Accounting and tax for dropshippers.
You can generally claim your advertising spend, platform subscriptions and payment fees against your dropshipping income, provided each one relates to earning it and you keep the records. This guide covers what dropshippers typically claim, how GST works when you never physically hold the stock, and how we help you see your real margin once ad spend and platform fees are properly accounted for. We're Brisbane based and work with dropshippers right across Australia.
Updated July 2026 · Reviewed by the LINK Advisors team
What dropshippers can claim.
Ordered by typical value. Every claim still has to pass the ATO's tests: you paid for it, it relates to earning your income, and you can show a record.
Advertising spend
Meta and Google ad spend used to drive traffic to your store is generally deductible and is usually the single biggest cost in a dropshipping business, often larger than the product cost itself.
Platform and app subscriptions
Your Shopify or store platform subscription, along with dropshipping and automation apps used to source and fulfil orders, are generally deductible.
Payment gateway and transaction fees
Fees charged by your payment processor on each sale are generally deductible.
Product samples and testing costs
Samples ordered to test product quality before listing them for sale are generally deductible as a cost of researching what to sell.
Website and domain costs
Domain registration, theme costs and any development work on your store are generally deductible.
Customer service software and tools
Subscriptions to help desk, chat and order tracking tools used to manage customer enquiries are generally deductible.
Virtual assistant and contractor costs
Payments to contractors or virtual assistants handling customer service, order processing or content are generally deductible.
Refunds and chargeback costs
Refunds you issue and any fees associated with payment disputes or chargebacks are generally deductible as a cost of running the business.
Accounting and bookkeeping fees
Fees for the accounting support that keeps your margin numbers accurate are generally deductible.
GST and BAS, done right.
GST on your sales works the same way as any other online store: domestic sales to Australian customers are generally taxable once you're registered, and export sales to overseas customers are generally GST-free. Not physically holding the stock doesn't change how GST applies to the sale you make to your customer.
Where dropshipping differs is on the buying side. Many suppliers, particularly those overseas, don't charge Australian GST on what they sell you, so there's often no GST credit to claim on your biggest single cost, the product itself. Most of your GST credits instead come from local costs: advertising, platform fees and any Australian-based services you use, and even some of those can carry their own nuances if billed by an overseas entity - worth checking with us rather than assuming.
Because margin per order is often thin once ad spend and platform fees are counted, it's worth having your Xero set up to show true profit per product line, not just total revenue. A healthy top line with a shrinking margin is the classic dropshipping trap, and it only shows up if your numbers separate ad spend and fees from the sale price properly.
The right structure for the work.
Dropshipping businesses often start lean: low overhead, no warehouse, sometimes run solo alongside other work, which makes sole trader a sensible starting structure for most people testing the model. It's worth revisiting once ad spend and revenue scale to the point where a company structure's asset protection and profit flexibility start to outweigh the extra admin, particularly if you're reinvesting heavily in advertising rather than drawing profit out.
Run the work, we run the numbers.
Your store platform connected to Xero through a reconciliation tool, along with clear tracking of ad spend against sales, is what turns a dropshipping business from a revenue number into a real profit number. We help set this up so you can see, product by product, whether the margin after ads and fees actually justifies the traffic you're buying.
Frequently asked questions.
Why is my margin so thin as a dropshipper?
Between the supplier's product cost, platform and payment fees, and advertising spend to drive traffic, a lot of dropshipping revenue is spoken for before it reaches you. Seeing this clearly per product, rather than as one blended number, is usually the first step to improving it.
Can I claim my ad spend?
Yes, generally. Advertising spend used to drive traffic and sales to your store is deductible, and for most dropshipping businesses it's the largest single cost after the product itself.
Do I pay GST on products I never physically hold?
GST on your sale to the customer applies the same way regardless of whether you ever touch the stock. What's different is that many suppliers, especially overseas ones, don't charge you Australian GST, so there's often no credit to claim on the product cost itself.
How do I handle refunds and chargebacks in my books?
Refunds and any chargeback-related fees are generally deductible as a cost of doing business, but they need to be recorded properly against the original sale rather than just netted off in a lump, so your true return rate and its effect on margin stays visible.
What software fees can I claim?
Your platform subscription, dropshipping and automation apps, customer service tools and any contractor or virtual assistant costs used to run the store are generally deductible as ordinary business expenses.
Talk to an accountant who knows dropshipper businesses.
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