While there is a limitless amount of preparation required to start running your own business, there are some critical basic matters you need to attend to regarding your tax compliance and related matters. One of the key components to operating a business in Australia is an Australian Business Number.
The Rewards of Running Your Own Business
Creating, building, and running a small business is equal parts rewarding and challenging. There is a lot of personal satisfaction to be gained from nurturing your business and seeing it grow and the opportunity it provides your family, employees and other stakeholders connected to your business.
It provides you the freedom to be your own boss and make decisions which you believe are appropriate for your given field of expertise. It will allow you to build wealth and create something of value you can pass onto the next generation or sell for a financially comfortable retirement.
What is an Australian Business Number?
One of the key components to owning and running a business in Australia is an Australian Business Number (ABN), which you’ll need to apply for. This is a unique 11-digit number which allows the government and other businesses to identify who you and your business are.
Not everyone is entitled to an Australian Business Number. To be entitled to an ABN you need to be operating in Australia. You must have started trading or have commenced business-like activities towards the commencement of business-like trading activities.
If your activities are a hobby or you are an employee, you will not be entitled to an ABN for these activities.
Your Australian Business Number does not replace your Tax File Number (TFN). Your business will need both numbers unless you conduct your business as a sole trader and then you will use your personal TFN.
Regardless of your legal business structure, the requirements for an ABN will be similar. These legal structures may include sole trader, partnership, trust, superannuation fund or company.
It is illegal to apply for an Australian Business Number if you are not entitled to one. Penalties of up to $10,200 may apply for each false and misleading statement made in connection with an ABN application.
An Australian Business Number doesn’t replace an Australian Company Number (ACN). An ACN is a unique number issued by the Australian Securities & Investments Commission (ASIC) when you incorporate a new company.
Why Do I Need an ABN?
When running a business in Australia it is critical to have an Australian Business Number. You will use your ABN to:
- Avoid having customers withhold payments made to you**
- Register for Goods & Services Tax (GST)
- Other business registrations including (PAYG) withholding and Fringe Benefits Tax
- Identify your business with customers and suppliers
** “The non-ABN withholding rule” – If you supply services to another business, with a value greater than $75, and you do not provide your ABN, the customer is required to withhold tax at the top marginal rate from the payment to you. This rate is 47% from 1 July 2017. Where an amount is withheld under this rule the withheld amount is reported on the customers next business activity statement. The withholder is then required to provide you with a statement confirming the withheld amount so you can claim the appropriate tax credit.
Applying for an ABN
You can apply for an Australian Business Number at the Australian Government Business Registration services website.
Make sure that when you go to apply, you have the following information on hand to complete the application:
- Details of your business structure
- Proof of Identity
- Details of your business operations i.e. industry type etc
You will generally receive your ABN immediately on completion of the application, assuming you were properly identified. If more information is required to complete the application the ATO will generally contact you within 20 business days.
How Long Does an ABN Remain Active?
Your Australian Business Number will remain active as long as you are operating your business. If you cease operating your business, you will need to cancel your ABN as you are no longer entitled to hold an ABN. The ATO does periodically check in to determine if you are still carrying on a business. This review by the ATO will be more likely to occur where you fall behind with your Business Activity Statement (BAS) and income tax return lodgements.
How to Cancel an ABN
You can cancel your Australian Business Number if you are no longer carrying on a business in Australia by contacting the ATO. Some examples of why you would need to cancel your ABN include:
- Your business has been sold
- Your business has closed down
- Your Business is no longer operating in Australia
Before you cancel your ABN, you need to ensure all of your connected registrations lodgements are up to date and also cancelled with the ATO including:
- PAYG (withholding)
- Single Touch Payroll
How to Reactivate an ABN
Once you cancel your Australian Business Number, you are unable to simply “reactivate” it. You will need to re-apply for an ABN should you require one again in the future. In this case, you should include your old ABN in the application when asked to do so.
Where Do I Find a Business’s ABN?
You can search for an Australian Business Number for another business you deal with on the ABN Lookup service. This is a free public view of the Australian Business Register. You can also use this service to update your own ABN details. In this current environment it is critical you keep your ABN details up to date as many agencies across all levels of government rely on the ABN information to identify your business and provide services.
Get Professional Help on ABNs
A registered tax agent can support you and provide any help you require in connection with your Australian Business Number and your dealings with the Tax Office.
Should you require any help in connection with your ABN please do not hesitate to reach out to us at Bishop Collins and our friendly and professional team will be happy to assist you.