Sole Trader Tips, What Is An ABN?
What You Need To Know About Abns
An ABN (Australian Business Number), is an 11 digit number that identifies your business/company to the government, other businesses, and the general public. Australian Business Numbers are registered with the Australian Business Register (ABR) and can be searched for in the ABN Lookup website, since it is public information. The data gathered by the Australian ABR to acquire this identification number, is also used to assist government agencies with decision-making surrounding investments, infrastructure development, disaster recovery, etc.
An Australian Business Number allows you to to conduct business as a sole trader (individuals) in Australia.
What is a sole trader?
A sole trader is the simplest way to structure a business and the cheapest to establish. Sole traders have unlimited liability, which means that they are personally responsible for every part of the business, including all debts and losses. As a sole trader, you are also personally responsible for paying tax on all the income that you have earned through your ABN. However, as a sole trader you enjoy complete control over all assets and decisions associated with your business, you are exempt from paying payroll tax, and there are fewer reporting requirements compared to other structures.
AN ABN does not replace your Tax File Number (TFN). Sole traders do not need to apply for a separate business TFN.
You must keep your ABN details up-to-date, as it helps to ensure the information provided is accurate, and you are conducting your business legally. If your details change, or if your businesses stops operating, you are legally required to notify the Australian Business Register (ABR) within 28 days. ABNs do not have an expiry date. However, it can be cancelled if your ABN comes under review and it is evident that you are no longer eligible for an ABN, or you weren’t entitled to one from the beginning.
Click here for more information about ABN cancellations and keeping your ABN updated.
Do I need to apply for an ABN?
Not everyone is required to have an ABN. An Australian Business Number is necessary if you have your own business, intend on establishing your own business, are selling commercially, or interacting with other businesses, the government, and government agencies on a professional basis.
To be eligible for an ABN as a sole trader, you must meet the following criteria:
- You are in the process of establishing a business (e.g. you have consulted a financial advisor, applied for a business loan, made a business plan, etc.)
- You are currently running a business
- You haven’t been asked by an employer to get an ABN. This is because an ABN may mean you are getting underpaid by the employer that requested it, and/or not receiving the necessary entitlements, such as annual leave, sick leave, superannuation, etc.
To check your entitlement click here.
Click on the video below for a brief overview of ABNs.
Having an ABN can provide many benefits. Here are some reasons why you should apply for one:
- You are recognised as an ‘active’ business and able to operate
- You are exempt from withholding tax on your invoices
- You are able to open a ‘.com.au’ website
- You are able to set up a business name
- You have access to government grants, rebates, and contracts
- It appears more professional, especially for freelancers
How Do I Get An ABN?
Australian Business Numbers are relatively easy to apply for and usually only takes about 15 minutes, if you have all the necessary information available on hand. There is no charge when you apply for an ABN online. However, if you hire the services of a third-party to set up an ABN on your behalf, a fee will be involved.
Before you apply, you need the following information:
- Personal details (i.e. name, DOB, contact details)
- Your Tax File Number (TFN)
- Previous ABNs, if you’ve held one before
- The date you need your ABN issued
Click here for more information on what you need for your ABN application.
Need assistance and want to know more?
Contact Holmans today;
Holmans Noosa: (07) 5430 7600 or email info@holmans.com.au
Holmans Maroochydore: (07) 5451 6888 or email infohm@holmans.com.au
