During the last few days, I have been approached by a number of Members of the Taxwise Client Club to assist them while they were applying for an ABN (Australian Business Number). So I thought if so many Members are doing this, there must be tens & hundreds out there doing the same thing, but not asking for help. The result – they complete the application wrong and get very upset when lots of bad things happen. Here now is a basic idea of the whole concept and what you should be aware of when applying.
Who should register for an ABN?
Before an applicant can register for an ABN they need to know if they are entitled to register. So, who is entitled to an ABN ?
You are entitled to an ABN if all of the following statements are true.
- Your activity is carried out in the
- form of a business
- nature of trade, or
- form of a regular or continuous grant of a lease, licence or interest in property.
- form of a business
- Your activity is carried out in Australia or you make supplies that are connected with Australia.
- You have a reasonable expectation that a profit will be made from your activity.
You are not entitled to an ABN if any of the following statements are true.
- Your activity is carried out as an employee or in connection with earning payment as a company director, office holder or under a labour hire arrangement.
[An employee is a person who receives a salary or wage in return for
work or services rendered. You are not considered an employee for ABN registration purposes if you have your own business but also receive a salary or wage from an activity related to your business].
- Your activity is a private recreational pursuit or hobby.
- Your activity is conducted as a member of a local government body, for example, as an elected member of a city, town or shire council.
What is an Entity ?
Entity means any of the following.
- an individual
- a body corporate
- a corporation sole
- a body politic
- a partnership
- any other unincorporated association or body of persons (excludes non-entity joint ventures)
- a trust
- a superannuation fund
In addition, the trustee of a trust or superannuation fund is taken to be an entity consisting of the person who is trustee at the time. That entity is a different entity to the person acting in their personal capacity. If reference is made to an entity of a particular kind, for example, a trustee, it refers only to the entity in its capacity as that kind of entity.
What is an Enterprise ?
An enterprise includes a business. It also includes other commercial activities. The other commercial activities include
- adventures and concerns in the nature of trade and where they are done on a regular or continuous basis, leases, licences and other grants of an interest in property.
- the activities of entities such as charities, deductible gift recipients, religious and government organisations, and certain non-profit organisations.
- activities done in the form of a business or adventure or concern in the nature of trade.
It does not include
- private recreational pursuits and hobbies.
- activities carried on as an employee, labour hire worker, director or office holder, or
- activities carried on by individuals (other than trustees of charitable funds) or partnerships (in which all or most of the partners are individuals) without a reasonable expectation of profit.
What information is needed to complete an ABN application?
To register for ABN or other registrations, the following information may need to be provided.
- applicant type for example sole trader or partnership
- Tax File Number (TFN) – the entity does not need a TFN to apply for an ABN. If they do not have a TFN, they can apply for one at the time of applying for an ABN (non-individuals only). If the entity chooses not to apply for a TFN, it may delay the processing of the application
- Australian Company Number (ACN) or Australian Registered Body Number (ARBN)
- contact details – this includes the contact person for the entity, phone numbers and email address (if they have one)
- associate details (including public officer for Corporations Law companies, directors, partners, members or trustees of the entity)
- email address must be provided if the entity is applying for GST and its GST turnover is $20million or more wishes to interact electronically with the ABR (Australian Business Register)
- tax agent reference number – this is usually a 7 or 8 digit number available from your tax agent
- bank account details (refunds are only paid electronically – no cheques are issued)
If the entity’s turnover/sales will exceed $75,000, it is mandatory to register for GST as well. Here’s additional information required for GST registration.
- estimate of the entity’s GST turnover
- whether the entity intends to use the cash accounting method for reporting GST (Strongly recommended if the entity’s turnover is less than $2 million as the Accrual method is very "cruel")
I strongly recommend you only apply for GST in addition to an ABN if, and only if -
- you are required to by law, eg Taxi Drivers
- you estimate your annual turnover(sales, contract payments) to be greater than $75,000
If you are in the Road-Transport Industry and own the vehicles you are using, you may be entitled, under certain conditions, to a Fuel-Tax Rebate. If this is you, here’s additional information required for fuel tax credits registration.
- the date you first acquire fuel for a use which is eligible for fuel tax credits
- the fuels (diesel, petrol, other) you use in your business activities
- whether you use fuel in a vehicle with a GVM greater than 4.5 tonnes travelling on a public road
If you intend hiring staff and will be withholding tax from them, you will also have to register for PAYG Withholding. Here’s some additional information required for PAYG registration.
- estimate of annual amount the entity will withhold from payments to payees
- estimate of number of payees
- whether the entity will report its withholding payment by ATO form or electronically. Further, if electronically is selected, whether the entity will self print the payment summaries.
About The Author
Warren Kruger is an Australian Tax Specialist and Advisor.
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