What happens without one
Australia's no-ABN withholding rule: when a business pays a supplier and the invoice doesn't quote an ABN, the payer must withhold tax at the top rate, currently 47%, from any payment over $75 (excluding GST), and pay it to the ATO. They give you a payment summary for the amount withheld, and you claim it as a credit when you lodge your tax return.
So the money isn't gone, but you've lent nearly half of your invoice to the government, interest-free, until tax time. And every payer with a bookkeeper applies the rule, because the penalty for not withholding falls on them.
The rule is about business-to-business payments. A household paying you for a job doesn't withhold anything, whether you have an ABN or not.
Who is entitled to one
You're entitled to an ABN if you're carrying on an enterprise: a business, or an activity that looks like one, with some regularity and the intention of making money. The Australian Business Register asks a few questions about this when you apply.
You're not entitled to one for:
- work you do as an employee, including apprentices, trade assistants and labourers, even if you or the employer calls it contracting;
- a hobby: something you do for enjoyment where the money is incidental.
Most sole traders who are asking this question are entitled. If you're advertising, invoicing and keeping records, that's an enterprise.
How to get one
Apply free at abr.gov.au, the Australian Business Register. It takes 10 to 15 minutes online, it helps to have your tax file number handy, and most sole traders get the ABN immediately. A few applications go to review, and then you may be asked for evidence that you've started the business.
Skip the paid "ABN registration" websites. They fill in the same free form and charge you for it.
Once you have the ABN, two things may follow, both separate:
- a business name with ASIC, only if you trade under a name that isn't your own;
- GST registration, only when your turnover heads for $75,000, or earlier if you choose.
Once you have it
Put it on every invoice, quote and receipt, in the From block: "ABN 12 345 678 901". Check a new client's ABN on ABN Lookup (abr.business.gov.au) the first time you deal with them. Your ABN doesn't expire, but the Register cancels ABNs that look abandoned, so keep your contact details current and lodge your tax return.
Worked example
Mara invoices a marketing agency $2,000 for a logo.
| ABN on the invoice | No ABN | |
|---|---|---|
| Invoice | $2,000.00 | $2,000.00 |
| Withheld by the agency | — | $940.00 |
| Paid to Mara now | $2,000.00 | $1,060.00 |
| Back at tax time | — | $940.00 credit |
With the ABN she's paid in full. Without it, $940 sits with the ATO until she lodges her return the following July.
The exceptions: Statement by a supplier
If you're not entitled to an ABN and the payment isn't business income, you give the payer a completed Statement by a supplier (ATO form NAT 3346) instead, and they don't withhold. The form covers:
- a hobby or private recreational pursuit;
- a supply that is wholly private or domestic in nature for you;
- a payment of $75 or less, excluding GST;
- a supplier under 18 paid $350 or less a week;
- someone not carrying on an enterprise in Australia.
The payer can refuse the statement if they have reason to think it's wrong, and the form is for genuine one-offs. If you find yourself signing it for the same customer every month, you're in business, and the ABN is the simpler answer.
ABN, TFN, GST, business name: which is which
| What it is | Where it goes | |
|---|---|---|
| TFN | Your personal tax file number | Tax return, employer, bank. Never on an invoice. |
| ABN | Your business identifier | Every invoice, quote and receipt. |
| GST registration | Adds 10% GST to your sales; compulsory at $75,000 turnover | Turns your invoices into tax invoices. |
| Business name | A trading name that isn't your own, registered with ASIC | Your invoices, alongside the ABN. |