An Australian Business Number ABN is a unique 11 digit identifying number issued to you by the Australian Taxation Office. You use your ABN when dealing with government agencies, other businesses and the community.
Depending on your business structure, you may also need a Tax File Number, but there are differences between when you use these identifiers and while ABNs are publicly available, Tax File Numbers only need to be provided in limited situations (usually only to the ATO or your bank or employer).
Note that not everyone is entitled to an ABN. You need to meet certain requirements, being they are carrying on or starting an enterprise in Australia and making supplies (of goods and services) connected with Australia.
A company registered under the Corporations Act is also entitled to an ABN, regardless of whether it is carrying on an enterprise.
Carrying on or starting an enterprise in Australia
An enterprise includes activities done in the form of a business, so running a business or engaging in commercial activity, like selling goods and services as well as some other activities, including:
acting as the trustee of a super fund
operating a charity
renting or leasing property (commercial).
To be eligible for an ABN if your business or enterprise is just starting out, before you can apply you need to have undertaken business-like activities towards starting your business, so some of the following:
setting up a social media account or a website for the business for advertising
buying business cards or business stationery
arranging any business licences or insurances (public liability and professional indemnity)
purchasing equipment or stock
leasing or purchasing a business premises
bidding for work
consulting with your accountant or financial advisor
applying for finance
buying an already established business.
Renting Residential Property
You don’t usually need an ABN if you are renting out an investment property even though it is an ‘enterprise’, as you usually don’t have GST or PAYG obligations to meet.
Employee versus contractor
If you are an employee you are not entitled to an ABN, even if your employer asks you to get one. Some employers request this to illegally lower their labour costs which affects your rights as an employee and denies you some entitlements such as annual and sick leave, you may not receive superannuation payments, you may not be covered by workers compensation, and you may be responsible for paying your own tax to the ATO.
How do I use my ABN?
Among other things, you use your ABN when you:
Sending tax invoices to other businesses or the public
Place orders with other businesses
Setting up a website and applying for an Australian domain name
Claiming credits for GST on your Business Activity Statement
Quoting your ABN avoids business clients withholding 47% from your payment
You can check an entity’s ABN by going to the Australian Business Register website ABN Lookup as ABNs are publicly available. You can see current and historical details about the entity – such as their business structure, whether it’s registered for GST, where it’s located, and how long it’s been active.
It is free to apply for an ABN and you can apply online yourself however we recommend consulting a registered tax agent, which HelloLedger is, to make sure all your details are correct on the application and we can arrange for other registrations you may need such as GST, PAYG withholding and Business Name and also make sure that your business is set up with the best structure eg sole trader, partnership, company, trust before you start.
We also recommend that if you are starting a new business, you register for an ABN before you begin to incur business related expenses to ensure you track all of your business expenses from day one of your commencement activities.
So contact HelloLedger for advice and we'll get your new business up and running with everything set up correctly from the start.