Last Updated on July 24, 2023 by lukesguide
Selling products on eBay Australia is big business in 2023 and running an eBay business from home can be a very profitable venture for those entrepreneurs willing to dive head first into the fast-paced world of e-commerce.
Of the 40,000 Australian eBay sellers on the platform, many are solopreneurs that run their eBay store from home.
While running an eBay shop from home can be lucrative, there are a unique set of issues to consider before you take the leap and start running an eBay store from home.
In this article, we will go through the key legal considerations you need to think about before you start running your eBay business from home.
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The eBay Business Policies are the selling and listing conditions that every seller on the platform must follow and adhere to. Ebay’s User Agreement is a binding agreement between eBay Australia and you, as the business owner, that sets out the key terms and conditions governing your use of the eBay Australia marketplace platform.
Before you can run an eBay business from home, you must agree to the eBay Business Policies and User Agreement.
The eBay Business Policies cover various aspects of selling on eBay such as listing guidelines, seller requirements, buyer protection, feedback, prohibited items, and community conduct. To some extent, it is possible to tailor the terms of your listings as long as they still fit within the eBay Business Policy guidelines.
Familiarity and adherence with these policies ensures a safe and positive experience on the platform.
Ebay’s User Agreement is a long document and chances are, you may have not read the whole thing top to bottom.
It’s important that you understand your rights and obligations under the User Agreement to help you avoid being slapped with an eBay seller account suspension or ban.
Here’s a summary of some of the key terms under the eBay User Agreement.
Clause 3 of the eBay User Agreement provides a long list of prohibited actions and eBay sellers would be well advised to familiarise themselves with each of them.
As an example, some of the prohibited actions include:
- Posting inappropriate content or items;
- Failure to deliver items you have sold (unless the buyer fails to meet its obligations);
- Manipulate the price of any item or interfere with other users’ listings;
- Taking steps to circumvent or manipulate eBay’s fee structure, the billing process, or fees owed to eBay;
- Manipulating feedback ratings; and
- Copy, modify or distribute rights or content from the eBay services or eBay’s copyrights and trademarks.
The list above is non-exhaustive and sellers should take the time to read the terms of the User Agreement before they start selling.
Clause 5 of the eBay User Agreement sets out the terms relating to eBay’s fees and services.
Importantly, sellers are responsible for paying fees for all sales made through eBay services, even if the transaction is completed outside of eBay.
Disclosing contact information or requesting buyer contact information outside of eBay can also result in additional fees. Sellers must meet eBay’s minimum performance standards, and failure to do so may lead to additional fees, as well as limitations, restrictions, suspensions, or downgrades to their seller accounts.
Clause 6 of the eBay User Agreement deals with the uploading of content by sellers to the eBay platform. Sellers should be aware that they are required to grant eBay Australia a broad license in respect of their business’s content and intellectual property (including trademarks and designs) when selling on the platform.
Effectively, this means that eBay has the right to use seller content for a broad range of applications, including advertising.
Clause 7 of the eBay User Agreement limits eBay’s liability in a situation where you, as a seller, may incur a loss.
Basically, it’s eBay’s way of distancing itself from any issues you may have when using their platform and making it very clear that sellers use their platform at their own risk and. This may involve the situation where you lose money making a sale to a fraudulent buyer.
As eBay sellers, we all know that selling items online carries with it a degree of risk. Ebay does have protections in place to support sellers but there are instances where these protections are not sufficient.
It is in these circumstances where eBay will invoke this clause and limit its liability for any loss a seller might incur.
Clause 9 of eBay Australia’s user agreement outlines the consequences of violating the terms and conditions as a seller. If a seller fails to meet eBay’s minimum performance standards, they may be subject to additional fees and penalties.
If you breach the eBay User Agreement, eBay has a number of actions it can take under clause 9, including:
- delay listing your item;
- delete your listing;
- issue you a warning;
- restrict your activities through the platform;
- temporarily suspend, indefinitely suspend or terminate your membership and refuse to provide our services to you; and
- require you to pay additional fees.
To avoid being on the receiving end of any of the above disciplinary actions, it is important that sellers are aware of their responsibilities when using the eBay marketplace.
Under clause 10 of eBay Australia’s User Agreement, sellers are obligated to accept returns and provide refunds for items that do not match the description or are faulty. Buyers have the right to initiate a return within a specified timeframe and must follow the agreed-upon return process. If a resolution cannot be reached between the buyer and seller, eBay may step in and facilitate the return process.
EBay also offers the Money Back Guarantee, which ensures that buyers receive a refund if they do not receive the purchased item or if it does not match the description. Sellers are required to comply with the terms of the Money Back Guarantee and may be responsible for refunding the buyer in such cases.
As a seller, you should be aware of the types of situations where the Money Back Guarantee can kick in.
Clause 11 of the User Agreement is one that all sellers will be aware of as it directly impacts their cash flow.
In simple terms, this clause allows eBay to withhold funds from sellers in certain circumstances (e.g. if a buyer lodges a transaction dispute with eBay).
Clause 15 of the eBay User Agreement sets out the conditions all sellers must comply with when creating product listings on the eBay marketplace platform.
These include providing accurate item descriptions, adhering to prohibited item policies, including clear photos, setting accurate prices, specifying payment and shipping details, and avoiding prohibited activities like shill bidding.
Seller’s should familiarise themselves with eBay’s rules and policies including Listing policies and Selling practices policy to ensure they are aware of their compliance obligations.
Generally, buyers are responsible for paying any applicable taxes on their purchases. However, sellers may be required to provide relevant tax information to buyers (where necessary). It is important for sellers to be aware of their obligations from a tax perspective and when selling products on eBay Australia.
You, as the seller, must indemnify eBay Australia in relation to any claim made against it that relates to a breach of the User Agreement or your non-compliance with relevant laws, failure to pay applicable taxes, or other claim made against you by a third party.
EBay has the right to modify the user agreement at any time. Any changes made to the agreement will be posted on the eBay website, with a 30-day notice for most modifications.
However, temporary promotions, new services, or fee reductions may be implemented without advance notice. If users do not agree with the revised terms, they must take action to close their accounts. Any outstanding listings at the time of the amendment will be subject to the revised terms unless they are removed or the account is closed.
It is important for users to review and understand the updated terms to ensure compliance with the agreement.
When you list items on eBay, you have the option to choose Business Policies, which include payment, postage, and return details for buyers.
By creating policy templates, you can efficiently manage your listings and store your preferences for each area.
Business policies inform buyers about payment methods, delivery times, available shipping services, costs, and your return policy. Instead of setting preferences for each listing individually, using templates streamlines the process.
You can apply these templates when creating new listings or update multiple existing listings, saving time and ensuring consistency across your eBay store.
Because most eBay businesses run from home start off small, the best business structure for running an eBay business from home will be the simplest and most cost effective to set up.
The reason for this is that most eBay businesses run from home start off small and are often run as a side gig for extra income. It doesn’t make much sense spending significant time and money setting up a complex business structure for a small venture in the beginning.
Also, eBay does not require its sellers to operate under a particular business structure. So you have the freedom of choice to select a business structure that best suits your needs.
Choosing the right business structure for running an eBay business from home can be a daunting process. But with a little planning and guidance, the process can go very smoothly.
There are four main types of business structures for eBay store owners to choose from:
- Sole trader
- Private Limited Company
- Trust Structure
Each of these structures has its own advantages and disadvantages, so it’s important to understand the key differences before making your choice.
We have summarised the key characteristics of each eBay business structure below.
A sole trader is probably the most common business structure chosen by people wanting to run an eBay business from home.
This is because setting up as a sole trader is a relatively simple process. Also, it is typically cheaper to set up than other business structures and does not require huge amounts of ongoing compliance and reporting.
As a sole trader, you are personally responsible for the day-to-day running of the business and liable for repaying any debts or liabilities incurred by the business. This means that sole traders do not benefit from the limited liability and asset protection characteristics afforded to other business structures such as a company.
Partnership structures are often used when choosing to run an eBay business from home with a spouse, family member or a friend.
A partnership is similar to a sole trader because you will be personally liable in relation to all aspects of the business. The difference with a partnership is that you will be sharing this responsibility with one or more partners.
However, because other parties are involved in the running of the business, it is important that the rights and obligations of each party are documented in a separate agreement (i.e. a partnership agreement).
Another popular structure adopted by people running an eBay business from home is the proprietary limited company,
A proprietary limited company is recognised as a separate legal entity by law and is distinct from the owner(s) of the business (i.e. the shareholders).
The owners of the proprietary limited company (i.e. the shareholders) are issued shares in the company. While shareholders do have a say in how the business is operated, decisions relating to the day-to-day operation of the company are usually left to the board of directors.
A company is typically more expensive and time-consuming to establish when compared to a sole trader. There are also significant ongoing compliance obligations and costs associated with running a company.
Many people who run an eBay store from home start as sole traders but as their business grows, they may decide that a company structure would be more appropriate. In this case, the business owner will need to take steps to transfer the ownership of the business to the new company.
Trusts are an often misunderstood business structure.
There are several types of trust structures but the most common would be discretionary trusts and unit trusts.
A discretionary trust in Australia is a legal arrangement where a trustee (usually an individual or company) holds and manages assets on behalf of beneficiaries.
The trustee has the discretion to determine how and when to distribute income and assets among the beneficiaries. The beneficiaries have no automatic entitlement to the trust’s income or assets, and the trustee can choose who receives distributions based on the trust deed’s terms and the trustee’s judgment.
This type of trust may offer flexibility and tax advantages, making it a popular choice with families that are running an eBay business from home.
It is important to distinguish eBay businesses from private eBay sellers who are privately selling items to other individuals via the eBay platform but not running a business. In these circumstances, the ACL is unlikely to apply.
The ACL can be complex and you should consider speaking with a lawyer.
The specific legal agreements needed when running an eBay business from home will depend on several factors including the type of business you have and the types of products you sell.
For example, if you are sourcing products from a manufacturer or supplier, it makes sense to have a manufacturing or distribution agreement in place to protect your rights.
A manufacturing or distribution agreement will usually include terms such as pricing of the goods, types of products being supplied, the passing of risk and title, freight, process for placing an order and making payments, and the dispute resolution process.
If you are needing to borrow money in order to fund the growth of your eBay business, your lender will ask you to sign an agreement with them before they advance you the money. Key terms include the loan amount and purpose, the interest rate and repayment terms, penalties for late payments, collateral/security, prepayment terms, default and remedies, and personal guarantees.
Before you sign any legal agreement, make sure you seek legal advice and don’t feel pressured to sign anything until you do.
Running an eBay business from home comes with its own unique set of risks and, in some cases, it makes sense to have insurance when running an eBay business from home.
Common risks include:
- Product Liability – for example, if a defective product you sell causes harm to another person;
- Shipping or Transit – for example, if an item you have sold is lost or damaged during transit
- Public Liability – for example, if someone is injured in connection with the operation of the eBay business from home; and
- Property Damage – for example, if property is damaged or stolen in connection with the operation of the eBay business from home.
There are insurance products available that can help mitigate different types of risks.
For many eBay sellers just starting out, weighing up whether the cost of insurance is worth it when their business is so small, can be a challenge.
While it is often the case that the cost of insurance cannot be justified for smaller businesses that only sell a low volume of products that are unlikely to cause any harm, there are some insurances that should be obtained.
These include property and/or home contents insurance and shipping insurance. It is worth talking with your current property/home contents insurance and make sure that your policy covers your business activities. It is often the case that you will need to notify the insurance company if you are running an eBay business from home and possibly pay an adjusted premium to reflect this.
Shipping or transit insurance is also important to protect yourself in a situation where your sold items are lost or damaged in transit and you are required to refund the buyer. Insurance coverage in this situation will help curb your losses.
The money you earn from your eBay business is likely to be considered assessable income, and you are required to report it in your annual income tax return.
If your eBay business has an annual turnover of $75,000 or more, you must register for Goods and Services Tax (GST) and charge it on your sales. Additionally, being GST-registered allows you to claim GST credits for any GST paid on business expenses, which may help reduce your overall tax liability.
To ensure compliance and accurate reporting, maintain detailed records of your eBay business transactions, including sales, expenses, and GST collected or paid.
Keep track of eBay fees, shipping costs, packaging materials, and any other business-related expenses as they may be eligible for deductions, reducing your taxable income.
Consulting an accountant can provide valuable guidance tailored to your specific eBay business and help you navigate tax complexities while maximising deductions and managing GST obligations. Staying informed and organised will help you fulfill your tax responsibilities efficiently and avoid potential penalties for non-compliance.
If you are looking for legal advice and don’t know where to start when hiring a lawyer, check out our tips for hiring a lawyer that will save you time and money.
When done right, eBay selling can be quite lucrative and a lot of fun. Take some time to plan out your eBay journey and you will be well on your way to building a successful eBay store.
If you found this article helpful, have further questions, or just want to say ‘hi, please feel free to get in touch with us through the comments.
Happy eBay selling!