You may know someone who works as a tutor, or maybe someone who writes articles for a website. ‘Pretty simple stuff that second one’, you may think. Sit down at computer; write; publish; make moolah. And, while the actual process might not be much more difficult than that, there are some hidden little complications in the set-up phase that might trip you up – like the need for an ABN.
Standing for Australian Business Number, an ABN is an 11-digit number that the government uses to identify businesses for a variety of purposes, including taxation.
Having an ABN is very useful as it allows you to start a business. However, and more importantly to this discussion, it also allows you to work as a sole trader if you so wish.
Regardless of whether you are an individual contractor working for a sole-trader, a small to medium enterprise (SME), or a large business, an ABN is a government-mandated implementation, and there are some very important things you must know about them.
Entitlement to an ABN
Not everyone is eligible for an ABN. You are eligible if you are:
- Carrying on or starting an enterprise in Australia
- Making supplies connected with Australia’s indirect tax zone
- A Corporation’s Act company
You are ineligible for/do not require an ABN if:
- You are an employee (even if your employer calls you a contractor)
- You are renting out a residential property to others as an investment
Things to be aware of
- You need to have a Tax File Number (TFN) before you can apply for an ABN
- There is no fee involved in getting an ABN
- You can have multiple businesses under the same ABN, so long as they function with the same structure
- Upon receiving your ABN, your details will be published on the Australian Business Register
- If you believe the disclosing of your personal details will endanger you or your family, you can request to have them hidden. Furthermore, if you have undertaken gender reassignment surgery, you can have your historical name records withheld from ABN lookup and data.gov.au
- False or misleading statements on your ABN application may incur a fine
With the increased amount of freelance, contract and temp work (watch this space for an article on the gig economy), having an ABN – and therefore being able to undertake these types of work as a sole trader – is becoming more and more valuable.
Of course, you should always ensure you are up-to-date on all the information regarding these matters as this article is by no means a comprehensive replacement for legal advice. You can find more information at the Australian Business Register.
If setting up your own business, or working as an individual contractor or sole trader, is something that appeals to you, check out our upcoming Graduate Gateway - especially the Monday sessions!