What is an ABN?

An ABN is a unique, 11-digit number that identifies your company. ABNs are issued by the Australian Business Registry (ABR). Businesses, charities, and many other groups across Australia may have similar (or even identical) names, but every ABN is different, as the ABR pointed out.

ABNs are used when interacting with other businesses, as well as government departments. They play an important role in goods and services tax (GST) and the financial health of your business, as you’ll see below.

Why and when do I need an ABN?

Why do I need an ABN?

Not every business is absolutely required to have an ABN. Businesses processing less than $75,000 annually don’t need an ABN. However, if you process more than $75,000 and don’t have ABN, you risk facing a penalty. Besides that, there are some very good reasons for you to request one for your business.

Using an ABN when requesting payment from another business means sidestepping pay as you go (PAYG) tax. Although this withholding is temporary, it can put a significant amount from each payment out of reach. Holding an ABN also allows your company to claim GST and energy grants credits, the Australian Government Business website said.

Simply put, your business enjoys more stable finances when it has an ABN.

When do I need an ABN?

In most cases, the sooner you get an ABN, the better. You won’t have to worry about PAYG withholdings, the application is free, and the advantages will last as long as your business operates.

Do I need an ABN as a sole trader or contractor?

Sole traders

Sole traders are in a similar position to many other types of businesses. There isn’t a requirement for all sole traders to apply for an ABN, but the benefits are clear.

Contractors

Contractors aren’t required to have an ABN either, but there are plenty of advantages that come with having one. The Australian Government Business website said hirers can withhold the top tax rate and Medicare levy from a contractor who doesn’t have an ABN, for example. Having an ABN can mean more money in your pocket.

How much tax do I pay on an ABN?

You will need to pay tax on the money your business earned throughout the financial year, but having an ABN doesn’t increase your tax rate or add additional fees.

What do you need for an ABN application?

Before submitting an ABN application, you will need to select a business structure. Beyond that, there are a dozen potential requirements placed on applicants by the ABR. Some apply to every, or almost every, scenario — like sharing your tax file number and the date by which you need your ABN. Others only come up in certain situations, such as sharing any previously held ABNs and the licence number of a professional advisor.

How to apply for an ABN

The application process is quick and easy. You can start and finish the application online at the ABR website. The application can be completed in several sessions or in one go, so don’t worry if you realise you’re missing some of the information required. Save your progress and get back to it when you’re ready.

Starting business with an ABN

Getting an ABN means a smoother path to opening and running your business. But it’s far from the only resource you’ll need for a shot at success. Business owners also need to consider everything from accepting payments, managing cash flow, and sending money.

This is where Zeller can help. Join our waitlist today to learn more.