Make Affiliate Program Australian GST Compliant
After a few discussions with our accountant, we've discovered that the Affiliate system in WHMCS does not comply with Australian GST/Taxation Law. This kinda throws a spanner in the works.
I sent through a couple of questions to my accountant to find out how things need to work here in Australia... and it looks like WHMCS may need some pretty major changes to be compliant. Below are my questions to our accountant, with the accounts response below, with a bit of a summary as to what this means at the end.
[Quick Side Note: An "RCTI" is a "Recipient Created Tax Invoice". That is, rather than an invoice from the seller saying "I sold you a thing" (or an affiliate saying "you owe/paid me this much money"), it's an invoice from the buyer/one-running-the-affiliate-program saying "I gave you money"]
Q. Should affiliate commissions be calculated on the Ex GST or Inc. GST amount?
A. The commission should be calculated ex GST then calculate the GST on top of the commission.
Q. Do affiliate payouts need to incur/include GST?
A. Yes, the affiliate payments do need to include GST if the affiliate is registered for GST.
Q. Do we need an invoice (listing the GST) from the affiliate when they want a payout from their commission balance if they’re registered for GST? Alternatively, do we need to issue an RCTI instead? Or are neither applicable.
A. Yes, to claim the GST credits you need to receive a tax invoice stating the GST amount (or have issued a valid RCTI). You can only provide RCTI's if the referral partner is also GST registered. There are also a few other requirements you must meet in order to issue RCTI's. Please let me know if you need more information about this.
Q. Also, if an affiliate is NOT registered for GST – do we just not pay them the GST component of their affiliate commission?
A. Correct, if they are not registered for GST you don’t need to add it to the commission.
Back to My Notes:
From what I understand, this means that for the affiliate program to be compliant with Australian GST laws, it would need to:
- Allow WHMCS admins to specify if their business is registered for GST (as any AU business with $75k+ turnover/year MUST be registered for GST).
- Allow us to set commissions to be calculated on the Ex-GST (pre-tax) amount.
- Give affiliates the option to specify if they are or are not registered for GST.
- If affiliates are not registered for GST, they would receive the commission as normal (i.e. how it works now, but ideally still generating an RCTI saying that there was no GST)
- If affiliates are registered for GST, they would need to have the GST amount (+10% for commissions on sales that incurred GST) ADDED to their commission and the system would then need to generate an RCTI to send through to them.
An RCTI needs to list our/one-running-the-affiliate-program's ABN, it must say "Tax Invoice" (not just "Invoice" - big legal issues there), and needs to specify the Ex GST amount, the GST component and the Inc GST amount (i.e. $100, $10 GST, total $110 Inc. GST).
Without this, the affiliate program is technically causing any Australian affiliate to be in all sorts of mess with GST and compliance with tax. It also means that they're not able to properly claim their GST credits (which can really add up to a lot if they're processing a lot of affiliate sales).
So.... yeah. Potentially some big legal and tax issues for anyone in Australia running an affiliate program with WHMCS at the moment. Here's hoping that we can get some up-votes and that they can add this feature ASAP :-/