An ABN (Australian Business Number) is an 11-digit number that the government and community uses to identify your business from others. According to the ATO (Australian Taxation Office), having an ABN is crucial for all companies in the country. This way, they can interact with all government levels with ease.
If you run a business in Australia, it’s crucial to know how having an ABN can affect your tax return.
What is the ABN and Who Needs It?
Before anything else, you should understand that an Australian Business Number is not the same as a Tax File Number (TFN). If you are a business owner, you may be required to get these two separate documents. Although different, you may also need an ABN for business and tax purposes, just like with TFN.
In general, businesses in Australia must carry an Australian Business Number. You will need to get in touch with the Australian Business Register (ABR) to get the number. Although ABNs are a requirement, it does not apply to everyone.
Business visa holders who plan to start a business in the country should apply for an ABN. Likewise, those who want to manage a business in Australia should carry this number as well. However, people who work as employees in the country are not required to get an ABN. It is not a prerequisite either to those who use the resources of their employer to operate their business.
Not everyone can get an ABN. If you applied for an ABN and it was not successful, it may be because you do not fit in any of the following requirements:
- You should begin or continue an enterprise in the country
- You create or offer supplies to Australia as well as the regions connected with the indirect tax zone
- Your business is defined as a Corporations Act company
The indirect tax zone includes Australia itself. However, it does not involve external territories. Some offshore areas are also not included in the list. As for the Corporations Act, companies under it are registered with the ASIC.
What exactly is it though? An ABN with its 11 digits classifies the businesses. This number is essential in commercial dealings and transactions that are performed with the Australian Taxation Office.
Australia is a large country with a growing population. It is entirely possible that one business, especially smaller ones, could have a similar name to another. An ABN means the government, customers, community, and even the business itself knows it is dealing with the right entity.
All businesses in Australia have an ABN, except for those mentioned above. No matter what the size, structure, and other factors, ABNs are a necessity. If you deal with customers and you have a business that operates, you should carry its ID. This identification is none other than your ABN.
Aside from applying to get an ABN, you also need to ensure that it is updated at all times. Alongside the ABN, you should also complete your Business Activity Statement or BAS. Lodge these documents whenever necessary.
ABN vs ACN
ABNs and ACNs are easily confused with each other. While ABNs are for businesses, ACNs are for companies. Now, what is the difference? An ABN has already been defined above. People who want to run a business should get an Australian Business Number.
Meanwhile, an ACN stands for Australian Company Number. As the name suggests, this number is only for companies. For you to know the difference between ABN and ACN, you should understand that a business is not a company. These two terms, although can be quite confusing, are not the same.
To make it easier, a company is a specific type of entity. Other entities are sole trader businesses, trusts, and partnerships. Companies, just like other entities, carry on a business. However, not all businesses are companies.
Individuals would often say they run a company, but what they mean is trade solely. A sole-trader business is not a company. To be called a company, you need to have a particular business structure that is not the same as its owners. The company owners are easily recognisable because they are known as the “shareholders.” Directors are the people that typically run or manage a company.
When you have a company, you will be heavily monitored and regulated by ASIC. There are strict rules and regulations that you need to comply with. Trusts, sole traders, and other business entities also have stern rules to follow. However, they are not as strict as with companies. Directors who mismanage their companies can face either criminal or civil penalties – or both.
An ACN works almost exactly the same as an ABN. However, instead of 11 digits, ACNs are only made up of nine. Only companies can apply for an ACN. Another difference between these two lies in the organisations that handle them.
With the ABNs, the Australian Business Register (ABR) handles all applications. As for the ACNs, the Australian Securities and Investments Commission (ASIC) provides and issues the number. Just like ABNs, an ACN is primarily utilised to identify a company. It is why both the ACNs and ABNs have unique combinations of digits, making it easy to track all companies and businesses in the country.
ASIC uses ACNs for monitoring companies in Australia. Businesses are generally required to have an ABN. On the other hand, companies running business activities in the country may have to obtain both an ABN and ACN.
Before you run a company, you should first get an ABN. An exception here is if you will not conduct any business activities. For instance, if you will only hold assets, it means you will not be directly involved in making deals or transactions. Therefore, you do not need an ABN.
As for an ACN, it will be used as your ABN’s base number if you will run a company. Therefore, the two numbers will be identical. However, the ABN will have two more numbers at the beginning.
How to Get an Australian Business Number
Before you apply for an ABN, you should first decide the right structure of your business. Therefore, you should identify if it is a sole trader, partnership, or company.
The application requirements will depend on your circumstances. However, it will mostly involve the following:
- Your tax file number (TFN)
- If you have any associates, such as your trustees, directors, or partners, you should also provide their tax file numbers
- Tax agent registration number
- Legal name of your entity, which appears on its legal and official documents
- Authorised contacts, which can be your name or your tax agent. Note that if you provide the name of your tax agent, you give them the power to make modifications, such as updating certain details, on behalf of the business.
- Details of your associates if you will have partners, trustees, or any other person running the business
- Contact details of your business, including its address and postal address. You will also be asked to provide its email address and phone number. Be aware that the email address should have at least five to 200 characters. There should not be any spaces and should not begin with the words “Support,” “Info,” or “Sales.”
- Location of the business, apart from the main site. The address should include all the premises where your enterprise operates. Although it is required, you may be allowed not to divulge such information if it will threaten the risk of your business, workers, or clients. For instance, those who hold a women’s refuge can keep the details of their location in private.
If you already had an ABN before, you will need to provide it as well. The same goes with your ACN if you obtained it before you applied for a new Australian Business Number. The ACN may also be called an Australian Registered Body Number (ARBN). Companies and organisations should have an ACN, which they can get through the ASIC.
When you are asked about when the ABN of your business is required, you should provide the date when you expect to begin any business activity. It can be something as simple as buying stocks. The date you give should not exceed six months from the time you apply for an ABN.
You may also be required to provide your business activities, which denotes the main source of income. Examples include manufacturing, investment, construction, or agriculture. Self-managed super funds may not carry on a business. In this case, they may not be able to provide their main business activity or source of income.
Once you have all the requirements in order, you can apply for an ABN. Simply visit the website of the Australian Business Register and apply from there. If you already have an existing ABN and you wish to update it, you may do so at the same site.
The application processing is quick and easy. If you have provided your tax file number, along with the other important requirements, you can get your Australian Business Number without waiting long. Since lodging is performed online, you can receive the number in just a few hours to a few days.
However, not all applicants or businesses have all the information required. It does not mean you cannot apply for a business number in the country. You can simply begin the application process on the website and save the details you have provided. You can come back to it when you have compiled all the needed documents. It is convenient but issuing the number will be delayed.
To make sure that the number will be delivered to you promptly, you should follow the instructions carefully. Once you have been approved, you can get the following benefits:
- You will receive your Australian Business Number
- You can print the information you have received or save your ABN details
- You can apply for other registrations that are suitable for your business, including Goods and Services Tax (GST)
- You can also claim credits for energy grants
- If you have an online business, you will benefit from the ability to obtain an Australian domain name
- ABN also allows you to avoid Pay as You Go (PAYG) tax on every payment you receive from your customers
- The Australian Business Register will immediately add your details to its log.
- You can ask the ABR to keep certain details in private if you are worried about the security of your business
If your request to keep your details private has been denied, you may lodge an objection or appeal.
When you have your ABN, it is your responsibility to keep everything updated. Applying for an ABN is completely free.
Meanwhile, unforeseen events or reasons may lead to your application to be declined. You will get a refusal number, which tells you that your application is unsuccessful. Within 14 days, you should receive a letter from the ARB that confirms your application was not approved.
Use this letter to your advantage. It contains the reasons why your application was turned down. You will see if you can reapply, as well as the other options or actions you can take. Review rights will also be provided.
Reference numbers are given to those who have applied yet may have incomplete details. Applications are reviewed within 20 business days. Most of the processing is quick, but it can take as long as two to three weeks. You may be contacted if further information is required.
You can use an ABN lookup service to see if your ABN has been processed successfully.
What If You Have Multiple Businesses?
It is possible to start different business ventures even if you only have one ABN. The rule is that your business structure should be the same as the other enterprises that you have your ABN for. If you have various structures for your other businesses, you will be required to apply for individual ABNs for all ventures.
The current ABN you are using can get cancelled the moment you change the structure of your business. For instance, you applied for an ABN when your business was a sole trading enterprise. It will no longer be applicable once you change your company to a partnership.
If you feel it’s time to get your ABN Tax return sorted, the team at TaxReturn.com.au can make sure you get the biggest return possible.