Category: Reseller Tax Theory

January Summary 2020

January 31st, 2020
The Overview

Welcome to the first Reselling January 2020 summary. This year’s going to be epic.

Straight up if you have read these summaries in the past you will immediately notice a difference in how the figures are presented. I’ve spent a bit of time massively improving some internal systems which as an added bonus spit out these nice summary figures which can be tailored to analyse a number of different business aspects.

In the Year Of The Turtle post regarding goals I had left things somewhat vague other than a minimum listing target. After creating the reporting dashboards I decided to set up my own personal scorecard and give myself a grade each month. For now the grade is based on the overall goal to pay off my investment property in 5 years or less, after which the rent proceeds from this house should allow me to take things semi full time while allowing epic amounts of time with bubba.

Realistically I need at least $1000 net each month to be applied across to the investment loan. To succeed fully this will need to be even more but I have five years and this seems like a great place to start.

So therefore for 2020 the score card will be set like this with totals for the month:

$500 or less: D – Colour Red. If I end up here for the month I probably stuffed something up badly like overspending on either inventory, other expenses or subcontractor costs.

$500-$1000: C – Colour Orange. I would call this range the OK range, not great but towards the top end heading towards the $1000 mark is close to where I’m gunning for.

$1000-$1500: B – Colour Yellow. Minimum target met but a little bit like a B at university, have put in some solid work but could still be improved upon.

$1500-$2000: A – Colour Green. At this level consistently the goal will be easily achieved and ahead of schedule.

$2000+: G – Colour Gold – A throwback to the primary school gold stars. Above this level for this year will make me very happy.

All of the above will have either a + or – added to the grade as well to define which side of the range the result sits on. For example a C- would be $500-$750 where as a C+ would be from $750-$1000.

Also to note is that the total net figure will also include recovered cost of goods sold. I have already outlaid thousands of dollars over the last year and a half on inventory, it Is time now to recoup some of my initial investment here and move it across to the investment property.

So without further ado, behold, January’s figures:

A couple of notes:
- The store value and total listings is compared against October 2019 values as I did not calculate Novembers and Decembers due to time prioritisation commitments with the new bubba.
- The other business expenses for this month are definitely out of the ordinary and include additional shipping associated with the bush fire relief (covered further below) and the purchase of a couple of office supplies including a new desk. All tax deductions of course.
- I am aware that this is 30 days and that January has 31 days, this for me is a rolling scorecard and at the moment I don’t feel like I am deriving any extra value from spending the extra time to go back an modify formulas for one day. If anything the results will always be a little better than what is posted.
The Magic of Tracking

This month I started logging time in the interest of continual business improvement. I think it will be very useful to be able to reflect where tweaks could be made to improve profitability or identify potential time sinks in all areas of the business. Indeed there was an interesting discussion on The Australian Resellers group page recently on just this question – What defines a part time seller?

This month across all aspects of sourcing, listing, packing and shipping I have spent:

28 hours for the month which equates to 7 hours per week which in my view is definitely part time.

Sales Update

It was a very slow start for January, closely I suspect (hope) due to lack of free available funds by many people contributing towards the ongoing bush fires.

Looking back against Jan 2019s figures of $723.15 net on 30 sales against 421 listings with a total listed value of $15889. The Jan 2020s results have been, in contrast, quite average considering I have just popped over 1000 active listings with more than double the total store value.

However, considering that I sold 0 high value items, (that is anything over $100) for the entire month I guess I should actually be pretty happy with this result.

Another factor which may have played a part could be the non-existent listing in December effectively flowing through into early January.

A Failed Sales Run

Tried to run a store sale with a rule, 15% discount on all orders over $40. This would have been my largest sale dollar amount to date and after I created the Sale + Markdown event only 1 listing showed in the sale initially! I check back 2 days later and there were 7. Well below the 326 that should have been in the sale…

I actually followed this up via an eBay chat and was informed that, if the same items were in the previous sale that has just ended then they would have to wait 5 days before being automatically added to the new sale… My previous sale had been 8% storewide so this was definitely true.

Something to keep in mind for future sales.

Changing The Store Name

I finally got around to changing the store name and updated the cover and icons with the new icon set. I’ve listened to Pure Hustle Podcast a lot and distinctly remember them saying with their interview with Sell Quick Ship Quick that it wasn’t a good idea to make huge sweeping changes across the store. Sure enough there was a slight lull but picked straight back up afterwards.

Business Fun For A Great Cause

It was my great pleasure along with the support of my wife and good friend from work that we were able to support 2AussieThrifters and their live YouTube bushfire donation fundraising event with a painting and drawing respectively being put up for auction and raising over $300.

This took place on the 12^th Jan 2020 over several hours and featured fellow resellers live from around the world coming together and offering their own items up for auction on the live stream with all winning bid amounts being applied to one of 3 different charities, all of which are directly involved with the ongoing bushfires across Australia. Together as group the total raised was a massive $12,000+ for the cause.

You can see the replay on the YouTube link below, skip to 4 hours 35mins 30secs to see my appearance along with my beautiful wifes Painting and friends drawing.

Skip to 4 hours 35mins 30secs to see my appearance along with the beautiful Painting and drawing.

January Business Improvements

A reorganised packing station is working well, being able to find things easily unsurprisingly leads to improved efficiencies with packing and shipping times.

Buying stamps in bulk has led to some notable improvement with time savings by not having to go into the actual post office.

Setup a new tracking system for the business which will pay dividends in both visualisation snapshots of the business and record keeping for both analysis and tax purposes. I’m still tweaking various workflows but am pretty happy with how it’s come together. Come tax time I will be able to have everything for the year organised very easily which will be in sharp contrast to last financial year where it took hours to get everything organised.

Previously providing the monthly updates were quite time consuming, with the way the tracking system is setup now I can get a snapshot at the months end accurately and extremely easily. All of the figures you see in this months report are from the dashboard of this system.

More on this system later in the year as I believe it could really help others across a number of different areas. Will spend the next few months with further testing and making it even better.

Finally got around to completing the business cards and getting them printed. One afternoon I was, for want of a better word, inspired and just sat down and smashed the whole design out. 2 sided, gloss finish, 100 cards for just under $40 delivered. One side with the usual stuff like logos and contact details, the reverse with a segmented list of reselling items I’m looking for. As previously written about I know most of the local managers, I cannot really see any downside to handing these out, especially when I already have so much stock on hand. Lets see how much sourcing comes to me over the next 6 months. The cards themselves came back from the printer and the text was slightly blurry due to the font sizing. Not totally unreadable but needs fixing for the next run.

So far I have used them twice, one when talking to a staff member in a Vinnies and the second time I handed one to a guy I know quite well at a local Salvos. I am being super selective where handing these out. I think its important to make sure those relationships are firmly established before attempting this. One of the reasons for starting to actually roll this out is that after some reflection it is becoming increasingly clear that sourcing from some of these larger chain stores is becoming an inefficient use of my time. If I get a couple of calls in 6 months about this it will be worth it I am sure. Guess will see how it pans out.

Also it is critical to note that I am NOT doing this at all at the local “honey holes” I spoke about during my 2020 plan, the items I find at those shops are already awesome and cheap to boot. Don’t shit where you eat.

Sourcing Theory

Well this area was supposed to be non-existent, as previously stated I have heeeeaps of items sitting in the death / money pile. But like many a reseller, I broke my own rule and took some sourcing opportunities where they were effective use of my time.

I had a small mission on December 31^st 2019 which was actually quite fun as the stores were empty owing to New Years eve. I recommend going sourcing on this day, staff were friendly, places were empty. Thoroughly enjoyable. In my mind this was technically still 2019 so I wrote this off as my last hoorah at the time.

The remainder of January featured some truly selective sourcing. The following are about as efficient and effective as I think I could possibly get (aside from digital sourced with delivery). I spent a grand total of $157 on a massive 115 items in only 7 hours. This is part time sourcing truly at its best. I estimate there’s easily well north of $700 in value.

Opportunity #1

I had to visit the local tip one weekend on the direction of my wife. Whilst there I took the opportunity to peruse the tip shop they have as this required no extra time to do so. I actually left my wallet at home thinking I wouldn’t need it, always the way. After quickly looking around I came across a good condition Gilbert Rugby body armour set and several vintage PC games. I’m guessing someone had thrown out a big box of these and the guys at the tip had rescued them. Anyway, I had $10 in my pocket, so when I walked up to one of the guys and said how much for all this? I was fully expecting to have to put a few things back. Today was my lucky day however and $10 took it all including over 20 vintage games (all later determined in good condition aside from a couple of broken cases, 1 was a bootleg), the Gilbert gear and a vintage QLD drink holder from the 70s, 80s or 90s (determined from a combination of the phone number and the use of Golden Fleece on the holder (a vintage petroleum brand). For a visit that had to happen (going to the tip), I was very happy to walk away with well over $400 worth of resale value (20x$20 games, excludes the drink holder and Gilbert Rugby Gear). So far I have sold one game for $20 and the drink holder for $45. Well into the money here.

Next time I’m bringing more cash money.

Opportunity #2

I finished work one day having to go to a shop to buy some items (work related). It was on the way home and literally around the corner was a clearance outlet, less than a 1 minute drive.

20 minutes spent and came away with a couple of tennis shirts, 3 hats (including 2 Guinness flat hats) @ 50c each, and 5x 8 Track Tapes! These blew me away, first time I have seen them in physical form – ever. Anyway they don’t appear super valuable but should return an easy $10 profit each. I cherry picked the best 5 of 10 available.

Opportunity #3

The day job resulted in a reconnaissance mission down south through some country towns. Conveniently through towns I have been meaning to get to for a long long time as obviously being so far out, fellow resellers are in much lower numbers and therefore potential treasure likelihood increases.

I utilised my lunch break to peruse a couple and was not disappointed coming away with some bread and butter items along with a couple of gems such as an ACME Sydney 2000 hat and a Pokemon 1996 Bum Belt Bag (Fanny Pack – American). Prices were very reasonable to boot.

Opportunity #4

I wrote about my local “go to” Op Shops in my 2020 goal post The Year Of The Turtle. One Saturday I needed to get out of the house and have some introvert time alone to recharge. After a 5 minute drive I was happily browsing through a shed full of books on a “fill a bag for $5” mission. They also happened to have some bags handy so I found an oversized tote and set to work filling it up. After I had found all I thought would be useful I went inside only to be told that they were closing in 5 minutes. I quickly managed to find 2 pairs of shoes.

For 32 items I spent a grand total of $12.50 which included a $4 extra donation which was all the change I had in the utes centre console. There may have been some other treasures hiding in here as I actually ran out of time when the shop closed at 13:00pm…

Opportunity #5

On a Sunday there was a garage sale less than 100m from my house. I scoured my entire house and could only manage to find $4 in loose change. I considered not going as what could I possibly get for $4? However as it was so close I thought why not. I was pleasantly surprised with the prices when I arrived and I ended up buying my first ever NERF item, an elite pistol with a large supply of ammo. This had $4 on the bag when I saw it so I thought yes I can probably make $10 from that. As I went to pay for this however I spied a Magic The Gathering logo at the bottom of a stack of puzzles. This turned out to be a Plainswalker Board game and had $2 on it! Now I was torn as I now had to get the game but still wanted the NERF gear. I asked the lady if she would take $4 for both and she said yes…Cha Ching.

Listing Theory

Began working through the death / money pile, spending the first couple of weekends of January heavily hitting taking photos for mainly books and media. It’s a good feeling to finally begin to at least start to get on top of it, particularly when it’s obvious there’s literally thousands of dollars sitting there ready to be sold.

My goal for the moment is simply to list more than 3 items per day on average and 5 per day as the stretch target. I’ll be honest I still struggled with this for most of the month but got pretty close to the stretch goal at 4.93 average per day. Finding time, an hour here or there can prove extremely difficult with the little one. It basically needs to be when she’s asleep so I don’t miss out on the magical life events.

I came across on Daily Refinement’s Insta feed an interesting poll that was run about listing which gave a nice summary breakdown, obviously the sample size is a little small.

I could list over 50+ items per day if I had all the photos ready and did nothing else for 10 hours straight – no interruptions. This little screenshot got me thinking what might be possible on a full time basis. I think I could achieve 30 listing per day on average and without burnout (which is a key consideration). This is based on 3 hour window of a larger 6 hour window. The other 3 hours being for sourcing and photos etc… Could work. Not really applicable for the next few years but interesting none the less.

Problem Childs

Had a couple of low balling peanuts and stupid offers this month.

Had a lady buy a spoon only to send me a message asking if it had been used (listing was for used). Then afterwards sent me a message asking for an additional 50% off as it was used. Cheeky, then she spammed me with messages to cancel the transaction after I said I would be cancelling it!

One to add to the block list for sheer entitlement. Super annoying that this costs me that PayPal fee for interactions such as this.

Thankfully, that was the extent of negativity this month.

Health Update

A new addition for these summaries but I am serious about getting my health in order this year after letting it go over the last couple. Afterall what good is making lots of money reselling if it destroys your health and relationships.

There’s a lot of data around about the increasing costs of healthcare as you age. I am looking to find ways and methods now to stave off poor health and disease later. Ideally I’d like to live past 100 with relative good health all the way. After all I have a little bubba to care for now. She is great motivation for getting my ass into gear.

The below chart illustrates some average costs by age group in USD for generic spending and also in relation to some common illnesses / diseases.

Its plain to see that the longer one can prolong exposure to age related disease the better from both a health AND a financial perspective.

So where to start then?

My initial goals are:
- Eat Better.
- Exercise More.
- Sleep Better. I have already posted about sleeping better here.
- Lose 20kgs for the year which is the first time I am documenting this number. This will take me down to 76kg a weight of which I have not been in over 10 years. So Starting weight of 96kgs.
Weight however, is not the primary focus, its about eating healthier, exercising effectively, spending more time with loved ones and living longer, the weight loss is a bonus from the process but a useful metric (one of) to be able to track.

For the month of Jan I lost 6.36kgs, yes 31.8% of my total goal already and not a bad way to kick things off, but a lot of that will be water weight and results from here on will slow to a crawl.

How?

The Keto Diet and 100 Pushups Per Day, that’s it.

The books I have read this month in relation to this are specifically are Genius Foods by Max Lugavere and Beyond Training By Ben Greenfield.

I expect the next months progress to be much slower obviously but this is a great start with some rather unexpected benefits resulting in a Reselling Secret Weapon, more on this in another post soon.

Plans For February

A new side project. January also birthed an idea for a Merch side project which I will be working on that relates to the reselling world. This will appear on my Insta feed (and here) when available. Might roll into March depending on supplier shipping.

Consider scheduling additional 3 day weekends with accrued annual leave, perhaps once a month where a single day can be dedicated to getting as many items listed or photographed as possible. I was actually doing this over a year ago before we received the news about the bubba whereby I then immediately began hoarding leave. These 3 day weekends are great to get focused blocks of work done whilst still feeling like you have a weekend!

Increase exercise for the Health mission, specifically adding a minimum of 20 Burpees to the daily routine in additional to the daily 100 pushups.
Reseller Tax Analysis 2019

August 3rd, 2019
Disclaimer: Any words assembled below into sentences within this post constitute general information only. For advice specific to your own reselling journey consult a registered tax professional. Also: Be 100% accountable (pun intended) for your own tax obligations and do your own research.

2019 RESELLING AS A BUSINESS

These concepts relate to Australian based resellers.

When I first decided that I wanted to elevate reselling from a hobby into a part time business or side hustle that supplements my current 9-5 I knew I would be writing this post at some stage. I have been looking forward to it actually. Why? Well, I feel like I have read a disproportionate amount on the subject of taxation over the years (I like money theory what can I say) and I have also noted the absence of this discussion in the reselling space.

Some don’t take the subject of taxation as seriously as it should be. I get it – It’s tax. It already has the stigma of being boring and mundane it it is also critical to maximise business advantages (such as paying tax last – post expenses). In many ways this is the business of my dreams, imagine being able to load up the car, drive 500km over a week, stopping at all the small op shops you are ever get to, staying at some nice Air BnBs and as long as you pick up a few items along the way to resell being able to claim the whole trip as a business expense. This is my eventual plan one day as I transition to part-time work and more full time reselling. My point is that understanding of taxation can actually markedly improve your life, particularly with this business that involves a lot of travel.

I thought I had a reasonable way of tracking items and certainly I have been able to keep a close eye on the cash flow of this business. As always however, I look to improve processes and practices as I better understand them. Seeming as this business was growing at a steady pace I knew that I needed to become better organised to have any chance of scaling one day in the future.

To this end I collated some questions and put them to an accountant for some feedback. They are somewhat generic but should give a broad overview of some ways to meet tax obligations and also some possible ideas of some tax deductions which may apply to this type of business legally.

The more knowledge you can accumulate on tax issues the better questions you will be able to ask your tax professional relevant to your own personal situation.

TRACKING THE COST OF GOODS SOLD

This items was where I needed the most clarification for my own business.

I was already tracking the costs of my purchases with all receipts. Every time I purchase items I take a photo of the receipt and once I return home it automatically uploads to Google photos. Later I will enter incoming inventory into my spreadsheet with its cost. If I have multiple items to sell with one cost, for example, a bag of 10 magnets I will sell individually, I will simply divide the total cost by the amount, so if the bag cost $2, individually each magnet is 20c.

I was also diligent in recording the cost of each item that had sold over the last financial year, which was lucky as my eBay sales report has been broken for the last month not showing the correct figures which eBay is still looking into. I may have been overcharged hundreds of dollars… more on that another time.

The other critical item to track is the cost of the stock on hand of the inventory. I didn’t really have this covered as well as I would have liked and this resulted in a large amount of time to go back through and work out the cost value of almost 800 items that were listed… and the death pile…

Still, I now had the knowledge I needed to move forward here and make some adjustments to the spreadsheet I am using and to processes moving forward.

One last point I asked about was tracking of those cash sales that have no receipts, for example, garage sales. The accountants reply was to record this using a ledger type system. So if using cash, they suggested on Friday go and get $200 out from the ATM, buy all the items from the garage sales over the weekend and then redeposit the balance back in on the Monday. Sounds simple in concept but creates some painful time issues also. Anyway the point is there needs to be an opening and a closing amount on the ledger. I suppose you could do this with a separate business account as well with digital transfers which would be the same, transfer money out to a different account, take out the cash, buy items, transfer left over remaining balance back in to business account. This way removes the need to go anywhere near a bank to deposit money!

TRACKING BUSINESS ITEMS

Q: Do you have a recommendation of an accounting app or software for people using eBay or PayPal or for this type of business? What is the easiest format from the Accounting side of things? What do you actually need or how would you like this laid out? What MUST I have on a spreadsheet?

A: An accounting system we recommend to all our clients is Xero. Xero is an online accounting software that has many applicable features which will assist with your inventory tracking. Xero enables you to track your inventory you purchase. From here you will be able to assign unit price, quantity, account code, tax code (making BAS preparation simple) and provide a description. This may be something to consider if you are buying bundle a of goods with specific amounts.

Xero will also allow you to track the sale side of the business . When you raise an invoice for the inventory sold and send to the customer, Xero will recognise the double entry. As Xero has a live paypal feed, this will allow you to reconcile the sale when cash hits your paypal or bank account.

Xero’s features will enable you to track your inventory purchases and raise sale invoices once you sell these goods.

**I followed this response up by considering the cost of Xero for my own requirements and decided that at this point in time I could not justify the cost, and therefore asked the following question**

Q: How about a Spreadsheet? I am already using one.

A: An accounting software such as Xero is a much more practical and effective method at tracking inventory but that is not to rule out your spreadsheet.

If you are opting into a spreadsheet, what I would recommend is tracking your inventory purchased, purchase price, total value of the inventory as well as a running balance of inventory. Once you have sold that inventory on hand, raise the sale and update your inventory sold in the same row but different column. Essentially showing the cost of sale (expense) and sale (income). As well as recording all other expenditure such as packaging, eBay and platform fees, posting and other material expenses.

**I took the opportunity to review and massively upgrade the spreadsheet I am using. I now also track Return On Investment (ROI) and also now tracking Gross profit per hour. That is, what is the equivalent hourly rate I am effectively making once time is factored in. This has been most useful in determining what items I should pay more attention to and where I can continually improve. I will make this spreadsheet available in the next week or so.**

GST

Q: At what point do I need to think about registering for GST?

A: The point at which you will need to consider being registered for GST is when your reselling business reaches or is expected to reach a GST turnover (gross income minus GST) of $75,000 or more. Your GST turnover is your gross business income, excluding the following:
- GST included in sales to your customers
- Sales that aren’t for payment and aren’t taxable
- Sales not connected with the reselling business
- Sales not connected with Australia
Q: Do I have to do Qtrly BAS Statements? Or IAS? Or does this only apply once registered for GST?

A: When you initially register for GST you will be able to report GST in two ways:
1. Annual GST return
  - An annual GST registration is where you pay you quarterly GST in instalments with a full reconciliation done at 30 June, where you will either be liable to pay extra GST or entitled to a GST refund as you have overpaid your instalments.
2. Quarterly BAS’
  - Lodging quarterly BAS’ is based on the actual income and expenditure incurred for that quarter, reporting the GST you both collected and paid in relation to your reselling business. As mentioned earlier, using Xero will automatically track your GST obligations.
IAS (Instalment activity statement) will not be applicable if you do not have any employees withholding wages.

DEDUCTIONS

Q: What items should I be looking to legally deduct for this type of business?

A: Expenses you should be looking to legally deduct for this type of business is any expense you have incurred to produce that income.
- Car travel used to source items
Two approaches you may take for claiming your car to source items:
1. Cents per Kilometre method
  - This method is a single rate used allowing you to claim a maximum of 5000km. You will be able to claim a deduction for the business kilometres you travel.
2. Logbook method
  - Claim the business-use percentage of the ongoing running expenses. This is includes fuel, registration, insurance and decline in value of motor vehicle. For this to be applicable you will need to keep a logbook of your odometer readings for a 12-week period detailing your business and private usage.
At year end we will calculate which method provides the best tax outcome and apply accordingly.

Computer and the Internet

Eligible to claim the business percentage of depreciation for your laptop and total internet bills.

Packaging Materials

Packaging expenses you may claim as they are expenses incurred as a result of reselling your goods.

Postage

Postage expenses you may claim as they are expenses incurred as a result of reselling your goods.

eBay and other platform fees

eBay and other platform expenses you may claim as they are expenses incurred as a result of reselling your goods.

Q: I’m currently doing this from my main residence. The physical storage of these items takes up almost an entire bedroom now. Can I claim power, etc…? What options are available here and tax implications of doing this?

Dedicating a specific room of your main residence for your reselling business you may claim the following:
- The cost of the rooms utilities such as gas and electricity. This must be apportioned based on the hours of business and private usage.
- Decline in value for the plant and equipment used such as any storage platforms / desks used to store your inventory, decline in value for any other capital items in that storage space (e.g curtains, carpets and light fittings), costs of using your home computer this will need to apportioned accordingly to your business and private usage.
- Occupancy expenses such as your mortgage interest, home insurance, council rates and other expenses you incur from your main residence. This will need to be apportioned too, a reasonable way in which we can determine how much you can deduct is working out the floor area of your storage room in proportion to your whole home (floor area or storage / floor area of whole house = deductible percentage). However, this does attract CGT implications, reducing our main residence exemption. See below:
Tax implications

Normally if you sold your main residence you will not be liable for any capital gains tax. However if you choose to claim the above mentioned expenses, you will be liable for capital gains made for that area of your main residence used to produce assessable income.

For example – You make a capital gain of $350,000 when you sell your main residence, the floor area used for your inventory storage was for 1 year of the 10 years you owned your main residence, the floor area for your storage is 15% of your house.

The capital gain you will liable for is (Capital Gain x percentage of the time storage was used at your main residence x floor area of storage room) = $350,000 x 10% x 15% = $5,250.00 assessable income.