We have had Australian Business Numbers (ABNs) since 2000, but how much do you really know about them? If you are an employer or contractor, or if an employer has asked you to get an ABN, you should be clear about the following important points.
What is an ABN?
An ABN is a unique number the Australian Taxation Office (ATO) uses to identify a business.
Why does a business need an ABN?
A business needs an ABN so it can register for Goods and Service Tax (GST) and claim GST credits, clearly identify itself to other businesses and the ATO, and avoid having tax withheld by customers or clients when they pay invoices it has issued.
What businesses can have an ABN?
Companies registered in Australia, individuals (sole traders) and Government organisations may apply for an ABN. The business may be already trading or getting ready to start trading.
The ATO website has all the details about eligibility and how to apply.
Who cannot use an ABN?
If you work as apprentice, trade assistant, labourer or any other type of employee, you can’t use an ABN. Your employer must pay you the correct wage under the relevant award or enterprise agreement and withhold pay as you go (PAYG) tax for you. This is to protect you from being involved in sham contracting, which some employers deliberately use to avoid their legal obligation to pay the correct wages and comply with tax and super requirements.
Does having an ABN make someone a contractor?
No, just having an ABN does not make someone a contractor. The ATO and the Fair Work Ombudsman (FWO) may consider a number of factors to determine whether a business and a worker have a contracting or employment relationship. The ATO will be concerned about tax and super guarantee payments, and the FWO about possible breaches of the Fair Work Act.
My employer has told me to get an ABN, what should I do?
If your employer asks you to get an ABN, you should seek advice from the ATO or FWO. Some employers ask their workers to get ABNs so they can incorrectly call them independent contractors in an attempt to get around the law. As mentioned above, this is sham contracting.
Where does a businesses need to show its ABN?
A business must show its ABN and business name on public documents such as letterheads, contracts, quotations and invoices.