All you need to know about ABN registrations
An ABN, or Australian business number, is one of the first things sole traders and businesses are required to register before commencing work.
What is an ABN?
This unique 11-digit number identifies your specific business to the government and appears on the ABN database accessible to the general public. Here, people are able to quickly and easily search for registered ABNs.
The database provides information including whether an ABN is active or cancelled and the suburb in which the business operates.
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.
Who needs an ABN?
An ABN is only required if you're carrying out activities with the aim to make a profit, as this legally defines you as a business. The ABN is required to track all of the activity you make as a business.
You should also apply for an ABN if you're planning on starting an
enterprise. An enterprise includes activities performed in the form of
a business, as well as activities that include:
- Acting as the trustee of a super fund
- Operating a charity
- Renting or leasing property.
If you're still unsure, there are a few useful online tools that can help shed more light on ABN applications - one of the more useful ones is the Australian Business Registrar's (ABR) ABN entitlement quiz.
What does an ABN do?
An ABN is used to confirm the identity of your business to others. It is also required for the following business-related functions:
- Ordering and invoicing
- avoiding pay as you go (PAYG) tax on payments received
- claiming back good and service tax (GST) credits
- claiming energy grant credits
- obtaining an Australian domain name.
If you're still a bit unsure and wish to find out if you're entitled to an ABN, it might be a good idea to speak to your accountant or visit the Australian Tax Office's website for information on GST.
When should I apply?
You should apply for an ABN before you start receiving business-related income or expenses. It's important to remember that business expenses will likely come before income is accrued, so an ABN should be applied for sooner than later.
Because the process is quick, it's worth registering early to guarantee the ability to track income and expenses from day one of your business venture.
Expenses may include:
- Setting up social media accounts or websites,
- Purchasing stationery, stock or equipment
- Applying for finance and obtaining insurance or licences.
How long does it take to get an ABN?
Applying for an Australian business number is a relatively fuss-free process. If the relevant information is submitted correctly, most people will receive their ABN immediately after finishing their application.
The application will need to be processed manually and can take up to 28 days if the following issues arise:
- Important information is omitted
- Irrelevant or incorrect information is supplied
- Your information cannot be verified.
If you apply for an ABN and are refused, there's no need to worry. After applying you'll receive a detailed response from the Tax Office outlining why your application was refused, and the necessary steps you must take in order to rectify your application.
The information required to apply for an ABN
It's good to be prepared with all of the relevant information before you start applying for an ABN, as there a considerable amount of information required.
The full list of information required according to the ABR is as follows:
- Your tax file number and those of relevant business associates
- Tax agent registration number
- Professional advisor number
- A previously held ABN (if relevant)
- Australian company number (ACN) or Australian registered body number (ARBN)
- The date your ABN is required (this is the date that you expect to commence business-related activities)
- The legal name of your business
- Any authorised contacts (those authorised to make changes or update information on behalf of the business)
- The details of your associates
- All business contact details (the address, postal address, email address and telephone number of the business)
- The activity of your business (the industry in which your business generates income)
- All business locations for premises operated under your business
Are there any fees involved?
If you apply for an ABN yourself online on the ABR's website, you'll receive an ABN for no cost whatsoever.
If you're not too confident about the process and seek out the services of an accountant to apply for an ABN on your behalf, there is likely to be a cost involved to cover their services.
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Updating, cancelling and reapplying for an ABN
As we touched on briefly, it's possible for ABNs to be cancelled.
ABNs are cancelled after either:
- Long periods of inactivity
- If a businesses ceases trading and intentionally cancels their ABN.
To see whether your ABN is still active, visit the Australian Business Register (ABR) and either look up your name or your ABN, if you remember it.
Updating your ABN
if your business is affected by changes, updating your ABN within 28 days of these changes is mandatory.
An ABN cannot be updated with the following, however:
- Business names
- Legal names for individuals and sole traders who need to contact the ATO directly
- Legal names for companies registered with Australian Securities & Investments Commission.
If you need this information changed, you may have to instead cancel and reapply for an ABN.
Once activated, ABNs don't last forever - The ATO cancels ABNs that offer no indication that they are tied to a functioning business, such as if the ABN stops reporting business income or expense.
ABNs can also be cancelled intentionally. This is necessary if your business has ceased trading or has been sold to another party. To do this, you'll need to visit the Australian Business Register's website and apply for a cancellation.
You can confirm when your ABN is cancelled by looking it up on the ABN lookup - it should say 'cancelled' if successful.
Reapplying for or reactivating an ABN
If you need to reapply for your ABN, the process is exactly the same as applying for an ABN from scratch. Simply visit the ABN application page of the ABR website to reinstate your ABN.
Staying up to date with new ABN regulations
Staying on top of everything tax-related can be a handful, but many small business owners don't realise this also extends to their Australian business number.
In fact, there are so many ABN holders that don't stay on top of tax obligations that the Australian Government has decided to crack down on those that have neglected to stay informed.
Upcoming ABN changes to keep in mind
The Government has decided to introduce new laws that state from July 2021, anyone with an ABN is required to file a tax return if they have a tax obligation. Then, from July 2022, it is mandatory to provide an annual update on your ABN status in addition to your personal details.
With these new laws set to be introduced, its a good reminder to always keep an eye out for new laws related to your business, even outside of the usual tax scope.
After you've successfully applied for your ABN, you’re all set to commence operating your business and adding your new ABN to invoices.
It’s also the perfect time to begin working with your bookkeeper or accountant to get set up with an online accounting system. Online accounting is ideal for business owners as it allows them to automate much of the admin related to business finances.
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