Technically, if you are running your own business, it is compulsory to get an ABN. You will need an ABN if you are carrying out a business operation or enterprise, and not working for somebody else. You need an Australian Business Number (ABN) if you are planning to or are currently carrying out business for the purpose of gaining profit. You are required by law to register with the Australian Tax Office (ATO).
An ABN enables the ATO to keep track of all companies trading in Australia. You are expected to have a registered and active ABN if you would like to register a business name, set up a bank account, apply for a government grant and/or invoice your suppliers. An ABN is an 11 digit unique number allocated to a business. Most trading entities such as sole traders, partnerships, companies and trusts are eligible to register for an ABN.
Normally, most businesses generate income, which simply entails you will need to register a Tax File Number or TFN if you don’t already have one. A complete ABN registration is compulsory before applying for pay-as-you-go (PAYG) or goods and services tax (GST).
Also note that the ATO provides detailed guidance on ABN eligibility via the Australian Business Register website. You are entitled to an ABN if you are operating a business, rather than a hobby, and you are not carrying out business tasks for anybody else.
In Australia, the line between a hobby and a business can be very daunting to define. The ATO provides easy to understand information on the definition of a business. If you are treating an operation as a business and managing it in a businesslike manner with the intent of generating income, you are in business.
The Benefits of Having an Australian Business Number
Note that one of the key benefits is that you will save time and money. That is because other businesses are legally expected to withhold tax from payments to you if your business doesn’t quote an ABN on invoices. Therefore, they must withhold it at a rate of 46.5 percent.
So even though your business can claim back any excess tax paid in the tax return at the end of the year, it is not ideal for your cash flow. Having an Australian Business Number also means your business can:
- Claim GST credits (when registered for GST)
- Claim fuel tax or energy grants credits (if you qualify)
- Stay compliant and be able to lodge activity statements (BAS/IAS) with the ATO
- Confirm your business identity to others when ordering and invoicing
- Avoid pay-as-you-go (PAYG) tax on payments you receive (see below)
- Obtain an Australian domain name (for your .au website)
- Deal with other businesses more seamlessly.
How to Apply for an ABN
First note that there is no cost associated with registering an ABN. To apply for an ABN, fill out the online ABN application. The ABN registration process involves a series of questions that determine ABN eligibility. In addition to answering eligibility questions, you will also need to provide identity information. To complete your ABN application – depending on your circumstances – you will need your:
- Tax file number (TFN) and the TFNs of any associates – e.g. partners, directors and trustees.
- Tax agent registration number
- Professional advisor number – if you are using the services of a professional advisor, you can provide their licence number e.g. Australian Financial Services licence (AFS licence)
- Previously held ABN
- Australian company number (CAN) or Australian registered body number (ARBN). Companies and registrable organisations can register for an CAN or ARBN through the Australian Securities and Investments Commission (ASIC)
- Date your ABN is required. This should be the date that you expect to start any business activities – e.g. buying stock. This date can’t be more than six months in the future when you apply
- Entity legal name – appears on all official documents or legal papers
- Authorised contacts – e.g. the applicant or tax agent. They must be authorised to make changes or update information on behalf of the entity
- Associates’ details – associate requirements are different for each entity type
- Business contact details including an address, postal address, and email address and telephone number. Your email address must meet requirements such as; being between 5 – 200 characters, contain no spaces and not start with “support@”, “Sales@” or “info@”
- Business activity – usually the main source of income for your enterprise e.g. agriculture, construction, investment and manufacturing. Self-managed super funds may not be carrying on a business and therefore might not have a main business activity
- Business locations – provide business locations for all premises operated by your enterprise, unless there’s a risk to safety of individuals as a result of the disclose e.g. a women’s refuge.
Once an ABN is issued to an entity, it will always remain the same. Although an ABN should be deactivated if the entity ceases to trade, it can always be reactivated in future. Registering for an ABN is not hard at all and only takes a few moments of your time. All that is required is to answer a series of questions about your business and the individuals who are responsible for the business.
Once this is complete, the ATO will send you a confirmation via the post with your 11 digit ABN; this can take up to 28 days. Once you’ve got an ABN, it falls on you to make sure your details are up to date. You should update your ABN details within 28 days if any of your key business details change, although it is important to note that if you change your business structure (i.e. go from a sole trader to a partnership), you will need to apply for a new ABN.
Australian Business Numbers are publicly available on the Australian Business Register. You can check an entity’s ABN by going to ABN Lookup, which is a website that gives the public access to information on the ABR. You can search by business name or by ABN, and you will be able to see current and historical details about the entity – including its business structure, whether it is registered for GST, where it is located, and how long it is been active.
An Australian business number (ABN) registration is important for any business operating in Australia. The ABN is an 11-digit number used to identify the business both to other companies and to the Australian Taxation Office. The process to undergo when you apply for an ABN is quick and convenient.
To avoid unnecessary delays, you must ensure all your entries in the ABN form are correct and truthful. Remember, ABN is a compulsory requirement to do business in Australia, and getting it is a top priority in moving forward to achieve your start-up goals.