Do I need an ABN? When sole traders must have one and how to get it

What an ABN is

An Australian Business Number is an 11-digit identifier for your business in dealings with the ATO, other government agencies and other businesses. For a sole trader it attaches to you personally, alongside your tax file number. You get one ABN for all your sole trader activities, even if you run two or three different lines of work. It is public: anyone can look it up on ABN Lookup and see your name, location, GST status and any registered business names.

It is not a company. A company has an ACN as well as an ABN and is a separate legal entity; see ABN vs ACN. A sole trader with an ABN is still just you.

Who needs one

You need an ABN if you are carrying on an enterprise: a business, or activities in the form of a business, including a side hustle that is run for profit. Practically, you need one the first time you invoice a business customer, register for GST, or sign up as a contractor with a platform or agency.

You are entitled to one if you are starting or carrying on a business in Australia. You are not entitled to one for a hobby, or as an employee, and the ABR will refuse or cancel an ABN that is not attached to an enterprise. The test is the same as hobby vs business.

The 47% withholding rule

If you supply goods or services to a business and your invoice does not quote an ABN, the business is required to withhold tax from the payment at the top marginal rate plus Medicare levy, 47%, and send it to the ATO. You get it back as a credit when you lodge your tax return, but that can be a year away. Small exceptions exist: payments of $75 or less, payments for a hobby where you provide a Statement by a supplier, and payments to employees. For everyone else, an ABN on every invoice is the fix.

What an ABN lets you do

• Invoice businesses and be paid in full.
• Register for GST, and claim GST credits on purchases once registered.
• Register a business name with ASIC (a separate step with a small fee) and a .com.au domain.
• Open a business bank account and deal with wholesalers and suppliers on trade terms.
• Sign up as a contractor with platforms, agencies and government bodies that require one.
• Apply for PAYG withholding registration if you take on staff.
• Claim fuel tax credits, if that applies to you.

How to apply

Go to the Australian Business Register (abr.gov.au) and start a new ABN application. You will need your tax file number, your identity details, the date you started or will start the business, a description of what you do, and your business address and contact details. The form asks whether you also want to register for GST, a business name and PAYG withholding; tick what you need.

Most sole trader applications are approved immediately. If the ABR needs to check something it can take up to 28 days. Applying is free; some websites charge to lodge the same form for you, and there is no need to use them.

Employee or contractor?

Having an ABN does not make you a contractor. If you work set hours, under direction, using the employer’s equipment, and cannot send someone else to do the work, you are likely an employee regardless of the ABN, and the employer owes you super and withholds tax. Being asked to get an ABN so that a regular job can be paid without super or leave is called sham contracting and is against the law. The Fair Work Ombudsman and the ATO both have guidance on the difference.

Looking after it

Keep your ABR details current: you must update changes to your address, contact details and activities within 28 days. If you stop trading, cancel the ABN within 28 days. The ATO reviews inactive ABNs and cancels ones that show no business activity, which is a nuisance if you were just having a quiet year, so lodging your returns with the business schedule keeps it alive. Put the ABN on every invoice and quote; FlowFi adds it to every invoice automatically once you enter it.