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Frequently Asked Questions

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What is an ABN (Australian Business Number)?

An ABN is an 11 digit number that is issued by the Tax office. It is unique to your business.

Is ABN registration compulsory?

Well, technically not. But if you read the next question, you will see why every new business needs to get an ABN.

What are the benefits of getting an ABN registered?

1. Payment – you can put it on your invoices and then people who pay you won’t deduct high tax

2. Authority – it helps people to see that you have an established business

3. Domain registration – for sole traders and partnerships, you need an ABN to register a domain

4. GST registration – if you want or need to register for GST, you must first get an ABN

5. Dealings – an ABN is mandatory for certain dealings with some Government and non Government bodies. (For example you need an ABN to open a bank account for your new business which every new business should do.)

6. Tax – you can’t lodge a tax return as a business without an ABN.

Can I do my abn registration online?

Yes, you can do it with the Tax Office or with a Tax Agent like us.

In the same way that people can do their own tax returns, they can also do their own ABN registration. But just like tax returns, many people chose to ask a Tax Agent (like us :)).

If you get the right Tax Agent, the benefits can include the following (but check with each Agent for exact details).

– simple easy process – the Tax Office process is very complicated
– double check on your eligibility so that you don’t get in trouble with the Tax Office
– if your ABN is not issued immediately, an Agent can monitor it for you which beats the hell out of calling the tax office (don’t you just love doing that?)
– free quality information for what you need to do after you have set up your ABN
– are they broader business advisors who can offer other advice (eg online marketing etc)

If you decide to use a Tax Agent to get my ABN, check out things like:

– their time commitment
– refund policy
– after sales service

If I use a Tax Agent to do my ABN, does it lock me into using them for tax returns, etc?

Nope. Some Tax Agents will try to get ongoing work from you. But if you are not interested, just give them a polite ‘no thanks’.

For ABN purposes, are ‘business’ and ‘company’ the same thing?

Nope, not the same.

A business can be operated under a number of structures including sole trader (or individual), partnership, company and trust.

So, before completing your ABN registration, you need to decide on the structure you want.

If you like, a company is just one form of business.

In order to set up a company you need to pay like over $440 to the Government

if you haven’t paid this money, then you might be a business but won’t be a company

When it comes to ABN registration, what are the terms I need to understand?

Business = generally, a systematic approach to sell goods or services and make a profit

Sole trader = a business where the legal entity is the individual (ie you).

Sole trader ABN registration = ABN registration undertaken by a sole trader

Partnership = 2 or more owners who decide to operate a business jointly (usually in equal shares)

Partnership ABN registration = ABN registration undertaken by a partnership

Company = registered legal entity (usually a Private or Pty Ltd Company). Usually has significant benefits over a sole trader but cost more.

Company ABN registration = ABN registration undertaken by a company

Business name = the name you operate your business under. The default is your own name. But if you want to operate under another name (eg John Smith Plumbing), you just need to register that name

GST registration = Goods and Services tax registration – see more below. Can be completed at the same time as you get your ABN

PAYG registration = required when a business employs people. Again, can be completed at the same time as getting your ABN registration.

Is ABN registration done by State Governments or the Federal Government?

Federal Government, through the Tax Office.

I want to set up my business as a company. Can I get my ABN first?

You can’t get your ABN until you have created the legal entity (ie the company).

So you need to set up the company first and then do the ABN registration.

My boss told me I need to get an ABN in order to get paid. Should I do that?

Obviously you want to keep your job. But the Tax Office will also tell you that should only get an ABN if you are eligible (see next question). There are fines for people who lodge an ABN registration without being eligible.

You may be eligibile for an ABN as an individual. But one option here can include setting up as a company and there are significant advantages in doing that anyway. See more below on this.

This is a tricky situation and you might want to seek advice.

What do I need in order to be eligible for an ABN?

You need to have ‘commenced operating a business’.

There are 2 aspects of this:

1. It needs to be a business – for example, it can’t just be a casual hobby

2. The business needs to have actually commenced.

See next questions for more on each of the above.

What constitutes a business for the purposes of getting an ABN?

Unfortunately there is not an exact formula for answering this but in general, if you get involved in a systematic undertaking with a view to making a profit, then that is a business.

Are there any criteria for whether you are operating a business for ABN purposes?

Not firm criteria but here are some of the criteria that the Tax Office provides:

● is a significant commercial activity
● there is an intention to make a profit from the activity
● the activity isn’t a hobby
● repetition of the activity
● commercial sales of products
● a business plan exists
● the activities are organised and carried on in a businesslike manner and records are kept
● the activities are of a reasonable size and scale
● the entity has relevant knowledge or skill.

Can I get an ABN as an employee?

No. You are either in business (and eligible for an ABN) or an employee (and not eligible for an ABN).

If I am setting up as a Sole Trader, does it matter whether I am a ‘contractor’?

It only matters in this sense.

If you are a contractor, then the Tax office asks another question. They will ask if you ONE or MORE of the following criteria:

My work agreement allows me to use or employ another person to perform the work on my behalf. (Note: You don’t actually have to employ others, just be allowed to)

My payments will be based on a quoted price; AND, I will be responsible for the cost of rectifying any defects in the work I perform.

I need to provide heavy machinery to undertake my business activity.
As long as you meet ONE or MORE of these, then it doesn’t matter if you are a ‘contractor’

How can I have commenced my business before I get an ABN? Don’t I need the ABN first?

This is a question that tricks most people.

Commencing a business can begin with actions other than making sales or buying stuff.

For most people there is a period of planning and preparation. And if this is accompanied by an intention to make money, then the Tax Office can accept that you have ‘commenced a business’ before you actually make sales.

Somebody told me that i need to start trading before I qualify for ABN registration?

Nope. You need to have ‘commenced a business’. You don’t need to have actually issued any invoices. (see last question)

Once you have commenced a business, you can register for an ABN and then put the ABN on your invoices and go for broke.

If in doubt, consider seeking advice from a qualified professional.

Do I need to supply my TFN when I register for an ABN?

Nope. But if you don’t supply it then you will certainly get delays (often up to 28 days) in receiving your ABN.

We have done over 20,000 ABN registrations and we have never had one problem arising due to our clients supplying their TFN.

What if I am starting a company or partnership which doesn’t yet have a TFN?

You just need to supply the personal TFN for the Directors or Partners.

Also at the same time as getting an ABN, you can apply for a TFN for the company or partnership.

How long does it take to get an ABN?

In most cases your ABN will be issued immediately. In some cases, you will have a delay of up to 28 days. See more below.

What will determine whether I get an ABN straight away?

The most common reasons people don’t get their ABN straight away is due to:

– You have previously had an ABN that has been cancelled;

– information that does not match the information in the Tax Office’s system (eg incorrect first name); or

– outstanding past tax or BAS returns

But I need to be sure to get an ABN right now to put on my invoices or get a new job or get paid.

We know. Unfortunately its not a system that always favours eager new businesses who want to get an ABN quickly.

How did the changes to the Business Name Registration system in 2013 impact on ABN registration?

It only impacts on people who want both an ABN and Business name.

Previously you could get a Business name registration while waiting for your ABN.

Now you can still register the Business name but it won’t be officially issued until you have obtained and supplied the ABN.

I already have a cancelled ABN. Can I use it?

No, You need to get it reactivated.

If I already have an ABN from 2 years ago. Can I just start using it?

If the ABN is still active and applies to the same entity (eg you as an individual) then you can start using it.

I have an ABN as a Partnership/Pty Ltd Company and I am going to operate as a Sole Trader. Can I just use my Partnership/Company ABN?

No. They are different legal entities. So you will need to apply for an ABN as a sole trader.

I have an ABN as a Pty Ltd Company and I am going to operate as a Sole Trader. Can I just use my Partnership/Company ABN?

No. They are different legal entities. So you will need to apply for an ABN as a sole trader.

I have an ABN when I operated business as a sole trader, can I now use it under a partnership or company?

No. Again, they are separate entities, so you need a separate ABN.

I already have an ABN for a business. If I set up a separate business, can i get a new ABN?

If the business is the same structure (eg both businesses are operated as a sole tradership), you do not need to get a second ABN and, even if you want a second ABN, the Tax Office will not issue you with one.

However, if the first business is a sole trader and you were to start up the second business in a company, then the company can get a different ABN.

What are the things I need to consider before registering for an ABN?

1. Structure. The structure for your business. Individuals can set up as sole traders or companies. Registering your ABN as a sole trader is simpler and least expensive but that doesn’t make it a good reason. Check out our information here:
http://smallbusinessauthority.com.au/setting-up-as-sole-trader-or-company/

Multiple owners can set up as partnerships or companies.

2. Brand. How are you going to brand your business? Do you want a business name? If so, then its a good idea to check the availability of the name and domain before doing the ABN registration.

3. GST Registration. You need to decide on this when you do your ABN registration. See more below on this below.

4. TFN registration. If you set up a new partnership or company, then you need a TFN and you might as well do it at the same time as getting your ABN rego.

5. A Plan. Anybody who is starting a genuine business should really have a plan for the business but see more below

What information do I need to complete an ABN registration?

For sole traders, the only information that you may need to dig out is your Tax File Number. (But see next question). All the other information like address, DOB etc will be known to you off the top of your head (hopefully). You will also need to decide if you want a business name and gst registration.

For a ‘partnership ABN registration’, you will need your partners details including address, DOB and ideally TFN (see next question).

For a ‘company ABN registration’, you will need the same details for each director.

As a sole trader, do I need a new TFN for my business when I get my ABN?

No. The TFN that you already have as an individual (that you include on each years tax return) also covers your business.

When i did my ABN registration, I got a reference number and not the ABN. Can i still get paid?

This is up to the person paying you. Technically they are required to withhold 46.5% but you need to negotiate the situation with them.

Am I required to put my ABN on my invoices?

The practical answer is that you need to put your ABN on your invoice. (This will avoid your customer withholding 46.5% of the payment they make to you.)

If i do my GST registration at the same time as ABN registration, when and how will my GST registration be issued?

It will be sent to you through the post, usually within a few weeks.

If i do my TFN registration at the same time as ABN registration, when and how will my TFN registration be issued?

It will be sent to you through the post, usually within a few weeks.

OK, I’ve got my ABN. What next?

Great question. There are generally 2 type of businesses that get an ABN. Which category you belong to will determine what you need to do next.

1. Single Customer – this is where you get all your income from one customer and aren’t interested in getting more customers; and

2. Multiple Customers – this is where your income comes from multiple customers

See more in following questions

What should Single Customer Businesses do after abn registration?

You should consider:

1. insurance – you are no longer covered by Workers Comp and are now liable if you get injured on the job. What’s more you are liable for injury to others and damage to others property caused by your actions or work.

2. Open a business bank account, put some cash into the account and then reimburse yourself for any business expenses already incurred

3. Put all income and expenses through your business bank account. (In the early days if you are spending more than earning, then you will need to loan more cash into the account

4. Set up a formal account system to suit your situation. Options include:

– the bank account itself
– a spreadsheet
– formal software package like MYOB or Xero. (we like Xero)

5. Prepare for tax (and possible BAS). Now that you are a business, the person who pays you will no longer withhold tax. So you need to put aside a little bit each week for when tax is due. The easiest option is to create another account and do a permanent transfer.

6. Super. You no longer have an employer who pays money into Super. Do you want to pay your own Super?

For more on this, check out our guide here:

http://smallbusinessauthority.com.au/unsure-about-business-finance-stuff/

What should Multiple Customer Businesses do after abn registration?

You should consider all the above plus:

6. How you are going to get paid and issue invoices.

7. Sales and marketing – How are you going to get the customers and sales you want? Including online marketing.

8. Delegating and Outsourcing. How can you delegate more and free up your time so that you can continue to grow your business – or just sit on the beach and drink tequs.

What has GST registration got to do with ABN registration? Why talk about them in the same breath?

Two reasons:

1. When you are starting a business, you need to consider whether you are required to register for GST

2. They can be completed at the same time

Is GST registration compulsory?

If you estimate that you will earn more than $75,000 turnover in the next 12 months, then you are required to register for GST.

If you believe that you will earn less than 75,000, then you can choose to register for GST

What if I don’t know whether I will earn more or less than 75,000?

The law requires you to estimate.

What has business name registration got to do with ABN registration? Why talk about them in the same breath?

1. When starting your business, you should think about whether you want to give your business a name.

2. You can register the ABN and business name at the same time

What business name should I choose?

Hah. Thats a major issue that should be part of your marketing strategy (involving issues of branding, internet marketing, domain and trademark registration) and way too detailed for this document. But see more on our related website which covers essentially the same issue in the context of company registrations.

www.registeringacompany.com.au

Why isn’t my ABN showing on the ABN Lookup website?

It takes a couple of hours for your ABN to appear on the ABN Lookup site. If you have requested a post-dated ABN, it will not appear on the site until the effective date.

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