Do You Need an ABN to Start a Business?

February 20, 2024
5
minutes to read
by
Alice Surdy
Contents

If you're planning to start or run a business in Australia, obtaining an Australian Business Number (ABN) is an essential step. An ABN is a unique 11-digit number that identifies your business to the government and other companies. It's required for transactions with the government and other businesses, and it's also needed for registering for taxes such as GST. This detailed blog will explain the importance of getting an ABN and how to get one for your business hassle-free.

The ABN system was introduced on 1 July 2000 as part of the Australian Government's tax reform. It replaced the previous tax file number (TFN) system for businesses. The ABN was implemented to simplify business registrations and streamline interactions with the Australian Taxation Office (ATO) and other government agencies.

Getting an ABN is a simple process that can be done online and is free. Obtaining an ABN is a crucial step for any business, and it should be done as soon as possible to avoid any potential issues.

Not having an ABN can lead to penalties and fines, difficulties in transacting with other businesses and government agencies, difficulty registering for taxes and accessing government services, and a loss of reputation and credibility.

Do you need an ABN?

All businesses in Australia must have an Australian Business Number (ABN) if they operate an enterprise or conduct business activities. An ABN is a unique 11-digit number identifying a business to the government and other businesses. 

A sole trader needs an ABN to claim GST credits, and if they don't have an ABN, they may have to pay GST on purchases they make for their business. Also, if they don't have an ABN, other companies may be unable to claim GST credits on their purchases from the sole trader. 

In summary, having an ABN is mandatory in Australia, as it is used to transact with the government and other businesses, register for taxes, and access other government services. 

What if I don't have an ABN? 

If you run a business without an ABN in Australia, there can be several consequences. 

  • It is against the law to operate a business without an ABN, and you may face penalties and fines for non-compliance with the law. The Australian Taxation Office (ATO) can impose penalties for failing to obtain an ABN when required, which can be costly for a business. 
  • Not having an ABN can make transacting with other businesses and government agencies difficult. With an ABN, other businesses may be able to claim GST credits on their purchases from you, and you may have to pay GST on purchases you make for your business. This can increase your expenses and negatively impact your bottom line. 
  • Not having an ABN can also make it difficult to register for other taxes, such as the PAYG withholding, or access other government services, such as the Fuel Tax Credit scheme or the Wine Equalisation Tax scheme. 
  • Finally, not having an ABN can also lead to a loss of reputation and damage the business's credibility. This can make it harder for the business to attract customers, clients, and investors and harm the business in the long run. 

How do I get an ABN?

To apply for an Australian Business Number (ABN) in Australia, you can follow these steps: 

Step 1: Check your eligibility

You must be carrying on an enterprise or planning to carry on an enterprise to be eligible for an ABN. If you are still determining whether you qualify, you can read the ABN eligibility rules on the Australian Business Register (ABR) website. 

Step 2: Gather your information

To apply for an ABN, you must provide certain information, such as your business name and structure, contact details, and tax file number. 

Step 3: Apply online

The easiest and quickest way to apply for an ABN is through the ABR website. You can use the ABN Application online service, which can take around 20 minutes to complete. It's free to apply for an ABN. Alternatively, you can apply for ABN with Thriday if you need assistance.

Step 4: Wait for your ABN

Once you have submitted your application, the ABR will process it and notify you of the outcome. The process can take around 28 days, but it can be quicker if you apply online and provide all the necessary information. 

Step 5: Use your ABN

Once you receive your ABN, you can transact with other businesses and government agencies. You can also use it to register for other taxes, such as GST, and access government services. 

You must also register for the Goods and Services Tax (GST) if your business has a GST turnover of $75,000 or more. This can be done at the same time as applying for an ABN by ticking the appropriate box on the ABN application form. 

Final Thoughts

Obtaining an ABN is crucial for any business operating in Australia. The importance of having an ABN cannot be overstated, as it serves multiple purposes. Firstly, it establishes your business as a legitimate entity, instilling trust and credibility among clients, suppliers, and stakeholders.

Secondly, an ABN is a prerequisite for registering for the Goods and Services Tax (GST). This enables your business to claim input tax credits on eligible purchases and ensures compliance with taxation laws. Additionally, an ABN is required to participate in the Pay As You Go (PAYG) withholding system, facilitating the correct withholding and remittance of employee taxes.

Ultimately, possessing an ABN demonstrates your commitment to professionalism, enhances your business's visibility and credibility, and unlocks various financial and operational benefits. Whether you're a sole trader, partnership, company, or trust, obtaining an ABN is vital to establishing and growing your business in Australia.

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