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Thread: Payment Gateway - Tax Implications

  1. #1
    Join Date
    Oct 2007

    Question Payment Gateway - Tax Implications

    I was wondering what kind of tax implications the following scenario would have:

    1. I have an online business which provides a service (anyone can deliver a package from A to B);
    2. The receiver uses the service and pays in for it using PayPal ($10)
    3. My business receives the payment in its PayPal account, I charge a fee ($1)
    4. I transfer the rest ($9) to the PayPal account of the person who delivered the package.

    In this scenario, how can I declare my tax? Note that the person who delivered the package won't provide me with any invoice. How can i consider only the $1 I kept as the income?

  2. #2
    Join Date
    Nov 2013
    New Zealand


    Yes - that $1 would be income. So depending on your profit you may need to pay tax on it or you may not.

    I would declare $10 income, $9 expense and $1 profit. You could just keep the paypal receipt as proof of payment to the other party.

    The main question I have in my mind if you are handling money on behalf of someone else that makes you a financial service provider (FSP). You might like to see -

    The rules in there can be a bit tricky to navigate but essentially you just need to pay some $'s and have a disputes resolution scheme (DRS) in place . Those both will cost you around $3k to complete.

    Generally speaking financial transactions are GST exempt. However - if you are providing a service then it might not be. You need a good written advice from an accountant on this.

    Also if you are handling $'s on behalf of someone else and it is deemed a financial transaction you will also need to complete Anti-Money Laundering compliance too!

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