TAX INFORMATION. GST FAQs.

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1 TAX INFORMATION GST FAQs

2 Question Answer 1. IBO BUYING FOR THEIR OWN CONSUMPTION FROM AMWAY What am I charged? Do I need to do anything relative to the GST? No Do I claim inputs on the product bought? No 2A. IBO ORDERING FOR A DOWNLINE IBO - I HAVE AN ABN AND AM GST REGISTERED What do I charge my Downline? a) Note the amount of GST on the purchase - this is your Input Tax Credit, which is a credit against your GST liability b) Note the amount of GST collected on the What do I need to do relative to GST? sale - this is your GST liability c) For this transaction the amount charged will agree with the amount paid - the GST included in the transactions will therefore net out to zero. It is recommended that you issue a Purchase Agreement and Tax Invoice with the goods. This need be no different to the paperwork you normally provide; but to be a valid Tax Invoice it must include the following: Your Name Your ABN The words Tax Invoice The name of the Downline and their address A brief description of the goods supplied The quantity of each item supplied The amount, excluding GST for the supply The amount of GST The total including GST While not all Downline will require a Tax Invoice, it is recommended that you issue a Tax Invoice for every transaction. 2B. IBO ORDERING FOR A DOWNLINE IBO - I DO NOT HAVE AN ABN AND AM NOT GST REGISTERED What do I charge my Downline? What do I need to do relative to GST? Nothing In the normal way by issuing a Purchase Agreement and Invoice (available from the downloads section of the Amway website). 3A. IBO ORDERING FOR A CLIENT - I HAVE AN ABN AND AM GST REGISTERED What do I charge my Client? Retail including GST

3 What do I need to do relative to GST? A) Self consumption by Client B) Used for business (eg cleaning products) a) Note the amount of GST on the purchase - this is your Input Tax Credit, which is a credit against your GST liability b) Note the amount of GST collected on the sale - this is your GST liability c) Assuming you have charged a retail price which is higher than the purchase cost, there will be a net GST liability on this transaction. It is recommended that you issue a Purchase Agreement and Tax Invoice (available from the downloads section of the Amway website), with the goods for all transactions. This need be no different to the paperwork you normally provide; but to be a valid Tax Invoice it must include the following: Your Name Your ABN The words Tax Invoice The name of the Client and their address A brief description of the goods supplied The quantity of each item supplied The amount, excluding GST for the supply The amount of GST The total including GST While not all Clients will require a Tax Invoice, it is recommended that you issue a Tax Invoice for every transaction. 3B. IBO ORDERING FOR A CLIENT - I DO NOT HAVE AN ABN AND AM NOT GST REGISTERED What do I charge my Client? Retail including GST What do I need to do relative to GST? Nothing In the normal way by issuing a Purchase Agreement and Invoice. Note - as you are not GST Registered, you must not issue a Tax Invoice. 4. MY CLIENT ORDERING DIRECTLY FROM AMWAY ON THE WEBSITE OR BY PHONE What will they be charged? Client - Retail including GST.

4 If you are GST Registered: You will receive a monthly summary of purchases and sales in relation to downline transactions which took place directly with Amway - for inclusion on your Business Activity Statement with all of your other business transactions What do I need to do relative to GST? If you are not GST Registered: The orders and paperwork will be despatched by Amway, and will show your upline GST Registered IBO as the supplier of the goods. Amway will provide information to your upline GST registered IBO regarding these transactions. Retail commissions on Client transactions will be paid to you by Amway. 5. GENERAL TAX QUESTIONS AND ANSWERS I m an Amway IBO, I m not GST Registered and I have a retail customer who requires a Tax Invoice for their purchases from me. What are my options? Should I apply for an ABN and register for GST? For an IBO comprising two partners, should each partner apply separately for an ABN? If the transaction value is less than $50, a Tax Invoice will not be required by your customer. You could encourage the retail customer to register as a Client, on the website. A Tax Invoice will then accompany all orders, but all Client transactions include a handling charge. You may register them as a Client on the website and place orders on their behalf. You must advise the retail customer that you are taking this action on their behalf and explain that it is to guarantee that all future orders will be accompanied by a Tax Invoice. As with the previous option, such orders will include a handling charge. Ask your upline GST Registered IBO to process the retail transaction on your behalf. The net amount of GST payable on this transaction (i.e. the difference between the GST received within the retail price and the GST paid on the wholesale purchase) must be passed on to the GST Registered IBO. It is recommended that all IBOs who qualify as being in business under the ATO s Administrative Position* should apply for an ABN and register for GST. *Administrative Position - Those IBOs who are at the 6% or above Distributor Bonus level for 6 months or more of a financial year, and satisfy the growth and business activity tests outlined in ATO advice. The partnership should apply for an ABN on the Companies and Other Organisations form.

5 If I have another business that qualifies for an ABN, should I apply for a separate ABN for my Amway business? Will Amway be charging GST on products? Will IBOs pass GST on to Clients? Will IBOs who are not registered for GST be required to remit GST to the Tax Office? Will GST apply to Bonuses? Will Amway deduct PAYG (Pay As You Go) Withholding tax from my Bonus payments? What income streams would be included for determination of turnover of an Amway business? What happens to those IBOs who are not in business? Could the GST make it more difficult for IBOs to build a business from this level? It is recommended that if the ownership of the other business is the same as that for the Amway business then the one ABN should suffice. Yes, most Amway products will be taxed at the full rate of 10%, while a relatively small number (mainly those food products which will be GSTfree) will be taxed at the rate of 0%. Yes, the goods and services tax is a consumption tax, and as such the selling prices will include GST. No, if they make retail sales, they will retain all monies received from their retail customers. There will be no GST liability on Bonuses received from Amway by IBOs who are not in business. The Bonus amount paid to GST registered IBOs will be adjusted to include GST. One eleventh of the total receipt should then be included in the GST registered IBO s Business Activity Statement, with the result that the net Bonus receipt will be the same as it would have been had there been no GST. There will be no GST liability on Bonuses received from Amway by IBOs who are not in business. Holders of an ABN will not be subject to PAYG Withholding deductions. IBOs who are not in business (by virtue of them being at less than the 6% performance bonus level) will not be subject to PAYG taxation deductions. Those IBOs who transition from not in business, by virtue of them being at a minimum of the 6% performance bonus level for 6 months in a fiscal year will avoid PAYG taxation deductions if they apply for an ABN, register for GST and advise Amway of their changed status. Gross product sales of a GST registered IBO and his/her non-registered downline, plus Distributor Bonuses and gross sales of business tools. At any given time there will be IBOs who do not meet the in business criteria of the Administrative Position. The Administrative Position puts in place a safe harbour, which provides ongoing certainty for IBOs of their taxation status, and the level they need to attain to be considered to be in business.