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Kian

Affiliation/Commissions - Looking for feedback, ideas, suggestions

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¬†@Ithiel and @kyli13 I need your help¬†ūü§Ē Can you confirm me that the flowchart is correct?

abn-diagram.thumb.png.77804c34ac9fd122e65914d8447cb217.png

Moreover I have one more question. Let's suppose that an affiliate has a commission of 100$. When you say you want an RCTI "GST included", which one would be correct?

  1. GST Exclusive. RCTI with "Commission 100$" as invoice item plus 10% GST (10$). The total amount of RCTI would be 110$
  2. GST Inclusive. RCTI with "Commission 90.91$" as invoice item plus 10% GST (9.09$). The total amount of RCTI would be 100$

 

 

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Just now, Kian said:

¬†@Ithiel and @kyli13 I need your help¬†ūü§Ē Can you confirm me that the flowchart is correct?

I do love a good flowchart! Yes, that is correct. 

Please keep in mind that for "Statement by Supplier OR <$75 AUD?" (per https://www.ato.gov.au/forms/statement-by-a-supplier-not-quoting-an-abn/), this relates to the payment... So even if they were receiving $5/month commission, if that built up to $80 and they wanted to withdraw it all at once... the payment would be over $80, so if they're an Aussie without an ABN, they'd need to have supplied a Statement by Supplier or be hit with the 49% GST witholding.

 

Regarding your question...

Scenario: A product is sold by a GST-registered seller for $1100 Inc. GST (meaning $1000 + $100 GST) and the affiliate makes a 5% commission.

  • 5% Commission is calculated off the Ex-GST Amount (0.05 * $1000 = $50 commission).
  • If "Credit Note without GST" scenario, the commission awarded to the affiliate is $50 (No GST)
    • If they sell this product 5 times, their total commission is $250 (No GST).
    • When requesting a payout, they would receive $250 and a¬†Credit Note that makes no reference of GST
  • If seller and affiliate both have an ABN and are both registered for, the commission awarded to the the affiliate is $50 + $5 GST
    • If they sell this product 5 times, their total commission is $275 Inc. GST ($250 commission + $25 GST)
    • When requesting a payout, they would receive $275¬†and an RCTI listing $250 commission, $25 GST, total $275¬†Inc. GST.

Similarly, in your scenario, assuming that the $100 you reference commission was calculated off the Ex GST amount, the answer would be #2.

An affiliate gets "paid" extra money if they're registered for GST, but they don't get to keep the extra bit as it goes to the ATO (tax office) :-)

 

Scenario 2: Another product is sold by a GST-Registered seller for $1000 GST-Free, because it was not a GST eligible product (some things are GST exempt),  and the affiliate makes a 5% commission.

  • 5% Commission is calculated off the Ex-GST/GST-Free Amount (0.05 * $1000 = $50 commission).
  • If "Credit Note without GST" scenario, the commission awarded to the affiliate is $50 (No GST)
    • If they sell this product 5 times, their total commission is $250 (GST-Free).
    • When requesting a payout, they would receive $250 and a¬†Credit Note that makes no reference of GST.
  • If seller and affiliate both have an ABN and are both registered for, the commission awarded to the the affiliate is $50 GST-Free (must reference that there was no GST)
    • If they sell this product 5 times, their total commission is $250 (GST-Free), from¬†$250 commission + $0 GST.
    • When requesting a payout, they would receive $250 and an RCTI listing $250 commission, $0 GST, total $250 GST-Free.

There was no GST collected, so no GST is to be paid to the affiliate, but you need to still mention that.

 

Scenario 3: Two products were sold by a GST-Registered seller. One for $1100 Inc. GST, the other for $1000 GST-Free,  and the affiliate makes a 5% commission.

  • 5% Commission is calculated off the Ex-GST/GST-Free Amount (0.05 * $1000 = $50 commission, 0.05 * $1000 = $50 commission).
  • If "Credit Note without GST" scenario, the commission awarded to the affiliate is $100 (No GST)
    • When requesting a payout, they would receive $100 and a¬†Credit Note that makes no reference of GST
  • If seller and affiliate both have an ABN and are both registered for, the commission awarded to the the affiliate is $100 + $5 GST
    • When requesting a payout, they would receive $105¬†and an RCTI listing $100 commission, $5 GST, total $105 Inc. GST

Where GST is collected, it must be paid proportionately to the affiliate. When no GST was to be collected, no GST is to be paid. When its a mix, they just get their bit of the GST for the bits that incurred GST. 

Source: https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Travel-and-tourism/GST-and-international-travel/?page=6

 

Summary:

  • When issuing an RCTI, you need to include the extra 10% for any products that were sold Inc. GST
  • As the RCTI needs to list the commission, the GST, and the total. If some commissions incurred GST and others didn't, they would need to be listed as separate line items on the RCTI.

Using this as a rough guideline (https://www.ato.gov.au/assets/0/104/694/815/f3b7bc3a-d97f-481d-ade4-464e7d6df32e.pdf), it would be laid out something like this:

  • Commissions | $50 | $5¬†GST | $55 Inc. GST
  • Commissions (GST-Free) | $50 | $0 GST | $55 GST Free
  • Totals: $100 | $5 GST | $105 Inc. GST

 

In case you're wondering when products/sales aren't subject to GST...

  • If I normally sell my hosting for $11 Inc. GST / Month,
    • Someone in Australia will¬†pay $11 Inc. GST, so a GST-registered affiliate earning 5% commission would receive $0.55c Inc. GST.
    • Someone in Europe will pay $10 (GST-Free), so a GST-registered affiliate earning 5% commission would receive $0.50c (GST-Free) Commission.
  • Even if my web hosting server was in Europe, as my business is registered in Australia, whether I charge GST for a GST-applicable product depends entirely on whether "the recipient of the service is outside Australia".¬†
  • There are also products that are simply exempt from GST, but it's the sellers responsibility to configure their products accordingly.

 

Hope that helps!

Legal: I am not an accountant - please do not treat this (or any other post here) as personal financial or accounting advice. This is simply me describing this mess as best as I understand it. :-)

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