It is not compulsory to have an ABN, but there are a lot of good reasons to have one. Firstly, having an ABN will avoid payers witholding tax from your payments. Unless you quote an ABN, businesses will be required to withold 46.5% of any payments they make to you.
An ABN also makes it easier to deal with the Tax Office and register for GST and other business tax registrations such as PAYG withholding.
Each entity (sole trader, partnership, company or trust) receives just one ABN, regardless of the number of commercial activities it undertakes. For example, a single partnership running both a corner store and a dress shop would have only one ABN. But if you were to set up separate companies, partnerships or trusts, each entity must register in its own right.
Online ABN Entitlement Tool
The Tax Office have an ABN Entitlement Tool designed to help individuals determine whether they are entitled to register for an ABN. This can be particularly helpful if you are unsure whether or not you are a contractor rather than an employee (an increasingly common issue).
Once you have answered a series of questions you will be provided with information regarding your entitlement to an ABN and provided with a report.
Australian Company Number and the ABN
If you choose a company structure, you will first need to register your company with the Australian Securities and Investments Commission (ASIC). The commission will issue your company with an Australian company number (ACN).
When you register your company for an ABN, you will be asked to supply your ACN. The ABN issued to your company by the Australian Business Registrar will be the company’s ACN plus two check digits at the beginning.
Put your ABN on invoices
Put your ABN on your business stationery, especially your invoices. If you don’t, other businesses must withhold 46.5% from any payment to you. Companies don’t need to show both an ACN and ABN on their invoices.
Source: Australian Taxation Office
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