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Vendors vexed as eBay dobs in its GST dodgers

Jodie Nitschke had no idea she had to charge GST selling perfume and skincare via her online business until she read that eBay had divulged financial details of its sellers to the Australian Taxation Office, which is cracking down on GST compliance.

“It was more of a hobby than a business,” Mrs Nitschke says. “I am running it at a loss and did it for a bit of fun. I had no idea I had to charge GST on all my sales.” While she intends to register her business for GST, she is having second thoughts about continuing with her loss-making enterprise.

Her eBay business – jay-bee76, which sells Givenchy, Christian Dior and Ralph Lauren fragrances as well as Clinique and Estee Lauder skincare – turns over between $60,000 and $70,000 in sales a year. Started two years ago, the mother of a seven-month baby from Adelaide holds down a full-time job as a scientist.

“I’m not very good at tax, GST and things like that. And with eBay doubling their fees last year, I really don’t think it’s worthwhile continuing. I pay eBay between $1500 and $2000 a month. I do all the packaging at night when my son is asleep and my husband keeps telling me to give it up because it’s not worth it.” But Mrs Nitschke still gets a buzz selling perfume at half the price that department stores charge and with the little extra money she makes, she buys herself something special – on eBay.

EBay has about 5 million members in Australia, of whom about 17,000 earn their primary source of income there. Another 35,000 people get their secondary source of income from selling goods online. They include mums who sell the odd item after clearing out their homes to fully fledged businesses which turn over more than $100,000 a year.

EBay declined to reveal the number of businesses that turned over more than $75,000 a year in online sales, making them liable for GST. Most online businesses that are registered for GST say the ATO’s crackdown on GST dodgers is a good move because it makes for a level playing field.

“There’s no excuse for ignorance,” says Gina Reali, who operates an online nail accessory business, BMNE-Direct. “I know of at least two to three sellers in the nail business which are turning over more than $75,000 a year and are not paying any GST. They undercut prices by between 10 to 15 per cent, which has forced us to lower our prices. It’s a vicious circle. But we are running a business, not a charity. I think it’s a very good move that the ATO is weeding out these businesses.”

Scott Bibby of Heavenly Perfumes agrees. “Online sellers who are not paying GST are undercutting the prices of legitimate businesses which are paying GST,” he says. “We have nothing to be worried about because we are registered for GST. I absolutely support the ATO’s investigation as I know of several GST dodgers who are selling fragrances on eBay.”

Based in Adelaide, Mr Bibby started his online perfumery business on eBay two years ago and is gradually shifting his business to his website because of the high fees eBay charges.

Besides a listing fee of between 30c and $3.50 for each item listed, eBay also charges a percentage of the final selling price. This is on a sliding scale of 5.25 per cent for sales up to $75, an additional 2.75 per cent for sales between $76 and $1000 and another 1.5 per cent for sales above $1000 each.

“I’m looking to scale back my business on eBay. While it is a good place to start an online business, it is not going to make me a millionaire,” Mr Bibby says.

But most mums find eBay a convenient medium for running their online business from home. Mother of three, Donna Kelly often gets Heidi, 16, Eddie, 12 and Frankie, 8 to lick the stamps or stuff envelopes with children’s T-shirts.

“I sell between 20 and 40 designer T-shirts a day and my kids often help me out by getting the packages ready for posting.” She started her online business more than three years ago and makes 100 per cent profit on toddlers’ T-shirts sold for $30 each – excluding postage of $3.95. She turns over about $100,000 in sales a year.

“I first started on eBay when I bought a three-pack ink cartridge for $40 and sold two of them for $80. I thought this was a nice little mark-up and that’s how I started my business.” She admits that she is addicted to online selling and has made many cyber friends.

“I’m off to Melbourne this weekend and will meet many of my cyber friends at a power sales convention. I love it, I don’t have to deal with customers directly and I can sell even in my sleep. I run the business on my own. The children sometimes help out by sticking stamps on the envelopes. But I’m not greedy. The extra money I earn gets to pay some of the bills at home – like my daughter’s orthodontist fees.”

Melbourne mother of three, Danielle Walker started her skincare online business, Designer Beauty, because she was bored looking after her young children. “I was getting stir crazy at home so I decided to sell discontinued lines of skincare by importing them direct from the US,” she says. Her business now turns over about $100,000 and helps pay for child care and the family’s car loan.

March 17 2007, The Australian


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