The answer to the question “why do I need an ABN?” is wide-ranging. In a nutshell – if you are planning to or are carrying out business for the purpose of gaining profit you are required by law to register with the Australian Tax Office. An ABN helps the ATO keep track of all entities trading in Australia. You will be required to have a registered and active ABN if you would like to register a business name, set up a bank account, apply for a government grant and/or invoice your suppliers.
To explain in more detail – An ABN is a unique sequence of 11digits allocated to a business which is earning revenue. The ABN is similar to a Tax File Number in that it helps the ATO maintain proper records on all businesses trading in Australia. Most trading entities such as sole traders, partnerships, companies and trusts are eligible to register for an ABN.
When starting a business, although it’s low on the list of things new entrepreneurs are thinking about, the ABN registration process should be a priority. Without this unique, identifying number it may be difficult to move forward.
Customers, for instance are entitled to withhold 46.5% of any payment when the supplier does not have an ABN. For a new business owner, who needs as much cash-flow as possible, such a high withholding can be detrimental.
Since ASIC has taken over the business name registration process, the application process for business name registration now dictates that the applicant must hold a valid ABN. Without this ASIC will not register a trading name.
Once a business reaches the $75,000 earnings threshold, it is eligible to register for GST, providing it already holds an ABN. Registering for GST may help legitimise a business in the eyes of perspective customers or partners. GST is a good indication of the validity of a business.
To register a domain name ending in .com.au or .net.au having an ABN or ACN is a requirement. Only registered sole traders, businesses or companies are entitled to these domains.
Another benefit of registering for an ABN is the opportunity it provides for applying for government grants and loans. Essentially, nearly every government association which awards money to small business requires a business to have an ABN.
Once an ABN is issues to an entity it will always remain the same. Although an ABN should be deactivated if the entity ceases to trade, it can always be reactivated in future.
Registering for an ABN is not too difficult, nor is it very time consuming. The applicant must answer a series of questions about the nature of the business as well as who the representative individuals are, their responsibility in the business and their personal details such as TFN, birthdate and residential address.
Upon completion of the ABN application, an ABN may be allocated in real time, or the ATO may need to manually review the application which can extend the allocation period to up to 28 days. In the case that the ABN is not allocated straight away, the ATO will send the ABN via post to the address of the business representative.
Once an ABN is established it is public information, searchable on the abr.gov.au website. The register will show information such as the date the ABN was established, the name of the entity, the postal code of the representative, as well as any trading names associated with the ABN. In special cases, certain public information may be supressed upon request.