Selling on Facebook Marketplace? The ATO might be watching

As more Australians turn to Facebook Marketplace and Gumtree to sell items and boost household income, tax expert Coco Hou, CPA and CEO of Platinum Accounting Australia, is warning sellers to be aware of their tax obligations. While many consider selling online as a hobby, the Australian Taxation Office (ATO) views any profit-making activity as taxable, whether you have an ABN or not.

“The ATO has made it clear that if you’re selling items to make a profit, rather than just offloading personal belongings, you may be running a business and that income must be declared,” Ms Hou explained.

Many people ‘upsell’ on Facebook Marketplace and Gumtree, purchasing items at lower prices and reselling them for a profit. While this may seem casual, the ATO considers this a business activity, meaning sellers may need to report their earnings and, in some cases, register for an ABN.

Hou outlines key tax considerations for Facebook Marketplace and Gumtree sellers.

Does income need to be reported to the ATO

“If you are trading on Facebook Marketplace, Gumtree or any other platform with the intent to make a profit then the ATO considers this type of activity and income derived from it as taxable income,” Hou said.

“In this case, you must report your income to the ATO each year as part of your tax return.”

Is Facebook Marketplace upselling a hobby or a business

“Many people consider upselling of items on these online and free marketplaces as a hobby. If this is done regularly and for profit, the ATO classifies it as a business,” Hou said.

Do sellers need an ABN

“Depending on the value of earnings over a 12 month period, you may not need to register for an ABN. If your earnings exceed $75,000 annually, GST registration is required. In this case, you will need an
ABN,” Hou said.

“The good news is that GST registration is a free activity. You do not need to pay a fee to get an ABN in Australia when you apply directly through the ATO’s online portal.”

Can the ATO track online sales on Facebook Marketplace, Gumtree and other sites

“While many people use fake profiles on these online trading and marketplace sites, the reality is the ATO sees a lot of financial data about you,” Hou said.

“It uses complex data-matching programs to track transactions on Facebook Marketplace and other online sales platforms and compares this with your financial activity.”

Ms Hou warned Australians to be cautious and ensure they discuss their selling activities with their accountant before tax time.

“If your bank account shows a constant stream of income that you can’t account for or expenses that appear to suggest that you are earning more income than you are disclosing, an ATO audit may follow. It’s better to be proactive and compliant than face penalties,” Hou said.

“If you are lodging returns showing you earn an average wage and yet you appear to have a new caravan or shiny car in your driveway, then people will start to wonder how you are achieving such an incredible accumulation of assets. The ATO’s dob in line is one of the busiest in the nation.”

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