Square, Stripe, PayPal and Afterpay fees: the GST on them, and the net-deposit trap on your BAS

Gross sales, fees, net deposit: the three numbers

Say a customer pays $110 for a taxable service through Square, and Square takes $1.76 and deposits $108.24. The sale is $110, of which $10 is GST you collected, so $110 goes to G1 and $10 to 1A. The $1.76 fee is a business expense, and because it includes GST it carries 16 cents of credit at 1B. The $108.24 in your bank account is none of those numbers; it is the result of the other two.

Report the deposit as the sale and G1 shows $108.24, 1A shows $9.84 instead of $10, and the fee vanishes. See BAS labels explained.

What each processor does with GST

• Square. Square Australia charges GST on its processing fees, and the rate it advertises is GST inclusive. A monthly tax invoice is in the Square Dashboard.
• Stripe. Stripe’s Australian entity adds GST to its fees for Australian accounts and issues a monthly tax invoice in the Dashboard.
• PayPal. PayPal’s fees in Australia are a financial supply, which is input taxed, so they carry no GST and there is no credit to claim. The fee is still deductible.
• Afterpay, Zip and other buy now pay later providers. The merchant fee is a percentage plus a fixed amount per order, and the provider issues a monthly statement or tax invoice showing the fee and any GST. Go by that document.
• Your bank’s EFTPOS terminal. Merchant service fees charged by Australian banks generally include GST, and the monthly merchant statement is the tax invoice. Account keeping fees and interest carry none; see which expenses have no GST.

Fee structures change, so the rule that survives is: claim the GST the processor’s tax invoice shows, and nothing more.

Putting it through your books

The bank statement only shows deposits, so the processor’s report has to come in alongside it. Each month, download the report or tax invoice showing gross sales, fees, refunds and payouts. Record the gross sales as income, with GST where the sales were taxable, and the fees as one monthly expense with the GST the tax invoice shows. Then check that gross sales less fees less refunds equals the payouts that reached your bank account. If it does, the month is right; if not, a payout is in transit or a refund has been missed. See how often to do your bookkeeping.

Refunds and chargebacks

A refund of a taxable sale is a decreasing adjustment on the BAS for the quarter you make it, not a correction to the quarter of the sale: reduce 1A by the GST refunded. Check whether your processor gives its fee back. Stripe keeps the processing fee on a refund, Square returns it on a full refund, and the buy now pay later providers vary, so match the statement rather than an assumption. A chargeback that goes against you is treated like a refund, and a dispute fee is an expense with whatever GST its invoice shows.

Cash basis, quarter end, and overseas customers

Most sole traders account for GST on a cash basis, so a sale belongs to the quarter you were paid. Payments the processor collected on 29 June but paid out on 2 July were received on your behalf in June and strictly belong in the June quarter; a PayPal balance is yours the moment it is credited. In practice the difference is a few days and a few sales, and what the ATO wants is consistency: pick a treatment, apply it every quarter, and keep the payout report that shows the dates. See cash vs accrual GST accounting.

For international cards and currency conversion, report the sale at its Australian dollar value and treat the extra fee like any other fee. If the customer is outside Australia the sale itself may be GST-free; see GST on services to overseas clients.

How FlowFi helps

FlowFi reads your bank statement and categorises each processor payout as income and each merchant fee debit as an expense, with the GST flagged where the supplier charges it, so the payout pattern is visible line by line when you review the quarter. Because the statement shows net deposits, the processor’s monthly report remains the record of gross sales and fees: keep it with the quarter and use it to check that G1 reflects gross sales before you lodge.