When it comes to starting a business, you want to make sure you’re registered correctly, starting with applying for an ABN. This is the first step to legally creating your business and must be done before you begin trading.
The term ABN is short for Australian Business Number. An ABN comes in the form of a unique, 11-digit number that identifies your business to the government, and is also used to inform the general public about your business by way of search on the ABN Lookup website.
An ABN is used in conjunction with your TFN, or tax file number, when dealing with the ATO and should be listed on any invoices or receipts you provide clients or customers. As such, registering for and acquiring an ABN must take place before your new business begins trading.
Rather than spend hours researching this process online, we’ve brought together all the key details in one place. This article answers the following questions:
The fact is not everyone needs an ABN, but if you’re carrying out activities with an aim to make a profit, then it’s most likely that you are legally defined as a business and therefore will require an ABN to track your business related activity.
Using online tools to check if you’re entitled to an ABN is a good start. You can find an ABN entitlement quiz here.
In short, though, if you’re carrying on commercial activities or plan on starting an enterprise, making supplies connected with Australia’s indirect tax zone or are a Corporations Act company, you can apply for an ABN.
The most common form of application relating to ABNs is carrying out activities with the goal of making a profit, or conducting ‘business’.
The ABN is used to confirm your business identity to others when ordering and invoicing, avoid pay as you go (PAYG) tax on payments you received, claim back good and service tax (GST) credits, claim energy grant credits and obtain an Australian domain name.
Unfortunately, there is no single test available to determine if you are entitled to an ABN. If you are still unsure and wish to find out if you are entitled to an ABN, speak to your accountant or visit the Australian Business Register (ABR) website.
Don’t panic though, if you’re applying for an ABN and are refused, you’ll receive a detailed response from the Australian Tax Office outlining why your application was refused, and the steps you can take to rectify your application if needed.
There are two ways to apply for an ABN.
The first is to have your accountant apply for you, and the second is to apply yourself.
There is no fee for applying for an ABN, although if you consult an accountant for assistance with your application, they may impose a fee to cover their services.
If you are starting a new business, you will want to register for an ABN before you begin to incur income or expenses relating to the business. Applying for an ABN at the very beginning ensures you are able to begin tracking your income and expenses from the day commencement activities begin.
Business commencement activities can be simple tasks such as setting up social media accounts or websites, purchasing any stationary, stock or equipment, or they can relate to more formal activities such as applying for finance and obtaining any insurances or licences. They also include any work you undertake for profit by selling products or services.
Working out if you want to operate as a sole trader or a limited company or something can be quite a difficult task. While both operations require an ABN, there are some significant differences between the two and it is recommended that you speak to an accountant to work out which is best for your situation.
For more information on the difference between sole traders and companies, see here.
While the process is straightforward, the length of time it takes to receive your ABN will depend on whether you provide all relevant information correctly, or whether the ATO will need to confirm parts of your application.
Key information required for applying:
For more information on the items you will need to apply for an ABN, visit this site.
If you correctly submit all of your information, you will usually receive your ABN immediately after finishing the application.
If you omit information or your information cannot be verified, then the application will need to be processed manually and can take up to 28 days.
After that, you’re all set to begin adding your ABN to your invoices, emails and critical business stationery. It’s also the perfect time to begin working with your bookkeeper or accountant to get set up with an online accounting system, which will allow you to automate many of the administrative tasks associated with your business finances.