For years, you have been knitting scarves for friends and received many compliments. Then the requests and commissions started flooding in, and the next thing you know, you’ve opened your Etsy store. Congratulations! As you expand your project, you’ll need to start thinking about the legal requirements associated with having an Etsy store. A common question for store owners is whether or not you need to apply for an ABN. This article goes through what you need to consider in working out whether you need an ABN for your Etsy store.
What is an Australian Business Number (ABN)?
An Australian Business Number (ABN) is essentially like a Tax File Number (TFN) for businesses. Other businesses use ABNs to identify your business.
With Etsy stores, the main thing that will determine whether you should get an ABN or not is whether you a running the store as a hobby or a business.
Do You Have a Hobby or a Business?
As your projects have expanded, it can be difficult to tell at what point your hobby becomes a business. If you are carrying on a business, you will need to pay tax on your received income. This means you may also be eligible for tax deductions on expenses made for your business.
To determine whether you have a hobby or a business, you should ask yourself the following:
- Do you intend to make a profit from setting up your Etsy store?
- Do you spend any money to have an online presence?
- Do you have regular sales?
- Are you selling your items for more than the cost price?
- Are you managing the store as if it were a business?
If you are answering “yes” to the questions above, it is likely that your Etsy store would be considered a business. You can see that your intention to run your store as an online business is a clear indicator.
Running a Business
If you are in business, you will need to apply for an ABN as you will need to be putting your income on your tax return. On the flip side, this means that you can claim tax deductions on items like supplies that you’ve spent on the goods that you are selling online.
Other Things to Consider
If you are just starting out, it is possible that your income will not exceed $75,000. However, if you find that your annual income is $75,000 or more, you will need to register for GST. You will need an ABN to register for GST.
Also, bear in mind that if you are trying to get a .com.au (Australian domain), you will not be able to do so without an ABN.
If you are still unsure about whether you need an ABN, please get in touch with us! We can chat through your legal requirements for running a business and the legal documents you may need.
Questions? Call us on 1300 544 755.