Merchant of Record for Australian SaaS: GST and BAS Guide

By Sergiy Kucherenko CPA, Director, 42 Advisory. Last updated 06/10/2026. Provider fees checked 06/10/2026.

You have just moved your SaaS billing to a merchant of record. It now collects tax from your customers in the countries it covers. Your Australian BAS is a separate question.

So what goes on the BAS now? The answer depends on the legal model in your provider agreement. The provider may be a reseller. It may be a platform treated as the supplier under the GST Act. Or it may only process payments, leaving you as the seller. This guide works through each model, then covers fees, chargebacks, US tax and the month-end reconciliation.

What Is a Merchant of Record for SaaS?

Two providers can both use the label and still split legal responsibility differently. That split drives three things for an Australian business: your GST code, your revenue figure and who carries a chargeback loss.

Ordinary Stripe Payments is a payment processor, not a merchant of record. With it, you remain the seller. You are responsible for tax in every country where you have an obligation.

Paddle vs Stripe vs Lemon Squeezy: How Do the Models Differ?

Paddle. Clause 2.1 of the Paddle master services agreement appoints Paddle as the seller's reseller. So there are two sales: you to Paddle, then Paddle to the customer.

Stripe Managed Payments. This is a separate product from ordinary Stripe Payments. Stripe's Managed Payments guide says customers see Link as the merchant of record, marked "Sold through Link". As at October 2026, it covers tax in more than 80 countries. The Managed Payments eligibility rules allow direct integrations selling digital products. They exclude Connect platforms, consulting and services that involve human delivery.

Lemon Squeezy. Its January 2026 update says its goal is to give users an easy way to migrate to Stripe Managed Payments. No closure date had been announced as at October 2026. A new Australian seller should factor that direction into the choice.

Who Accounts for Australian GST When You Use a Merchant of Record?

Model 1: an offshore reseller

When a non-resident reseller buys your SaaS, your supply is to the reseller. Item 2 in section 38-190(1) of the GST Act can make that supply GST-free. It covers supplies (other than goods or real property) to a non-resident who is not in Australia when the thing supplied is done.

Section 38-190(3) limits this. Item 2 does not apply where the supply is provided to another entity in Australia. The exception is an Australian-based business recipient. That is an entity registered for GST, carrying on an enterprise in Australia, and not acquiring the thing solely for a private or domestic purpose.

The ATO's view is in GSTR 2025/1, issued 23/07/2025. In practice, if a reseller sells your software to Australian consumers, part of your supply may be taxable. Any GST the reseller collects from those customers relates to its own sale, not yours.

Model 2: a platform treated as the supplier

Section 84-60 of the GST Act covers sales made through an electronic distribution platform. The supplier and a GST-registered platform operator can agree in writing, before the supply, that the operator is treated as the supplier. The operator then accounts for GST on those taxable sales, not you.

There are limits. The agreement cannot cover GST-free or input-taxed supplies, so export sales stay with you. Paragraph 59 of the ATO's LCR 2018/2 gives an example. An Australian app developer selling through a platform is responsible for GST on its app, unless it has entered such an agreement.

If a provider says it accounts for GST on your Australian sales, ask which clause does that. Ask what statutory basis it relies on. Keep a copy of the answer on your tax file.

Model 3: you remain the seller

With ordinary payment processing, you are the supplier to every customer. If you are registered, you charge 10% GST on taxable Australian sales. Sales to overseas customers may be GST-free under item 2, subject to the same section 38-190(3) test.

Where the amounts are material and the agreement is unclear, we recommend considering an ATO private ruling on the actual contract. Our SaaS accounting team can review a provider agreement on this point before you migrate.

Do GST-Free SaaS Sales Count Towards the A$75,000 Threshold?

The duty to register is in section 23-5 of the GST Act. The ATO's registration guidance sets the threshold at A$75,000 of GST turnover.

Section 188-15 leaves some supplies out of current GST turnover. They include input-taxed supplies, supplies not made in connection with your enterprise, and supplies not connected with Australia. GST-free supplies are not on that list, so they stay in.

Measure turnover from the value of your own supplies. Under a reseller model, that is the price the reseller pays you, not customer billings and not the bank deposit. Registration also lets you claim GST credits on Australian business costs subject to the tax invoice rules.

How Are GST-Free Exports of SaaS Reported on the BAS?

GST on exports of services works differently from goods. The ATO's BAS sales instructions list GST-free services among the items not to report at G2. SaaS is a service. Before your first BAS on the new model, check which BAS label each Xero tax rate reports to.

On fees, read each invoice rather than assuming 1/11. Stripe's Australian pricing page states its card fees include GST. Stripe issues separate monthly invoices for Managed Payments, so check the GST shown on each.

A business that acquires offshore services solely for a creditable purpose is generally outside the ATO's reverse charge rules. Our BAS and IAS service can set up these tax codes with you.

How Much Does a Merchant of Record Cost an Australian Seller?

Headline rates are only a starting point. Some providers charge their percentage on the tax-inclusive order total. Stripe's Managed Payments pricing note says its fee applies to the full amount, including indirect taxes. Lemon Squeezy's fee schedule says the same of its fee.

Source: each provider's published pricing, checked 06/10/2026. Stripe figures are AUD; Stripe states its card fees include GST; Stripe has flagged lower international card pricing from 01/04/2027. Other figures are USD.

Worked example: 100 US subscribers at US$100 a month

Take a Melbourne SaaS business with 100 US-card subscribers paying US$100 a month. That is US$10,000 of monthly sales. Assume no sales tax on the order, no refunds and published rates as at 06/10/2026.

1. Paddle: 5% is US$500. Add 100 × US$0.50 = US$50. Total US$550 (5.5%), before currency and payout costs.
2. Lemon Squeezy: 5% plus the 0.5% subscription surcharge is US$550. Add US$50 in fixed fees. Total US$600 (6%), before the 1% fee on payouts to a non-US bank.
3. Stripe Managed Payments, Australian account: 3.5% international card + 3.5% Managed Payments + 0.7% Billing = 7.7% of sales. Add 100 × A$0.30 = A$30. Stripe charges these fees in Australian dollars. Adaptive Pricing, on by default, avoids Stripe's 2% merchant conversion fee.
4. Creem: 3.9% is US$390. Add US$40. Total US$430 (4.3%), before payout and currency costs.

On these published rates, the cost runs from 4.3% (Creem) to 7.7% plus A$30 in fixed fees (Stripe Managed Payments). On US$120,000 of annual sales, each percentage point is US$1,200. Fixed per-transaction fees weigh more on low-priced subscriptions, and non-US card surcharges apply to non-US customers, so your own mix can change the order.

We recommend running the comparison on your last 12 months of transactions, in your settlement currency. Our forecasting service can model the fee and cash-timing difference in a 3-way forecast.

Who Pays for Chargebacks and Refunds?

Paddle's chargeback policy says its automated defence does not accept extra evidence from sellers. Stripe's Managed Payments guide says it may refund a customer without your approval if you miss a 48-hour support escalation. Someone in the business needs to own that inbox.

Sound controls apply whichever provider you choose. Check how the provider's name appears on customer card statements, and send clear renewal reminders. Offer an easy way to cancel. Keep records of sign-up, terms acceptance and usage.

What US Tax Obligations Remain for an Australian SaaS Company?

US sales tax is set state by state, and SaaS treatment varies. As at October 2026, New York treats remote access to prewritten software as taxable, per its computer software bulletin. Texas taxes SaaS as a data processing service, with 20% of the charge exempt.

California does not tax SaaS as at October 2026. From 01/01/2027, its definition of taxable property expands to include digital products, as the CDTFA's notice on digital products explains. Washington's remote seller rules require sellers with more than US$100,000 of Washington receipts to file for its business and occupation tax. This applies even when a marketplace collects the sales tax.

For income tax, Articles 5 and 7 of the Australia–US tax treaty deal with permanent establishments and business profits. US staff, an office or dependent agents can create a permanent establishment. US Treasury regulations finalised in January 2025 classify cloud transactions as services. Where a payment is a royalty instead, Article 12, as amended by the 2001 Protocol, limits US tax to 5%.

If the provider requests it, the company gives a Form W-8BEN-E to certify its foreign status. It is not sent to the IRS. Where the US position is uncertain, a protective Form 1120-F can preserve deductions. These are US questions, and we recommend confirming them with a US tax adviser.

For Australian income tax, the starting point does not change with the provider. A resident company is assessed on worldwide ordinary income under section 6-5(2) of the ITAA 1997. Foreign currency amounts are translated into Australian dollars under section 960-50.

How Do You Record Merchant of Record Payouts in Xero?

A payout can combine several weeks of sales, less fees, refunds, disputes and taxes. AASB 15 paragraphs B34 to B38 set the principal-versus-agent test.

If you control the software before it reaches the customer and the provider acts as your agent, revenue is generally the gross customer price. The provider's fee is then an expense. If a reseller buys from you, your revenue is generally the price the reseller pays you.

Simplified illustration. Excludes customer tax, refunds and deferrals.

Annual plans paid upfront are generally recognised over the service period under AASB 15 paragraph 35(a). Our guide to SaaS revenue recognition covers this in detail. For clearing-account mechanics, see our post on gross versus net payouts.

Keep each provider's source documents. Paddle supplies a payout reconciliation report itemising fees, taxes and adjustments. Stripe issues three monthly invoices for Managed Payments, including a self-billed reverse invoice.

Standard Stripe Tax reports exclude Managed Payments volume. If you run direct and Managed Payments sales side by side, export both. Our bookkeeping team can run this reconciliation monthly.

What Should You Ask a Merchant of Record Before You Sign?

• Which legal entity contracts with us, and is it a reseller, an agent or a platform operator?
• How are Australian end users treated, and is there a written s 84-60 agreement?
• Are our product and every target country and US state covered for tax?
• What is the total cost on our actual transactions, including payout, currency and dispute fees?
• When are payouts made, and can reserves or set-off be applied?
• Can subscriptions and payment details move to another provider if we leave?

Payout timing affects working capital. As at October 2026, Paddle's payout guide says payouts are created on the first of each month and sent by the 15th, once the balance passes the minimum threshold.

If you would like us to review a move, send us four things: the provider agreement, a sample payout with its transaction export, a customer breakdown by country, and your current Xero tax rates. Founders still choosing a structure may find our startup accounting service and our SaaS accounting guide useful.

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