Tax

GUIDE: ABN Registration, Application & Tax

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Everything you need to know about registering your own ABN, operating though an ABN and the tax implications.

People working for ‘sharing economy‘ companies like uber, deliveroo and Airtasker, operate under an ABN.

AirTasker-v13  Uber    Deliveroo

What is an ABN?

ABN stands for Australian Business Number and is the unique number used to identify your business.

What About My Tax File Number?

The ABN is different from a Tax File Number (TFN).

Your TFN is the unique number the Australian Tax Office (ATO) uses to identify each taxpaying entity.

Not all individuals will have a TFN, but if you have an ABN you will also need to have a TFN.

Who uses an ABN?

To apply for an ABN you must be either:

  • carrying on an enterprise in Australia;
  • carrying on an enterprise that makes supplies connected with Australia; or
  • be a company registered under the Corporations Act 2001 (Cth).

businessman choosing freelancer to employee ticking box with red marker

 

What Does it Mean to Have an ABN?

To have your own ABN means you have to take responsibility for getting paid, paying tax on your earnings and superannuation.

1.To get paid you issue an invoice

To get paid by a customer you have to issue an invoice which

EXTRACT: Example Invoice from the ATO

 

ABN - Invoice

What About GST?

Australia has a value added tax known as the Goods & Services Tax or GST.

GST is charged at 10% on most goods and services sold in Australia.

ABN - How GST works

To manage the GST system, the Australian Tax Office must keep track of all transactions in the economy and ensure tax is collected by businesses and paid to the ATO.

If your business (i.e. you have an ABN) is going to earn over $75,000 in income, you need to register for GST.

You must register for GST if:

  • your business or enterprise has a GST turnover (gross income minus GST) of $75 000 or more
  • your non-profit organisation has a GST turnover of $150 000 per year or more
  • you provide taxi or limousine travel for passengers in exchange for a fare as part of your business, regardless of your GST turnover – this applies to both owner drivers and if you lease or rent a taxi
  • you want to claim fuel tax credits for your business or enterprise.
source: ATO

2.You have to pay your own tax 

As an ABN holder, you are running your own business so you need to keep accounts and pay tax on profits.

You need to keep track of the following:

  • What you got paid (your invoices)
  • The costs of running your business

EXTRACT: What Deductions?

ABN - tax

 

Put simply you must pay tax on your taxable income:

Assessable income – allowable deductions = taxable income (the amount you pay tax on)

 

You then pay tax on your taxable income according to the prevailing tax rates:

EXTRACT: Individual Australian Resident Tax Rates

ABN - tax rates

To estimate your tax, use the ATO tax calculator 

What Can I Claim?

For details of what you can claim, please refer to the below:

ABN - what can I claim

3.You don’t get any super contributions

Employees get superannuation in addition to their wage.

However as you are running your own business you don’t get extra income for super contributions – you have to manage these for yourself:

EXTRACT: Employees get Super, ABN holders have to manage their own Super

ABN - super

How Do I Apply For an ABN?

ABN registrations have been growing in Australia, so you are not alone in considering it.

In fact the number of Australian Business Number registrations surged 36% in 2016  to a total of 883,740, up from 649,947 in 2015.

Applying is Free:
It doesn’t cost anything to apply for an ABN and you can do so HERE 

ABN - am I entitled

 

Get an Accountant

As you can see operating under an ABN requires more work than just being an employee.

To get the full benefit of running your business and to ensure you are paying the right amount of tax you should find a good accountant.

 

Summary

  • ABN stands for Australian Business Number
  • To work for companies like deliveroo, uber and airtasker you need an ABN
  • ABN holders need to take responsibility for their own invoices, record keeping, superannuation and taxation
  • You should consider finding a good accountant to help with your responsibilities
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The information on this blog and website is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision. We recommend you consult a licensed financial adviser in order to assist you with this.

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