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Do I need an Australian Business Number (ABN)?

An Australian Business Number (ABN) is an 11 digit code that identifies your business, making it much easier for you to comply with Australian Government requirements, maintain a healthy cash flow, and streamline the administration of your business. If you’re running a small business, an ABN is an excellent asset, and it’s free to apply for one if you go through the Australian Business Register.

If, however, you apply for an ABN without being entitled to one, or fail to comply with other statutory requirements, you could face a fine of up to $10,000, so its important to seek advice early, to prevent later fees.

You are eligible for an ABN if:

  • Your company is a Corporations Act company
  • You are ‘carrying on an enterprise’ in Australia

It can be difficult to know if you are carrying on an enterprise. If what you’re doing is in the form of a business, involves trade, and is on a regular or on-going basis, then you may be entitled to an ABN. Trustees are sometimes eligible for an ABN, as are charities. You are not carrying on an enterprise if you are an employee, or are merely pursuing a hobby without expecting substantial profit.

Even if you are carrying on an enterprise, you don’t necessarily have to get an ABN. If your expected turnover will be less than $75,000 per year, there is no obligation for you to register for GST, and therefore no legal requirement that you obtain an ABN.

If your expected income is less than $75,000 per year, an ABN can still be useful from a cash flow perspective, particularly if you are issuing invoices to a business that does have an ABN. In this situation, your lack of ABN means that your payer must withhold tax from you – at a rate of 46.5%. Though you can claim these amounts on your tax return, from a cash flow perspective, an ABN would be advantageous.

For many, the question comes down to whether their business is an enterprise, or a hobby that helps earn a little extra money on the side. If you’re having difficulty determining the nature of your business, or would like specialised advice for your small business, contact Pathway Lawyers & Migration Agents for comprehensive, cost-effective advice. 

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