- Australian Business Number (ABN);
- Tax File Number (TFN);
- Goods and Services Tax (GST);
- Pay as You Go (PAYG).
Below, we unpack the factors that will determine whether your business, company or trust is required to obtain any registrations.
Australian Business Number
An ABN is a unique number associated with your business that identifies your business to the public. If you are carrying on a business, you will need an ABN. Carrying on a business could include:
- advertising your services;
- quoting and invoicing for work; and
- maintaining a business bank account separate to your personal account.
Companies will also need an Australian Company Number before they can trade. It’s important that you apply for an ABN using the legal name of your entity. This will differ depending on your business structure.
|Business Structure||Legal Name|
|Sole Trader||Your legal name|
|Company||Name registered with ASIC|
|Partnership||Names of all the partners|
|Trust||Name of the trust as shown on the trust deed|
Tax File Number
Your business or trust may need to apply for a TFN with the Australian Taxation Office. If you operate as a sole trader, you must apply for an individual TFN. All other business structures must apply for a TFN for business. If you are a sole trader, you can use your individual TFN to lodge your tax return. If you are operating a partnership, company or trust, you will need a separate TFN for the business. A corporate trustee will not need a TFN unless it is conducting business (i.e. it’s a trading trust).
Goods and Services Tax
Whether you need to register for GST will depend on your GST turnover.
GST turnover is based on your gross income – the amount your business earns in the course of operating before any expenses and other deductions.
If your business earns more than $75,000 before paying expenses, you will be above the threshold and required to register. If you are running a business that has a GST turnover of $75,000 or less, registration is optional. It is your responsibility to register for GST. You must have an ABN to register for GST.
GST Concessions for Small Businesses
There are several GST concessions that are available to a small business with an annual turnover of less than $2 million, including:
- Accounting for GST on a cash basis. This means that you only account for GST on your statement for the period when you received payments from your customers. This differs from a non-cash basis where you account for GST on the statement that covers the period in which you issued or received the invoice.
- Claiming tax credits for making payments to your suppliers.
- Paying GST by instalments according to what you owe (or estimate you will owe) to the ATO.
- Annual apportionment of GST input tax credit. Annual apportionment is when you buy items for both the business’ and personal use. Normally, you can only claim the amount attributable to business use as a GST tax credit. You can, however, get a full tax credit for a business purchase that you intend to use partly for private purposes under certain circumstances (namely, when you are a small business with less than $2 million turnover).
Pay as You Go
You may also need to register for PAYG withholding. PAYG is a mechanism for holding amounts from payments that you make to employees and other businesses so they can meet their end-of-year tax liabilities. With PAYG, you pay incremental amounts that collectively go toward your expected income tax liability.
You are obligated to register for PAYG if you:
- have employees,
- have withholding agreements with contractors, or
- pay businesses that don’t quote an ABN.
You collect tax from the payments that you make to them, to ensure that they meet their end-of-year tax liabilities.
PAYG is based on withholding amounts of payments that your business makes. The withholding amount is sent to the ATO as taxes. If you no longer operate your business or stop employing people, you will no longer be obligated to withhold payments. At this stage, you should cancel your PAYG registration.
The Australian government mandates whether your structure needs to obtain certain registrations. The registrations include an ABN, TFN, GST and PAYG and they all serve different purposes. Each one has different criteria for determining whether your business needs to apply. It is important to consider whether your business, company or trust meets the relevant criteria which determines whether your structure needs to register. Registration, when it is necessary, ensures that you are complying with all your regulations and will not be subject to any penalties. If you have any questions or need assistance registering your business, get in touch with our commercial law team on 1300 544 755.
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