What is an ABN?
An ABN, which stands for Australian business number, is a unique 11-digit number that not only identifies the business to the government, but also to other businesses and community organisations.
It is a legal requirement to hold an ABN when operating a business in Australia. The number is used on invoices and orders when liaising with contractors and suppliers, as well as to claim goods and services tax (GST) credits, claim energy grants credits and even to secure an Australian domain name for a website. It can also be used to avoid pay as you go (PAYG) tax on payments received, to obtain a trademark and to apply for other business registrations.
It is a publicly listed number, so that others can check business details. For example, a business may want to check that they have the supplier details correct, or ensure the business that they are dealing with is legitimate. As each number is unique to the holder, an ABN can also help other businesses and customers distinguish your enterprise from others that may have a similar name.
An ABN should not be confused with an ACN, which stands for an Australian Company Number and is assigned only to companies. However, a company will still need an ABN.
Registering for an ABN can be done using the Australian Government’s Business Registration Service. It is a free service and only takes a few minutes to complete.
When to register for an ABN
A business owner needs to have made some kind of start to their business to register for an ABN but does not need to have secured their first customer or client or have completed any work for them.
To have started, the business owner may have issued a quote, ordered business cards or stationery, or set up a social media account for their business. Applicants cannot register if they have a good idea for a business but are yet to take any action to see it actualised.
When buying another business that is already in operation, a new ABN must be obtained, as ABNs cannot be transferred or sold with the business. This can be done during the business purchase process.
It is best to register before being paid for goods or services, as if the payment is more than $75 (excluding GST), other businesses are legally required to withhold tax from businesses that do not provide an ABN. The tax withheld must also be charged at the top tax rate of 47%. While the correct tax may be charged later and a refund provided, not having access to these payments immediately may limit cash flow. An ABN can also be used to gain tax deductions for purchases made while running the business, so the sooner it is obtained, the sooner deductions can be acquired.
As soon as the application process is completed online, the business owner will be advised whether their registration is successful or not. If more information is required or their identity cannot be confirmed, a reference number will be issued and the Australian Tax Office (ATO) will review the application within 20 business days and may contact the applicant to continue the process.
What information is needed to register for an ABN?
To obtain an ABN, business owners need to do a little preparation before filling in the form.
First, gather some details that will be required during the process. These include the tax file number (TFN) of the applicant as well as those of any partners or directors who will also be involved in the business. If using a registered tax or business activity statement (BAS) agent, or other advisor, ask them for their registered agent or licence number, as that is required too. If the applicant has previously held an ABN, have this to hand.
Business owners also need to know what kind of structure their enterprise will have. The four commonly used business structures in Australia are sole trader, partnership, company and trust. A sole-trader operation is solely owned by one person, although they may have employees. A partnership is when two or more people, or an association, run a business and share the income and losses from it. A company is a separate legal entity that has its own tax and superannuation obligations, owned by shareholders and run by directors. A trust is an obligation that is imposed on a person, or an entity, to hold and manage property for the benefit of others. A trustee runs it.
A date on which the business is expected to start its operations is required, so applicants can register in advance of an official launch day or start date. However, this date cannot be more than six months in advance of applying for an ABN.
Basic business contacts, activities and location need to be provided too, so be prepared to have the name of the business that will appear on official documents or legal papers, the business contact details including a postal address and email address, the location where the business will be operated from, and know which activity or industry the business is operating in, such as agriculture or accounting.
The application process can be started online and saved to continue later if not all the information is available, however this will cause a delay to an ABN being issued.
What to do if an employer asks for an ABN
Workers who do the work as an employee, such as an apprentice, trade assistant or labourer, are not entitled to an ABN. Even if the employer decides the worker is carrying out the work as a contractor, or asks a person to obtain an ABN as a condition of employment, the worker is not entitled to an ABN. If unsure whether the work undertaken is as an employee, the Australian Taxation Office provides guidance on the differences between an employee and contractor.
Other things to keep in mind
ABN holders must ensure that their information remains up to date, and if anything such as contact details or the business location changes, they have 28 days in which to update their details.
If the business structure changes, such as a sole trader goes into partnership with another person to become a partnership, a new ABN needs to be acquired. However, a person or group who already holds an ABN may conduct more than one business under the same ABN, provided that it is being operated under the same business structure. For example, a sole trader may have several businesses that they run themselves, that all operate under the one ABN. Further businesses that operate under different structures need a separate ABN. A person can hold more than one ABN.
If a new partner is acquired in a partnership, or one of the partners leaves, a new ABN may not be required – it will depend on whether the business maintains its structure.
How to apply for an ABN
Once all the information is prepared and the business is underway, visit the Australian Government’s Australian Business Register website and complete the form.
If the registration is rejected, a refusal number and a letter will be issued detailing the reasons for the refusal as well as possible options, such as review rights.
If still unsure about whether to apply for an ABN, an accountant or lawyer can provide professional advice.
Once an ABN is received, business owners can proceed with their business knowing that another task has been completed on their to-do list and they can start making it a success.
