Starting a business often begins with a practical question: do I need an ABN, and how do I get one? An Australian Business Number, or ABN, is one of the key registrations for many sole traders, contractors and business owners. It helps identify the entity running the business when dealing with customers, suppliers, government agencies and the ATO.

Applying is generally straightforward when you have chosen the right structure and can show that you are genuinely starting or carrying on an enterprise. The important part is not just completing an online form, but making sure the ABN is being applied for by the right entity and for the right reasons.

What an ABN is, and what it is not

An ABN is an 11-digit identifier issued through the Australian Business Register. It identifies a business or organisation to government, other businesses and the public.

For many small businesses, an ABN is useful when issuing invoices, opening business accounts, dealing with suppliers and registering for other business tax obligations. If a supplier does not quote an ABN when it is required, the business paying them may need to withhold an amount from the payment under the no-ABN withholding rules, unless an exception applies.

However, an ABN is not the same as every other registration you may need. It is important to distinguish between the following:

  • An ABN identifies the business or entity for business and tax purposes.

  • A tax file number, or TFN, is used for income tax administration. A sole trader generally uses their own individual TFN, while other structures may need a separate TFN.

  • A business name is the name you trade under. Registering a business name is separate from applying for an ABN.

  • An Australian Company Number, or ACN, is issued to a company when it is registered with ASIC.

  • GST registration allows an eligible business to charge GST on taxable sales and claim GST credits, subject to the relevant rules.

Having an ABN does not automatically mean you are registered for GST, have registered a business name or have formed a company. These are separate decisions, although some registrations can be completed together through the Australian Government’s business registration process.

Check whether you are entitled to an ABN

The first step is confirming that you are entitled to hold an ABN. Under the Australian Business Number legislation, an entity is generally entitled to an ABN if it is carrying on an enterprise in Australia, starting an enterprise in Australia, making certain supplies connected with Australia, or is a company registered under the Corporations Act.

For most new sole traders, the practical question is whether their activity is a genuine business or enterprise rather than a hobby or employment arrangement.

Signs you may be carrying on a business or enterprise

There is no single factor that decides whether you are in business. The Australian Business Register considers the overall circumstances. Relevant indicators can include:

  • you intend to make a profit from the activity;

  • you have a business plan, pricing approach or marketing plan;

  • you are actively promoting your products or services;

  • you have bought equipment, stock, insurance or other business resources;

  • you are providing quotes, bidding for work or negotiating with customers;

  • your activities are organised, repeated and carried out in a business-like way; and

  • you keep records of income, expenses and customer transactions.

You do not necessarily need to have made your first sale before applying. If you are genuinely preparing to begin, commencement activities such as arranging insurance, advertising, purchasing equipment, setting up a business profile or issuing quotes may support your application.

Keep evidence of those steps. The Australian Business Register may review an application and ask you to show that you had begun, or had taken real steps to begin, the enterprise from the date stated in the application.

When an ABN may not be appropriate

An ABN is not intended for a hobby. For example, someone occasionally selling handmade items without a commercial plan or genuine intention to operate as a business may not be entitled to an ABN simply because money changes hands.

It is also not appropriate to obtain an ABN for work you perform as an employee. An employer should not require a worker to obtain an ABN merely to label them as a contractor. Whether someone is an employee or contractor depends on the real working arrangement, not just the title used in a contract or invoice.

This distinction matters because employment arrangements can involve PAYG withholding, superannuation and other obligations that cannot be avoided by asking a worker to quote an ABN.

Choose the right business structure before applying

Your ABN is connected to the entity that operates the enterprise. That makes choosing a structure an important decision before you start the application.

The common structures used by Australian businesses are:

  • Sole trader: one individual owns and runs the business. The sole trader is personally responsible for the business’s debts and obligations.

  • Partnership: two or more people or entities carry on a business together.

  • Company: a separate legal entity registered with ASIC. A company must have an ACN before applying for its ABN.

  • Trust: a trustee carries on activities for the benefit of beneficiaries under the terms of the trust.

A sole trader structure may be suitable for someone starting a relatively simple business, such as a consultant, tradesperson, designer or online retailer. A company or trust may be appropriate in other circumstances, but they involve different legal, tax, administrative and record-keeping responsibilities.

It can be tempting to select the quickest structure simply to get started. However, changing structure later can have consequences. A change from sole trader to company, for example, generally means the original entity is no longer the entity operating the business. This may require cancellation of the former ABN and an application for a new ABN, alongside updates to registrations, contracts, bank accounts, software and invoicing.

A brief discussion with an accountant or registered tax agent before applying can help you avoid setting up a structure that does not suit your plans.

Gather the information you will need

Once your structure is decided, gather the details needed for the application. Having accurate information ready can make the process faster and reduce the risk of delays.

Depending on your circumstances, you may need:

  • your TFN and, where relevant, the TFNs of associates such as partners, directors or trustees;

  • the legal name of the entity;

  • your ACN or Australian Registered Body Number if applicable;

  • the date you expect business activities to start;

  • the main business activity that is expected to produce income;

  • business contact details, including physical, postal, telephone and email details;

  • the location or locations where the business operates;

  • details of associates connected with the entity; and

  • the details of a registered tax agent or BAS agent if they are authorised to act for you.

The start date should reflect when you expect to begin business activities, which could include buying stock or equipment, advertising, arranging licences or insurance, or providing services. The Australian Business Register advises that the date nominated cannot be more than six months in the future when you apply.

Providing a TFN is not compulsory under the ABN legislation, but it can assist with identity verification and may speed up processing. If the information provided does not match existing records, the application can be delayed or refused. In some cases, further proof of identity may be requested.

How to apply for an ABN

ABN registration is free when completed through the Australian Government’s official business registration services. Be cautious of private websites that charge a fee to complete an application that you can ordinarily submit yourself at no cost.

The process can be completed online, and you can also apply through a registered tax agent or BAS agent who is authorised to act on your behalf.

A simple step-by-step process

  1. Confirm your entitlement. Make sure you are starting or carrying on a genuine enterprise, rather than a hobby or employment arrangement.

  2. Choose your structure. Select the entity that will own and operate the business, such as yourself as a sole trader, a partnership, a company or a trustee.

  3. Prepare your details. Gather identity, associate, contact, business activity and commencement information before beginning.

  4. Complete the online application. Answer each question carefully and ensure the details are consistent with your tax and identity records.

  5. Consider other registrations. Depending on your circumstances, you may apply for a business name, GST, PAYG withholding or other registrations at the same time.

  6. Save your confirmation. If the application is successful straight away, keep a copy of the confirmation and your ABN details for your records.

Some applications are approved immediately. Others receive a reference number while the Australian Business Register checks the information or requests further details. The Australian Business Register states that reviews are generally aimed to be completed within 20 business days, although timing can depend on the information required and the complexity of the application.

If an application is unsuccessful, the applicant receives a refusal number and is notified of the reasons and available review options.

Decide whether to register for GST at the same time

An ABN and GST registration are related, but they are not the same thing. You need an ABN before you can register for GST.

A business is generally required to register for GST if its GST turnover reaches the relevant registration threshold. Under the current GST regulations, the threshold is $75,000 for most businesses and $150,000 for non-profit bodies. Different rules apply to businesses providing taxi, limousine or ride-sourcing travel, which must register regardless of turnover.

GST turnover is not simply business profit. It is based on the value of relevant sales over a current or projected 12-month period, subject to specific exclusions. This means a business should monitor its sales regularly, particularly as it grows.

If you are required to register, the ATO says you generally need to do so within 21 days. A business that expects to meet the threshold in its first year may register when applying for its ABN rather than waiting until sales increase.

Voluntary GST registration may be available if you are below the threshold, but it brings ongoing obligations. Once registered, you may need to charge GST on taxable sales, keep appropriate records, issue compliant tax invoices where required and lodge BAS statements. Voluntary registration is therefore a commercial and administrative decision, not simply a box to tick.

A practical example

Consider a freelance marketing consultant who has accepted work from several clients and is preparing to launch under a new trading name. They have prepared service packages, obtained professional indemnity insurance, created a website, issued proposals and expect to begin invoicing shortly.

They may be able to apply for an ABN as a sole trader because they have taken genuine steps towards operating a commercial enterprise. If their projected GST turnover is below the compulsory registration threshold, they may choose not to register for GST initially, while continuing to monitor turnover as the business develops.

If the consultant later decides to operate through a company, the change should be planned carefully. The company would be a different entity, with its own registrations and obligations.

What to do after your ABN is issued

Receiving an ABN is an important milestone, but it is not the end of the setup process. The next steps depend on your business activities, structure and whether you engage workers.

You may need to:

  • register a business name if you are trading under a name that must be registered;

  • set up a separate bank account for business income and expenses;

  • choose bookkeeping software or another reliable record-keeping system;

  • prepare invoices that show the correct entity details and ABN;

  • register for GST if required or if voluntary registration is appropriate;

  • consider PAYG withholding registration if you employ staff or have other withholding obligations;

  • arrange appropriate insurance, licences and permits for your industry; and

  • put a process in place for saving receipts, reconciling transactions and setting aside money for tax obligations.

It is also important to keep your ABN details current. Under the Australian Business Number legislation, you must notify the Registrar within 28 days after becoming aware that information recorded on the Australian Business Register is no longer correct.

This can include changes to your business address, contact details, business activity, associates or other registration details. If the business is sold, closes or stops carrying on an enterprise, the ABN may need to be cancelled. A significant change in structure can also require a new ABN rather than a simple update.

Getting the foundations right

Applying for an ABN is usually a manageable first step, provided you are applying as the right entity and for a genuine business or enterprise. Take time to confirm your structure, gather accurate information and consider whether GST or other registrations are needed now or later.

The right setup can make bookkeeping, invoicing, BAS reporting and tax planning easier as your business grows. General information can only take you so far, so speak with a registered tax agent or accountant, such as Ample Finance, about your specific circumstances before making important structure or registration decisions.

This article is general information only and is not personal financial or tax advice. Your circumstances may affect the registrations, tax obligations and business structure that are appropriate for you.