GST for Online Sellers: What Every Shopify & Amazon Seller in Australia Needs to Know

If you're running an online store — whether through Shopify, Amazon, eBay, Etsy, or your own website — you're operating in one of the most rapidly changing tax environments in Australia. The ATO has significantly expanded its data-matching capabilities, the GST rules for e-commerce have been overhauled multiple times, and many online sellers are unknowingly non-compliant right now.

This guide cuts through the complexity and gives you the practical, accurate information you need to stay on the right side of the ATO.

The Basics: When Does an Online Seller Need to Register for GST?

The rule is straightforward: if your business's annual turnover is $75,000 or more (or $150,000 for non-profits), you must register for GST. This applies regardless of whether you're selling physical products, digital goods, or services.

The $75,000 threshold is based on total turnover — not profit. So if you're doing $100,000 in gross revenue but only making $10,000 profit after costs, you still need to be registered.

Low Value Imported Goods (LVIG) — The Rule That Changed Everything

Before 1 July 2018, goods imported into Australia worth under $1,000 were generally GST-free. That loophole has been closed. Under the Low Value Imported Goods (LVIG) rules, GST now applies to almost all goods imported into Australia — regardless of value.

Here's what this means in practice:

• If you're a dropshipper shipping from overseas suppliers directly to Australian customers, GST likely applies to those sales
• If you're an online marketplace selling imported products under $1,000, you (or the platform) must collect GST
• If you're buying goods from overseas suppliers for resale, how you handle the GST on that purchase matters

Marketplace Facilitator Rules — When Shopify, Amazon & eBay Collect GST for You

This is where it gets interesting — and where many sellers get confused about their own obligations.

Under Australian tax law, certain online marketplaces are classified as "electronic distribution platform (EDP) operators". When this applies, the platform is responsible for collecting and remitting GST — not the individual seller.

Critical point for Shopify sellers: Because Shopify doesn't collect GST on your behalf, you need to configure Shopify to charge GST on applicable products yourself — and then remit that GST via your BAS. Many Shopify store owners discover months later that they haven't been charging GST correctly, meaning they owe the ATO money they've never actually collected from customers.

GST-Free vs Taxable Sales — Getting the Rate Right

Not everything you sell attracts GST. Some categories are GST-free, which means you don't charge GST on those sales but you can still claim input tax credits on your purchases. Common GST-free categories include:

• Basic food — unprocessed ingredients, fresh produce, bread, milk (but NOT restaurant meals, confectionery, soft drinks, or snack foods)
• Health goods and services — certain medical devices and medicines
• Exports — goods sold to overseas customers and physically exported are generally GST-free (provided you have export evidence)
• Educational materials — certain types of educational resources

If you're selling a mix of taxable and GST-free goods (common for food and health product sellers), your accounting setup needs to correctly categorise each product — otherwise your BAS will be wrong.

Overseas Income: What's Taxable in Australia?

If you're earning income from overseas customers or overseas platforms, there are two questions:

1. Is the income subject to Australian income tax?

Yes — if you're an Australian tax resident, all worldwide income is assessable, including income from overseas customers, foreign Shopify stores, Amazon US, and international digital product sales. You must include this in your Australian tax return, converted to AUD at the applicable exchange rate.

2. Does GST apply to overseas sales?

Generally no — exports of physical goods are GST-free (zero-rated). However, digital products and services sold to Australian customers by overseas businesses do attract GST. If you're an Australian business selling digital products to overseas customers, those sales are typically GST-free as exports.

The ATO Is Watching — Data Matching from Online Platforms

The ATO has formal data-sharing agreements with major platforms including eBay, Airbnb, and Uber, and actively cross-matches this data against tax returns. The ATO's data-matching program identifies taxpayers who:

• Have not declared online selling income in their tax returns
• Have not registered for GST despite exceeding the threshold
• Have declared income inconsistent with platform-reported earnings

If you receive a data-matching letter from the ATO, respond promptly and seek professional advice. Voluntary disclosures (before the ATO contacts you) attract significantly lower penalties than discovered non-compliance.

Deductions Available to Online Sellers

Online business owners can claim a wide range of deductions. Here are the most commonly missed ones:

Inventory Tax Treatment — It's Not What You Think

Many online sellers think they can deduct the full cost of stock when they buy it. That's not how it works.

The ATO requires you to account for the trading stock opening and closing value. The formula is:

If you buy $50,000 of stock but only sell $20,000 worth this financial year, you can only deduct the $20,000 cost of the sold goods — not the full $50,000. The remaining $30,000 sits as an asset (stock on hand) on your balance sheet.

Setting Up Your Accounting Correctly — Xero for E-Commerce

Most general bookkeepers don't know how to connect Shopify or Amazon Seller Central to Xero in a way that correctly handles:

• Separating sales from platform fees (especially in Amazon's combined remittance reports)
• Correctly coding GST on taxable vs GST-free products
• Handling refunds and returns without distorting your BAS
• Foreign currency conversions and exchange gains/losses
• PayPal and Stripe reconciliation where funds sit in a payment processor wallet

We configure Xero specifically for e-commerce clients so your financial statements accurately reflect your business — and your BAS is correct every time.

BAS Obligations for Online Sellers

Once registered for GST, you'll need to lodge a Business Activity Statement (BAS) either:

• Monthly — if your annual GST turnover exceeds $20 million
• Quarterly — most small online businesses (turnover under $20M)
• Annually — only for very small businesses (turnover under $75,000 but voluntarily registered for GST)

Your BAS reports your total sales (G1), total GST collected (1A), and total GST credits on purchases (1B). The difference is what you pay (or receive back) from the ATO.

Do You Need to Register as a Business or Can You Operate as a Sole Trader?

Most online sellers start as sole traders, which is fine in the early stages. But once your revenue starts growing, the structure question becomes critical:

• Sole Trader — simple, low cost to set up, but all profit taxed at your personal marginal rate (up to 47%)
• Company — 25% tax rate (small business), more complex, but significant savings at higher revenue levels
• Trust — flexible income distribution to family members, asset protection, but more expensive to run

The right structure depends on your revenue, personal tax situation, growth plans, and whether you have a partner or family who can benefit from income splitting. We help online sellers model this and restructure at the right time.

Common GST Mistakes We See in Online Businesses

• Not registering for GST after crossing the $75,000 threshold (often by several years)
• Shopify store owners not charging GST on their products
• Claiming GST credits on purchases that include non-deductible private components
• Not keeping valid tax invoices for purchases over $82.50 (required to claim GST credits)
• Treating platform fees net of GST — you need the full invoice to claim the GST credit
• Not accounting for inventory correctly and overstating deductions
• Forgetting to include overseas income in Australian tax returns