You've turned your creative passion into a thriving Etsy store. The orders are rolling in, your products are getting five-star reviews, and you're finally making real money from your craft. But then reality hits harder than a cymbal crash: tax time is approaching, and you've got a shoebox full of receipts, a spreadsheet that looks like abstract art, and absolutely no idea if you need an ABN, GST registration, or a Business Activity Statement.
Here's the thing—the Australian Taxation Office doesn't care how beautifully you hand-paint ceramics or how perfectly you sew vintage-inspired dresses. They care about whether you're keeping proper records, declaring your income, and meeting your compliance obligations. And with the ATO's new Sharing Economy Reporting Regime now tracking every Etsy transaction since October 2025, ignoring the paperwork isn't an option anymore.
The good news? Getting your accounting sorted doesn't require a commerce degree or a personality transplant. You don't need to trade your creative soul for a calculator. You just need to understand the fundamentals, set up simple systems, and know when to call in the professionals. Let's break down the accounting basics every Australian Etsy seller needs to master, without the jargon that makes your eyes glaze over.
Let's start with the big question that keeps creative entrepreneurs awake at night: are you running a hobby or a business? The Australian Taxation Office draws a clear line between the two, and it's not about how much you love what you do.
You're officially "carrying on an enterprise" if you're operating with intention and structure. That means having a business plan (even a rough one scribbled on a napkin counts), keeping financial records, marketing your products, and conducting regular transactions with the goal of making profit. If you're selling sporadically without any real business structure, that's a hobby. But if you've got an Etsy shop with regular sales, product photography, social media marketing, and you're tracking your expenses, you've crossed into business territory.
Once you're running a business, you need an Australian Business Number. The application is free through the Australian Business Register and usually gets approved instantly. This 11-digit number becomes your business identity—it's like a backstage pass that lets you claim GST credits, deal professionally with suppliers, and access government services. Without it, you're playing unplugged when you need amplification.
If you're trading under a name that isn't your legal name (think "Sarah's Handmade Ceramics" instead of just "Sarah Smith"), you'll need to register that business name with ASIC. It costs $45 for one year or $104 for three years, and it gives you exclusive rights to use that name across Australia.
Now for the number that matters: $75,000. If your Etsy store's turnover hits or projects to hit $75,000 in a 12-month period, GST registration becomes mandatory—not optional, not negotiable, mandatory. You've got 21 days from when you hit that threshold to register, and the penalties for non-compliance can be brutal. The ATO can backdate your GST registration by up to four years and demand you pay GST retrospectively on all those sales you thought were GST-free.
The tricky part? You need to monitor both your current turnover (this month plus the previous 11 months) and your projected turnover (this month plus the next 11 months). If either exceeds $75,000, you're required to register within three weeks.
But here's where it gets interesting: you can voluntarily register for GST even if you're below the threshold. Why would you do that? Because you can claim back the GST you pay on business purchases—the raw materials, packaging supplies, equipment, software subscriptions, and professional services. For many Etsy sellers investing heavily in stock and equipment, claiming those GST credits makes voluntary registration worth it, even if it means adding 10% to your prices.
If you're GST-registered, you charge an extra 10% on top of your prices. That GST isn't your money—you're collecting it on behalf of the ATO and remitting it through your quarterly Business Activity Statement. The formula is simple: GST equals one-eleventh of your GST-inclusive price. So if you charge $55 for a product, $5 of that is GST ($55 ÷ 11 = $5).
Here's the good part: you can claim back the GST you pay on business purchases. If you spent $1,100 on supplies (including $100 GST) and collected $550 GST from sales, you'd owe the ATO $450 ($550 - $100 = $450). If you spent more on business purchases than you collected in sales—common for new businesses or those making large equipment purchases—you'd actually get a refund.
One crucial exception: if you're selling internationally and shipping goods overseas, those sales are GST-free. They don't count toward your $75,000 threshold, and you don't charge GST on them. But you can still claim GST credits on the business expenses related to making those export sales.
Remember that shoebox of receipts we mentioned? Time to upgrade your record-keeping system before the ATO comes knocking. Australian law requires you to keep all business records for at least five years from when the record was prepared or the transaction completed—whichever comes later.
Your records need to explain every transaction, be stored securely (physical or digital), be in English or easily translatable, and be accessible for ATO inspection. That means keeping:
The ATO accepts digital records, and frankly, they're easier to manage than paper. Scanned receipts, photo invoices, and cloud-stored documents are all valid—as long as they're clear, complete, and genuine reproductions. Most accounting software can import bank transactions, categorize expenses, and generate reports automatically.
For Australian Etsy sellers, cloud-based platforms like Xero, MYOB, or QuickBooks Online integrate with multiple sales channels, handle GST calculations, and make BAS preparation significantly less painful. These platforms cost between $10-$70 per month depending on features, but they save countless hours during tax time and reduce the risk of costly errors.
The key is setting up your system from day one, not scrambling to reconstruct twelve months of transactions in June when tax returns are due. Create a simple folder structure in Google Drive or Dropbox, snap photos of receipts immediately, and reconcile your accounts monthly. It's like maintaining your instruments—regular upkeep prevents major breakdowns.
If you're GST-registered, welcome to the world of Business Activity Statements—quarterly reports that show the ATO how much GST you've collected and paid. Even if you had zero activity in a quarter, you still need to lodge a BAS. Missing lodgements triggers penalties and raises red flags with the ATO.
Most Etsy sellers lodge quarterly, which means four BAS reports per financial year. The due dates follow a predictable rhythm:
If your turnover exceeds $20 million (unlikely for most Etsy stores), monthly reporting becomes mandatory with lodgements due by the 21st of the following month. Businesses with poor compliance history may also be moved to monthly reporting from April 2025 onwards, locked in for a minimum 12-month period.
Alternatively, if you've voluntarily registered for GST with turnover under $75,000, you can opt for annual reporting with a single BAS due 31 October—though you'll still need to pay quarterly instalments throughout the year.
Your BAS tracks three key figures using labels that sound like equipment model numbers:
The calculation that determines whether you owe money or receive a refund is straightforward: GST collected (1A) minus GST paid (1B) equals your net GST payable. If you paid more GST on business purchases than you collected from sales—common when you're making large equipment purchases or exporting products—you'll receive a refund from the ATO within 1-2 weeks of lodging.
You've got several options for submitting your BAS:
Here's a bonus tip: if you use a registered BAS or tax agent, you automatically get a four-week extension on lodgement deadlines. Self-lodging means sticking to the standard dates. Miss a deadline without an agent, and you're looking at late lodgement penalties, interest charges on unpaid GST, and increased audit risk.
This is where creative entrepreneurs get excited—and where many make expensive mistakes. As a sole trader running an Etsy store, you can claim legitimate business expenses against your income, reducing your taxable profit. But the keyword is "legitimate." The ATO now receives transaction data directly from Etsy through the Sharing Economy Reporting Regime, so over-claiming deductions is a fast track to an audit.
Let's start with the obvious ones. Every cent you pay to Etsy is deductible: listing fees (USD $0.20 per item), transaction fees (6.5% of the sale price including shipping), payment processing fees (3-4% plus AUD $0.25 per transaction), and any Etsy Ads spending. These fees add up quickly—if you sold $50,000 worth of products, you're probably paying $3,250-$5,000 in Etsy fees alone.
Your cost of goods sold—the raw materials, components, packaging supplies, labels, tape, bubble wrap, and tissue paper—are fully deductible. Keep every receipt from your craft supplier, fabric store, or wholesale packaging company. The same goes for shipping costs: postage, courier charges, shipping label printing, and packaging materials like boxes and mailers.
Equipment and tools used exclusively for your business are deductible through depreciation if they cost over $300. Under that amount, you can write off the full cost in the year of purchase. Cameras, lighting, shelving, production tools specific to your craft, computers, and printers all qualify—but only the business-use portion. If you use your laptop 60% for business and 40% for personal use, you can claim 60% of its cost.
Working from home opens up additional deductions, but the rules are more complex than most people realize. There are two categories: running expenses and occupancy expenses.
Running expenses can be claimed even without a dedicated workspace—you can work from your kitchen table and still claim:
You can use the fixed rate method (70 cents per hour worked from home as of 2024-25) which covers electricity, gas, internet, phone, stationery, and consumables. You'll need a detailed record of hours worked—a diary or spreadsheet tracking each work session. If you worked 400 hours from home, that's a $280 deduction (400 × $0.70 = $280). You can still separately claim depreciation for assets over $300.
Alternatively, use the actual cost method where you claim real expenses based on receipts and calculate the business portion. This requires more documentation but may yield higher deductions if your costs are substantial.
Occupancy expenses (mortgage interest, rent, council rates, insurance) can only be claimed if your home office is "clearly identifiable as a place of business"—meaning it's used exclusively or almost exclusively for business, not easily suitable for domestic use, and ideally receives client visits or serves as the hub for significant online business operations.
Warning: claiming occupancy expenses can trigger capital gains tax implications when you sell your property, as the main residence exemption may not apply to the business-use portion. Tread carefully here.
Some costs feel like business expenses but don't qualify for deductions:
The ATO's general rule: if the expense has a private or domestic element, you can only claim the business portion. Keep detailed records showing how you calculated the split.
| Deduction Type | What You Can Claim | Evidence Required | Common Mistakes |
|---|---|---|---|
| Etsy Platform Fees | 100% of listing, transaction, and payment processing fees | Etsy monthly statements | Forgetting to convert USD to AUD |
| Cost of Goods Sold | Raw materials, components, packaging supplies | Purchase receipts, supplier invoices | Not tracking inventory properly |
| Home Office (Fixed Rate) | 70 cents per hour worked from home | Time log or diary | Inflating hours worked |
| Home Office (Actual Cost) | Business % of electricity, internet, phone | Utility bills, business-use calculation | Claiming personal use portion |
| Equipment Under $300 | 100% immediate write-off | Purchase receipt | Not separating personal use items |
| Equipment Over $300 | Depreciation over useful life | Purchase receipt, depreciation schedule | Incorrect depreciation rates |
Here's where things got serious in October 2025: the ATO implemented the Sharing Economy Reporting Regime, requiring platforms like Etsy to report seller transaction data directly to the tax office. This isn't coming—it's already here, and it fundamentally changes how the ATO monitors online sellers.
Every quarter, Etsy sends the ATO a report containing your sales revenue, the fees Etsy charged you, payment processor details, and transaction information. The ATO then cross-references this data against your tax return and BAS lodgements to check for discrepancies.
Underreported income, incorrectly calculated GST, and claimed deductions that don't match your actual business operations become immediately visible. The days of treating Etsy income as "under the table" earnings are over—the ATO knows exactly what you sold and when you sold it.
The Sharing Economy Reporting Regime raises the stakes for accurate record-keeping. If Etsy reports that you earned $65,000 but you only declared $45,000 on your tax return, the ATO will notice. Penalties for under-reporting income include backdated tax assessments, interest charges, and potential prosecution for serious cases.
The flip side? If you've been keeping proper records and declaring all income honestly, SERR actually protects you. The ATO can verify your returns match platform data, reducing audit risk and speeding up processing. Think of it as having your accounts professionally sound-checked before the gig.
This system also makes voluntary disclosure more important than ever. If you discover an error in a previous return—maybe you forgot about some sales or miscalculated GST—contact the ATO immediately. Voluntary disclosure before they catch the mistake significantly reduces penalties compared to being audited.
There's a time for DIY accounting and a time to bring in the professionals. Knowing the difference can save you thousands in penalties, missed deductions, and stress-induced grey hairs.
If you're spending more time categorising transactions than creating products, something's wrong. If GST calculations make your head spin, if you've received letters from the ATO you don't understand, or if you're approaching the $75,000 GST threshold and panicking about registration—these are clear signals you need professional support.
Complex situations also warrant expert help: you're planning to change business structures, hire employees, purchase significant assets, or expand internationally. A registered tax agent or chartered accountant can guide you through these transitions, ensuring compliance and optimising your tax position.
Many Australian accounting firms charge $150-$400 per hour for tax work, with annual tax returns for sole traders typically costing $300-$800 depending on complexity. Monthly bookkeeping services range from $150-$500 per month. BAS preparation usually costs $80-$200 per quarter.
While these fees might seem steep when you're running a small creative business, consider what they prevent: ATO penalties (easily $500-$5,000+), missed deductions (potentially thousands per year), registration errors, audit costs, and the opportunity cost of time spent wrestling with accounting software instead of making sales.
Most importantly, a good accountant doesn't just process numbers—they provide strategic advice on business structure, tax planning, cash flow management, and growth strategies. They spot opportunities you'd never see and prevent mistakes you didn't know existed.
Not all accountants understand creative businesses or online selling. Look for firms that specialise in small business and e-commerce, demonstrate knowledge of platform selling and GST regulations, and communicate in plain English rather than impenetrable jargon.
Ask potential accountants about their experience with Etsy sellers, their software preferences (they should work with modern cloud platforms), their turnaround times, and their approach to proactive tax planning. The cheapest option often costs more in the long run if they're missing deductions or making errors.
Getting your accounting basics right isn't about suffocating your creative spirit under spreadsheets and compliance checklists. It's about building solid financial foundations that let your Etsy business grow sustainably, legally, and profitably. Think of it as tuning your instruments before a performance—the preparation might not be glamorous, but it's essential for hitting the right notes.
The Australian tax system isn't designed to catch out honest small business owners—it's designed to ensure everyone contributes fairly. By registering for an ABN when required, tracking toward the GST threshold, maintaining proper records for five years, lodging your BAS on time, claiming only legitimate deductions, and declaring all income accurately, you're not just staying compliant. You're building a professional business that can access funding, attract partnerships, and scale confidently.
The Sharing Economy Reporting Regime has removed the grey areas around online selling. The ATO knows what you're earning through Etsy, so your records need to reflect reality, not wishful thinking. But here's the upside: proper accounting gives you clarity on your actual profitability, helps you price products correctly, identifies your most profitable lines, and shows you exactly where your money goes each month.
As of February 2026, running an Australian Etsy store means more than creating beautiful products and photographing them perfectly. It means understanding ABN requirements, monitoring GST thresholds, keeping meticulous records, lodging quarterly BAS reports, claiming appropriate deductions, and knowing when to get professional support. Master these fundamentals, and you'll spend less time stressed about tax obligations and more time doing what you love—creating products that delight customers and generate genuine profit.
If you're operating in a businesslike manner—regularly making sales, marketing your products, keeping financial records, and intending to make a profit—you are technically carrying on an enterprise and should have an ABN, regardless of turnover amount. Even small-scale operations benefit from ABN registration as it enables you to claim GST credits once registered, deal professionally with suppliers, and establish proper business foundations before scaling.
You must register for GST within 21 days if either your current GST turnover (this month plus the previous 11 months) or projected GST turnover (this month plus the next 11 months) exceeds $75,000. Export sales are GST-free and don't count toward this threshold. Many sellers opt for voluntary registration before hitting the threshold to claim GST credits on business purchases and avoid last-minute registration stress.
Yes, you can claim home office expenses. For running expenses such as electricity, internet, and phone, you can use the fixed rate method (70 cents per hour) or the actual cost method if you have detailed records. However, occupancy expenses (like mortgage interest, rent, or rates) require that your home office is clearly identifiable as a place of business and used exclusively or almost exclusively for business.
If you forget to declare some income, contact the ATO immediately through their voluntary disclosure process. With transaction data being reported directly from Etsy under the Sharing Economy Reporting Regime, discrepancies between your reported income and the ATO's data will trigger reviews. Correcting errors proactively may significantly reduce penalties compared to waiting for an audit.
For straightforward operations with low turnover, accounting software like Xero or QuickBooks may suffice. However, if you're nearing the GST threshold, dealing with complex deductions, or receiving unclear ATO correspondence, professional support can save you time and money by ensuring compliance, optimizing deductions, and even providing strategic advice.
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