. Australia’s economic wealth ranks highly in the developed world in terms of GDP, terms of trade, and wealth per adult.
Australia is an open market with minimal restrictions on imported goods and services. This has also allowed Australia to establish significant trade and tax agreements with other nations. The price of goods sold in Australia tend to be higher than that of other countries such as the USA and Canada, even with the consideration of exchange rates.
Australia’s top imported goods include: vehicles, machinery & computers, mineral fuels (including oil), electrical machinery & equipment, pharmaceuticals, medical apparatus, boats & ships, and gems & precious metals. The services sector is the leading sector of the Australian economy, accounting for over 70% of GDP and over 75% of jobs.
English is the most common language spoken in Australia with over 72.7% of the population speaking English only. Other commonly spoken language includes: Mandarin spoken by over 2.5% of the population, Arabic spoken by over 1.4% of the population, Cantonese spoken by over 1.2% of the population, and Vietnamese spoken by over 1.2% of the population.
Income tax in Australia is imposed by the federal government and collected by the Australian Tax Office (ATO) on behalf of the federal government. Income tax in Australia is levied at progressive rates, whereas companies are taxed at one of two rates (27.5% for small businesses and 30% for companies with a turnover of $10 million or more.
Most international sellers on Amazon Australia will not be an Australian Resident for Taxation purposes. However, income from an Australian source is generally taxable in Australia.
Whilst international tax is complicated, most international sellers selling on Amazon Australia will only have two questions to answer to determine whether they are subject to Australian income tax:
Question 1. Does my country have a Double Taxation Agreement (DTA) with Australia?
The following countries have a Double Taxation Agreement with Australia
North America: Canada, United States of America, Mexico
South America: Argentina, Chile
Europe: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Malta, Netherlands, Norway, Poland, Romania, Russia, Slovakia, Spain, Sweden, Switzerland, Turkey.
Asia: China (not including Hong Kong), India, Indonesia, Japan, South Korea, Malaysia, Philippines, Singapore, Sri Lanka, Taipei, Thailand, Vietnam
Africa: South Africa
Oceania: Fiji, Kiribati, New Zealand, Papua New Guinea
Note: Hong Kong does not share a DTA with Australia.
Question 2: If my country has a DTA with Australia, does my company have a “Permanent Establishment” in Australia?
It is important to determine whether your business operation will constitute a permanent establishment in Australia. Australian sourced income which is attributable to a permanent establishment is taxable for income tax.
• Places of management (not including local agents)
• Brick-and-mortar sales outlets (not online marketplaces like Amazon)
You do not have a permanent establishment in Australia if you use Amazon FBA or a warehouse for storage and dispatch of your stock.
Local Agents or Tax Agents are also not examples of having a permanent establishment in Australia.
Income Tax FAQ
FAQ 1: My country has a DTA but no permanent establishment, is my company liable for Australian income tax?
No, you will not have a requirement to pay income tax or lodge income tax returns in Australia.
FAQ 2: My country has a DTA and a permanent establishment, is my company liable for Australian income tax?
Yes, you will only be liable for the Australian sourced income attributable to the permanent establishment. You will be required to lodge income tax returns each year.
FAQ 3: My country doesn’t have a DTA, is my company liable for Australian income tax?
Yes, you will be liable for all Australian sourced income. You will be required to lodge income tax returns each year.
Goods & Services Tax
GST will apply to everything that you buy and sell in Australia. There are some exceptions, but they are unlikely to apply to international Amazon sellers on the Australian marketplace.
There are two types of GST:
1. GST Paid:
This is the GST that you pay when buying products/services in Australia, as well as the GST applied when importing your inventory to Australia.
The good news is you get a credit for the GST that you pay.
- GST Collected:
When you make a sale on Amazon you will collect GST. All prices on Amazon are GST inclusive, so the price already includes GST. The GST amount is 1/11th of the GST inclusive price.
Each quarter you will be required to pay the net GST (GST Collected – GST Paid) to the ATO.
Registration for GST is required if:
- Current GST turnover is A$75,000 or greater per year. This is based on all supplies made, or likely to be made during the current month, and all supplies made during the previous eleven months.
• Projected GST turnover is likely to be $A75,000 or greater per year. This is based on all supplies during the current month, and all likely supplies to be made during the next eleven months.
If it is likely your turnover will be higher than $75,000 using either method, you should register for GST. The price on Amazon is GST inclusive, which means that you will need to take account of the GST Collected (being 1/11th of the sale price).
If your turnover is below A$75,000, you do not need to register for GST. However, you will not be able to claim back any input tax credits from eligible services.
Customs duty is predominately 5% of the value of the goods (depending on the tariff classification of the goods). Check with the Australian Customs Border Protection Service for more information regarding relevant duty rates for your goods.
GST is calculated based on the value of the goods + customs duty.
Business Activity Statement (BAS)
The Business Activity Statement is a statement of aggregate taxes collected and paid by a business. BAS is made up of GST, PAYG instalments, PAYG withholding, and other taxes. It is lodged on a quarterly basis.
XYZ Ltd sells 10,000 bags on Amazon Australia for A$7.00 (incl. GST) per unit. The bags were sourced from a supplier in China for A$1.80 per unit. Freight and shipping cost $0.20 per unit. Amazon fees amounted to an FBA cost A$3.00 per unit and a commission of 9% of sales.
|Amazon Australia Sales (10,000 units @$7.70)||$77,000|
|Less: GST Collected
($77,000 x 1/11)
|Less: Cost of Goods Sold|
|Cost of Product||($18,000)||($18,000)|
|Freight to Australia||($2,000)||($2,000)|
| Import Duty
($20,000 x 5%)
| GST on Import
($21,000 x 10%)
|FBA Costs @ $3.00 per unit||($30,000)||($30,000)|
|Amazon Commission @ 9%||($6,930)||($6,930)|
| GST on FBA & Amazon
|GST Payable to ATO||($1,207)||$1,207|
For a more detailed explanation, please see Dolman Bateman’s Amazon International Sellers Pricing & Profit Calculator.
Registration Requirements for a Foreign Company
When intending to establish a foreign branch in Australia for business operations, it is necessary to register a foreign company with the Australian Securities and Investment Commission (ASIC). Upon registration, the foreign company will obtain a unique nine-digit Australian Registered Body Number (ARBN), which must be displayed on the foreign company’s public document’s.
Register for ARBN:
1. Form 402:
Lodgment of a Form 402 is necessary to register as a foreign company in Australia. When submitting the application form, general information about the company and supporting documentation is required.
Lodgment of Form 402.
• A certified copy of your organisation’s current certificate of incorporation/registration.
• A certified copy of the company’s current constitution.
• Memorandum of appointment of the local agent or power of attorney in favour of the local agent.
Form 418 Memorandum of appointment of local agent
- Lodge the form with the fee and supporting documents:
The documentation must be signed by a director or secretary of the foreign company, or by the local agent. There is a fee for registering a foreign company with ASIC, the details of which can be found in the documentation for Form 402.
Once the application has been processed, ASIC will send you your ARBN and your registration certificate.
Appointing a local agent is necessary to fulfil obligations that a foreign company in Australia must meet. A local agent may also be liable for any breaches or penalties.
Should you set up an Australian Subsidiary?
An Australian subsidiary company is subject to pay income tax in Australia on its worldwide income, as opposed to a Permanent Establishment (e.g. foreign branch) which would be assessable on income sourced only in Australia. Both subsidiaries and permanent establishments are subject to the status of any DTA agreements with Australia.
Setting up a subsidiary company can be complicated and expensive for International Amazon sellers. We can help you to determine the right business structure for your Amazon business in Australia.
About Dolman Bateman:
Dolman Bateman Chartered Accountants specialise in helping Amazon sellers with tax, business structure, accounting and strategic business advice, and business sale.
We have over 300 Amazon clients (Australian & International sellers) ranging from multi-million-dollar sellers to people just starting out.
In order to properly understand our clients’ Amazon businesses, we started our own private label Amazon business. We have now launched 3 products and trade in Amazon US, Canada, UK, Europe and Australia.
Our detailed understanding of the Amazon environments makes us the ideal partner for your Amazon business.
Dolman Bateman can be your local tax agent, our Amazon expert accountants can help you with all your Australian tax needs as well as your international taxes.