How to Obtain Your ABN
So you want to work for yourself as a business, contractor or sub contractor and not sure where to start? Before you do anything else you really need an ABN, this is a unique 11 digit identification number for your business, that you will use when dealing with other businesses and to identify yourself to the tax department.
With an ABN you can:
- Purchase an Australian domain name
- Claim GST and energy grants credits
- Confirm your business identity to others when ordering and invoicing
It is not mandatory to have an ABN but it really is advisable as without one other business can withhold up to 46.5% of any money they owe you for taxation purposes, OUCH! You also cannot claim business expenses at tax time without an ABN, things like car expenses and fuel, internet and phone and even electricity and gas can all be claimed if they are directly a part of operating your business.
Not everyone is entitled to an ABN, when you apply you will be asked a series of questions to determine if you are entitled to one. Find out more about entitlement to an ABN here https://abr.gov.au/For-Business,-Super-funds—Charities/Applying-for-an-ABN/ABN-entitlement/
If the tax office defines you as an employee your application will be refused, the differences between an employee and contractor as stated by the ATO are;
- An employee cannot subcontract or delegate the work, a contractor can.
- An employee is paid for their time, a contractor is paid for an end result based on the quote provided.
- An employee is provided with the tools, assets and equipment to complete a task or is reimbursed by the business for obtaining any of these, a contractor provides the tools, assets and equipment needed and is not reimbursed.
- An employee takes no commercial risks; the business is legally responsible for all work and any defect found with that work and is the holder of any insurance required. A contractor takes commercial risks; they are legally responsible for their own work and any resulting defects and must have their own insurance.
- An employee has no control over the direction of the work, they simply do as required by the business, a contractor is free to manage the work as they see fit and is only bound by any specific terms written into any applicable contract or agreement.
- An employee works within and is considered to be a part of the business and does not operate independently, a contractor works independent from the business and has the right to refuse or accept work that is offered.
So if after going through all of that you are sure that you are a business, contractor or sub contractor and not an employee then the next step is to fill out your application.
An ABN application can be done online here https://abr.gov.au/For-Business,-Super-funds—Charities/Applying-for-an-ABN/Apply-for-an-ABN/ or via post (download a postal form here https://www.ato.gov.au/General/Gen/Order-ATO-products-online/)
Once you’ve submitted your application you will be notified advising whether you have been successful, need to provide more information, or your application has been refused. If your application has been successful you then have the opportunity to continue on and apply for other business registrations depending on the status of your ABN application and the type of entity your business is.