Accredited advice: do I need an ABN as a sole trader?

Before discussing the the requirements and benefits of holding an ABN as a sole trader, it is important to clarify what a sole trader is, what an ABN is, and whether you are required to have one as a sole trader. This blog post will answer all of your questions; read on to find out more about whether you need an ABN as a sole trader.

What is a sole trader?

A sole trader is defined as the simplest form of business structure. If you operate your business as a sole trader you are the only owner of said business. As a sole trader you are legally responsible for all aspects of your business.  The key features of a sole trader include being:

  • Responsible for day-to-day business operations;
  • Responsible for any debts and losses; 
  • Legally responsible for all aspects of your business; and 
  • Responsible for your own super and the super of employees you hire.

What is an ABN?

An Australian Business Number (ABN) is a unique number that identifies your business.  Your ABN is an 11 digit number that will be used to identify your business to the government and community.  You can use an ABN to: 

  • Identify your business to others when ordering and invoicing; 
  • Avoid pay as you go (PAYG) tax on payments you get; 
  • Claim goods and services tax (GST) credits;
  • Claim energy grants credits; and
  • Acquire an Australian domain name.

Do I need an ABN as a sole trader?

As a sole trader you are NOT required to acquire an Australian Business Number unless your expected annual turnover will exceed $75,000.  So to answer the question, you do not need an ABN unless you fall under the specific annual turnover circumstances.  Despite not being legally required, it is encouraged that sole traders acquire an ABN due to the many perceived benefits of an ABN.  Some key benefits to having an ABN as a sole trader include: 

  • Legitimately confirming your business identity to others;
  • Avoiding business clients withholding Pay as You Go (PAYG) tax on payments; 
  • Claiming back Good and Services (GST) credits; and 
  • Acquiring an Australian domain name.

How do I acquire an ABN as a sole trader?

As a sole trader, you are able to apply for an ABN for free, however, not everyone is entitled to an ABN.  You are entitled to an ABN if you are:

  • Carrying on or starting an enterprise in Australia;
  • Making supplies connected with Australia’s indirect tax zone; or 
  • A Corporations Act company.

Once an application is submitted, if you are successful with your application you will receive your 11-digit ABN immediately.  Once you have received your ABN you can immediately apply for other business registrations such as GST.  Your details will be added to the Australian Business Register (ABR), where you can request that certain details are not disclosed if any privacy concerns may arise.  It is now your responsibility to ensure your ABN details are up to date.  

If your submitted application is rejected you will receive a refusal number.  Within 14 days you will receive a letter confirming that your application has been unsuccessful, the reason as to why you were refused and the options available to you continuing forward.  

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What is needed for an ABN application?

If your business falls under the conditions listed above, and is entitled to an ABN, before applying you should understand the important information and documents that are needed for your application. To ensure you can complete your ABN application the following is required:  

  • Tax file number (TFN);
  • Tax or BAS agents registered agent number, if you use a registered agent; 
  • Professional adviser number, if you’re using the service of a professional adviser, you can provide their licence number e.g. Australian Financial Services Licence (AFS Licence);
  • Previously held ABN (if applicable);
  • Date your ABN is required (this should be the date that you expect to start any business activities – e.g. buying stock and can’t be more that six months in the future from when you apply);
  • Entity legal name (as it appears on all official documents or legal papers);
  • Authorised contacts (this can be a registered tax or BAS agent if they are authorised to make changes or update information on behalf of the entity);
  • Business contact details including an address, postal address, email address and phone number;
  • Business activity (usually the main source of income for your enterprise e.g. agriculture, construction, investment and manufacturing); and
  • Business locations (include the business’ physical locations for all premises operated by your enterprise, unless there’s a risk to safety of individuals as a result of the disclosure).

With your newly acquired understanding of the requirements and benefits of holding an ABN as a sole trader, you are now ready to register your ABN.  This can be done by heading to the Australian Business Register website and following the application steps found on the website. As a sole trader, you may benefit immensely from Business Kitz‘ subscription plan, which offers access to over 150+ legally compliant, employment and HR related customisable documents for the low price of $14 per user per month. Click here to find out more about our subscription plan.

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