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janklan
Community Member

UpWork should by law charge GST to my Australian customers - but doesn't

I'm trying to wrap my head around how the UpWork cash flow goes, and how to record it correctly in my accounting books. 

 

Context: I'm an Australian resident, subject of Australian GST. I'm registered for GST and when I issue an invoice, I automatically add a 10% GST on whatever amount I charge. Customers pay the invoice with the GST and then I remit the GST portion to the ATO on a regular basis. 

 

The problem: UpWork issues invoices on my behalf, as if I did it (see the attached file). When such invoice goes to an Australian customer, I am required by law to charge the GST. If I fail to do so, I may be liable to pay the GST portion even the customer wasn't charged GST: https://www.ato.gov.au/Business/GST/Registering-for-GST/#WorkingoutyourGSTturnover1 

 

"If you don't register for GST and are required to, you may have to pay GST on sales made since the date you were required to register. This could happen even if you didn't include GST in the price of those sales.

You may also have to pay penalties and interest."

 

Either the invoices can't be issued with my business name in it, or they have to include the GST portion, when the counterpart is also subject of the GST. 

 

Or is there a third option? Is there an UpWork setting I missed? 

 

Please advise.

 

**Edited for Community Guidelines**

ACCEPTED SOLUTION
janklan
Community Member

A May 2020 update for all interested parties: UpWork has not fixed this yet.

 

Invoices issued on your behalf are not valid tax invoices for GST purposes as required by the ATO. 

 

This means that if you are a GST-registered business in Australia and are working with Australian or New Zealand customers, the fee you're charging is considered GST inclusive and technically speaking, you should take the 10% GST off of the amount UpWork charges on your behalf and you should send that portion to the ATO when the BAS time comes. 

 

The only right way to go around this is to issue an Australian tax invoice supplement to what UpWork sends out, stating that it is a tax invoice. To make it a valid Australian tax invoice, you need to (1) label it "Tax Invoice", (2) and break down the GST portion. To avoid breaking any UpWork terms and conditions, you must not receive any additional payment outside UpWork. Amount due on your Tax Invoice must be $0. Write "This invoice has been paid via UpWork". If you want to keep your accountant happy, also include the UpWork's invoice number and if your accounting software allows (Xero and QuickBooks do), include the original UpWork invoice with it. 

 

This way you get to declare the GST the way it should have been done by UpWork, without receiving money outside UpWork. A personal recommendation: Don't bother with converting AUD/USD. Nothing stops you from issuing an Australian Tax Invoice in USD. 

 

BTW, all this also means that if you normally charge $100 + GST per hour, then on UpWork you should advertise your hourly rate as $110/hr. You can always offer a $100/hr rate for non-ANZ customers.

 

I really wish UpWork got its act together. I'm sure many GST-registered Australian sole traders don't even realise this and they will pay for it if an ATO audit comes. 

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20 REPLIES 20
janklan
Community Member

An update for my fellow Australian freelancers after discussing with my tax advisor:

 

If you're a business registered for GST in Australia, then all Australian invoices issued on behalf of that business should include GST. 

 

UpWork attempted to implement GST rules imposed by the ATO (read here: https://support.upwork.com/hc/en-us/articles/115008309168-Australian-GST), but their implementation is incomplete: they require an ABN to be provided in order to not charge GST to an Australian business on their service fee. That's probably OK for Australian freelancers providing services to non-Australian customers, and for Australian freelancers not registered for GST.

 

If an Australian GST-registered business provides services to another Australian business (GST or not), that business is legally required to charge 10% GST on top of the cost of the services provided. As of August 2019, this doesn't happen, when you provide your services on UpWork.

 

If you are an Australian registered for GST, want to work on UpWork and want to do things legally right, here are your options (from the legally best to the legally worst way to tackle things)

 

  • Wait until this is resolved on UpWork end (this is the only truly correct solution)
  • Work through UpWork, but don't use your GST-registered ABN (this will make all UpWork income to be attributed to you personally. Depending on your circumstance, this may or may not be bad. Either way, if you don't provide your ABN, you'll have to pay the UpWork's GST charge)
  • Bump your Australian fees by 10% and remit that 10% to the ATO voluntarily (this will prevent the customer from claiming that GST portion back)
  • Send a separate invoice outside UpWork, containing only the GST portion, clearly stating that the customer already paid whatever amount in A$ as a pre-payment and the document you're sending is a final tax invoice. This may or may not put you in breach of T&C here on UpWork.

Any of the UpWork team, can you please comment?

 

VladimirG
Community Manager
Community Manager

Hi Jan,

 

Thank you for sharing the information about the GST-related problem you've noticed. I see you're already communicated with our Support team and will share the details you provided here and on your support tickets with our dedicated team from my end as well. We'll follow up with you directly on your main support ticket and also provide an update in case any changes are made to the invoicing process.
.

~ Vladimir
Upwork

Thanks. I'm looking forward to seeing that changes allowing us to use UpWork in accordance with Australian tax law were implemented in a timely manner.

Hi Jan.

 

If I am an agency based in Australia and registered for GST, do you konw if I can claim GST on the invoices that I am paying to upwork? (I cant see gst on any of my invoices).

Do not implement anything that involves receiving money from the client in other ways than through the platform!

Upwork does issue invoices in your name, but there's nothing preventing you and your client form totally ignoring those invoices and issuing new ones for the same amounts but in the correct form.

You can also mention the number of the cancelled invoice on the new invoice, just to keep track.

 

 

Hi Julie,

There are a few ways you can do it:

1) include GST in your hourly rate for ANZ customers
2) don’t include GST in your UpWork rate and issue a separate tax invoice for the GST amount only, for ANZ customers only
3) Do neither and either pay the GST portion from your own pocket, or risk running into trouble if you get audited
4) Act on behalf a non-GST-registered company (or a sole trader) specifically for the purpose of doing business through upwork
5) Don’t provide services to customers located in ANZ.

None of them are in breach with UpWork’s T&C as long as you receive all profit for your service via UpWork (so they can have their slice)

UpWork indeed doesn’t make it easy for Australian GST-registered businesses.

Thanks Jan, I am so confused!

 

I am not a freelancer in upwork, but I hire freelancers in upwork who dont charge gst.

 

So when I charge my clients for my services (this may include me having used upwork freelancers to complete a project), I charge GST. 

 

But I don't claim any GST from upwork invoices for freelancers that I have used becuase Upwork do not have any GST on their invoices.

 

Does this make sense? I think it just means I am losing out on claiming gst for freelancers that I am using beucase they are not based in ANZ. 

You're mixing a few things together Julie... 

 

- Keep adding GST to the invoices you issue to your customers. UpWork and its freelancers are irrelevant at that point.

- Not claiming any GST on the invoices you receive from UpWork issued on behalf of the freelancers is the correct way to do it - the UpWork invoices are not a valid document for claiming GST

- If you're receiving any invoice from UpWork directly (I'm not sure what they charge clients these days), those invoices may be valid Tax invoices

- If those freelancers are GST-registered, they have to pay the 10% GST portion on everything they earn on UpWork. They may or may not be adding this 10% to their fees.

- If they are, you may be able to liaise a proper tax invoice with them, without involving any money transfer outside UpWork. I know I wouldn't mind giving you a way to claim the money I know you shouldn't have to pay 😉

- If they are not GST registered (meaning all freelancers outside ANZ, and many other freelancers in ANZ), you're not losing any money as they're not charging you any GST.

 

Welcome to international taxation. It's a dark and confusing place. 

Thanks Jan, this was a big help, you've answered my questions 🙂

Happy to help.

And thanks so much for taking the time to reply.

Hi Julie, 

I'd like to share this help article for more information about Australian GST. I would recommend that you get in touch with a local tax advisor for more information about your question. 


~ Avery
Upwork

Avery there is no way for me to enter my ABN. I go to settings and there is no option for tax information.

janklan
Community Member

Avery, that help article is not very helpful. 

Or more precisely, it explains that UpWork is charging GST on its fees and silently dismisses the whole topic of GST-registered freelancers wanting to charge GST and wanting to provide Tax invoices to their ANZ customers.

As far as I am aware, this is not implemented on UpWork's end for an unknown reason. 

janklan
Community Member

A May 2020 update for all interested parties: UpWork has not fixed this yet.

 

Invoices issued on your behalf are not valid tax invoices for GST purposes as required by the ATO. 

 

This means that if you are a GST-registered business in Australia and are working with Australian or New Zealand customers, the fee you're charging is considered GST inclusive and technically speaking, you should take the 10% GST off of the amount UpWork charges on your behalf and you should send that portion to the ATO when the BAS time comes. 

 

The only right way to go around this is to issue an Australian tax invoice supplement to what UpWork sends out, stating that it is a tax invoice. To make it a valid Australian tax invoice, you need to (1) label it "Tax Invoice", (2) and break down the GST portion. To avoid breaking any UpWork terms and conditions, you must not receive any additional payment outside UpWork. Amount due on your Tax Invoice must be $0. Write "This invoice has been paid via UpWork". If you want to keep your accountant happy, also include the UpWork's invoice number and if your accounting software allows (Xero and QuickBooks do), include the original UpWork invoice with it. 

 

This way you get to declare the GST the way it should have been done by UpWork, without receiving money outside UpWork. A personal recommendation: Don't bother with converting AUD/USD. Nothing stops you from issuing an Australian Tax Invoice in USD. 

 

BTW, all this also means that if you normally charge $100 + GST per hour, then on UpWork you should advertise your hourly rate as $110/hr. You can always offer a $100/hr rate for non-ANZ customers.

 

I really wish UpWork got its act together. I'm sure many GST-registered Australian sole traders don't even realise this and they will pay for it if an ATO audit comes. 

This is great information mate. I NEVER understood what the deal was with this. Looks like you've nailed it ... and Upwork is fairly unhelpful in this regard.

Happy to help, mate.

4e614c75
Community Member

Jan the man.. you seem the expert on this issue so im just asking this: what if (not sure if this helps): get paid on your personal bank account via upwork->paypal, don't apply for ABN = problem solved? 

janklan
Community Member

I'd say, "problem solved as long as you don't get audited". Make your own risk assessment.

 

Maybe you can do that without an ABN. It gets tricky when dealing with Aus customers. Look up "witholding when supplier did not quote ABN". 

 

I'd love to see a client on UpWork that tries to withhold 47% from the money paid so that the ATO is happy in an unlikely event of an auditing emergency.

 

It's all in the "too hard" basket. That's why I suspended most of my activities here. Well, UpWork's loss.

65767e0e
Community Member

Hi Jan, I'm a little confused. I want to know if I can claim GST on my pucrhases for services in upwork. I'm in NZ. My invoices are not a TAX INVOICE nor do they offer a NZ tax number. Am I correct in assuming that tax will only be applied if the freelancer that I engage is also located in NZ and charges me GST directly, with a Tax Invoice for the services (ex Upwork fee obviously, which is exluding GST because Upwork aren't GST registered?) I wish there was clearer information available here!

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