Starting a new online business is so exciting. Starting a dropshipping business in Australia – even more. You can finally turn your big dream into reality and take ownership of your work life. You can manage your own schedule and workload without having anyone breathing down your neck.
Although it sounds attractive to work for yourself, it may be hard to consider jumping from the comfort of your full-time job into the unknown. The truth is that when you work for yourself, you’ll face challenges that you don’t often have to deal with when working for others.
You will have to do a few crucial tasks as long as you want to become your own boss. In short, you will have to make sure your business complies with all the legal responsibilities and obligations.
If you want to start your own successful dropshipping business in Australia, then this article is for you. But before taking you through each step of setting up a dropshipping business in Australia and helping you learn more about what it takes to get it up and running, let’s reveal some interesting facts about this country and its e-commerce market.
Australia’s Population and Economy
While Australia is the sixth-largest country by total area in the world, it is not a densely populated country. The population size of Australia is now more than 25.7 million people, according to UN data. Despite being home to just 0.33% of the total world population, the country held its place as the world’s 13th-largest economy in 2020.
Australian E-Commerce Market Size
Australian e-commerce market size was valued at US$26 billion in 2020 and is anticipated to reach US$29 billion in 2021. It is expected to grow at a compound annual growth rate (CAGR) of 4.22% from 2021 to 2025, contributing to a projected market volume of US$35 billion by 2025. These numbers are an indicator that online shopping is a popular activity in Australia. By the looks of it, e-commerce in this country will continue to grow for years to come.
Internet User Penetration
While the country’s internet penetration rate has remained stagnant since 2015, the overwhelming majority of Australians are internet users and the number of people who actively use the internet in the country is expected to exceed 21.5 million by 2025.
Preferred Payment Methods
The good news is that Australians tend to easily adopt a wide array of emerging e-commerce techniques. From making purchases via social media channels to using electronic payment methods. So the usage of credit cards remains high in Australia. To be more specific, credit cards are the most preferred payment method in the country, accounting for over 53% of all online purchases in 2020.
Now, let’s discuss how to start your own successful dropshipping business in Australia while complying with the country’s existing national laws and regulations. You do not want to deal with legal problems when setting up an online business in this country, right? So, here is what you need to do:
Choose the Right Business Structure for Your Dropshipping Business In Australia
First things first – what is the right business structure for your dropshipping business in Australia?
Choosing the right structure for your business is crucial because it can have a huge impact on the level of personal liability you will incur, the level of control you will have when it comes to making important business decisions, the types of taxes you will have to pay, the legal and regulatory obligations you will have to manage, the way profits and losses will be shared, etc.
In this country, there are four types of business structures, each with different pros and cons. Sole Trader, Company, Trust, and Partnership.
- Sole Trader
A sole trader is not a legal entity and, therefore, it is the simplest business structure under which you can operate a business in Australia. Being a sole trader means that you are the only proprietor of your business.
This business structure is easy to set up and requires less paperwork and fewer set-up costs. It gives you full control over your assets and business decisions, but it does not give you much protection if something goes wrong.
As a sole trader, you are responsible for all legal aspects of operating your business, which means that you have unlimited liability for debts and are personally liable for any loss your business makes.
This is a type of business structure that involves two or more people that run a business together and distribute profits and losses between themselves.
This business structure is not very expensive to set up and operate. You and your partners have unlimited liability when operating a partnership and are personally responsible for your business debts.
Unlike a partnership or a sole trader structure, this is a more complex business structure, since it is a legal entity.
This business structure makes your company a separate legal entity from you. It requires more paperwork and can be pricey to operate. However, it provides some asset protection.
To put it simply, in case of any legal actions and company debts, only your company assets are at risk. This business structure is perfect for those who want to grow and scale their businesses.
This is not a separate legal entity and can be pricey to set up and operate. This is a type of business structure where an individual (a trustee) carries out the business on behalf of other people (beneficiaries.)
If you want to set up a trust, then you, as a trustee, will be legally responsible for the operations of your business.
Choosing the right structure for your online business is one of the most important decisions you will have to make, so it is advisable to consult a legal and financial expert such as a business advisor, a solicitor, or an accountant before making any final choice.
Obtain an Australian Business Number (Abn) And Register a Business Name
Once you have selected your business structure, you need to obtain an Australian Business Number (ABN) and register a business name.
You must obtain an ABN to legally operate a business and sell products online in the country. An ABN is an 11-digit number, which’s unique to your business.
This number is easy and free to register online. It confirms your business identity. With an ABN, you can also register an Australian domain name for your website. Moreover, many suppliers will refuse to cooperate with you unless you have this number.
Once you have obtained this number, then you need to register your business name. Although you can apply for your ABN and register a business name separately, you can also do both simultaneously through the Business Registration Service.
Your business name must be unique. This means that it cannot be identical to the name of an existing business, a website, or a trademark.
So, go to the Australian Securities & Investments Commission (ASIC) business names register to check if the name you want for your online business is available. You should also check if the name is not already a trademark or a website name.
Depending on the type of products you are about to sell online, you may also need to apply for other business licenses & permits. Visit the ABLIS (the Australian Business Licence and Information Service) for more information on this topic.
Become Familiar With the Taxes and Regulations for Selling Online and Register for the Right Ones
Taxes are unavoidable if you are interested in selling physical goods online in Australia. Understanding the tax obligations for your online business can save you money in the long run. So, read on!
The Australian Taxation Office (ATO) administers and collects taxes in this country. In some cases, this is done by the state government revenue offices. The most common taxes paid by businesses in Australia include Goods and Services Tax (GST), Income Tax, and Capital Gains Tax (CGT). These types of taxes are administered by the Australian Government.
As a dropshipping business owner, you can choose to pay your taxes every month, every quarter, or every year. Well, first you’d have to find products for your dropshipping store. However, whether you want to sell branded clothing or pet products, you have to register for the right taxes to avoid penalties. That’s why you need to consult an accountant. For more information regarding taxation, go to this page.
Once you have your online store ready to “go live”, it is important to ensure that you have all the necessary legal information available. You should do that if you want to be honest and fair with your customers. It’s crucial for protecting your business as well.
Before “getting online”, you should make sure that you are not misleading your customers about what you are selling. Australian law requires you, as a website owner, to set the terms for your customers that buy products on your website and make sure the products are as described. You can do so by displaying “Terms and Conditions” on your website.
You should also respect and protect the privacy of people, regardless if they want to make a purchase or not. Keep in mind that the Office of the Australian Information Commissioner (OAIC) actively monitors Australian websites.
Understand How Australian Law Can Affect Your Business When It Comes to Refunds and Returns
Refunds and returns are typically part of the Terms & Conditions on many e-commerce websites. If you want to sell physical goods as a dropshipping business in Australia, you need to understand how the Australian Consumer Law (ACL) can affect your business when it comes to refunds and returns. According to the ACL, you, the seller, have to provide a refund, repair, or replacement if a product is faulty. This also applies if it does not match its description.
For instance, if a customer ordered a jacket from your online store and the jacket arrived with a stain on it, the product could reasonably be considered faulty. If this happens, you need to provide either a refund or deliver a new jacket to your customer. This means that you should be generous with your return policy to comply with the ACL. In addition, focus on meeting the expectations of your Australian customers.
So it is a good idea to choose a supplier with a flexible return policy. Before partnering with the supplier, you should discuss and agree upon the product returns process. This is important to avoid conflict and create effective collaboration. It’s crucial to do and yet it’s still one of the biggest mistakes in dropshipping most people make.
Australia has seen an online boom over the last few years, especially in e-commerce. One of the wealthiest Asia-Pacific nations, Australia is a great place to start your first e-commerce dropshipping business.
When starting a new business venture in this country, you need to make sure you can provide a simple, fast, and hassle-free online shopping experience to meet the needs of your Australian consumers as well as comply with all the legal obligations of operating a dropshipping business in Australia.
As you can see, there are a few legal requirements for a dropshipping business in Australia. So, ensure your new online business complies with all its legal responsibilities. Then focus on succeeding in the commercial marketplace.