If you run or own a business owner, then you will need an Australian Business Number (ABN) or an Australian Company Number (ACN). Although, in many situations, you may need both. These numbers are essential in allowing your business to operate successfully in Australia and ensuring that anyone interacting with your business understands who they are dealing with. This article will explain what ABN and an ACN are, the difference between the two, and which one you need to register.
What is an ABN?
An ABN is the unique 11-digit number issued by the Australian Tax Office (ATO) to identify your business. All businesses in Australia must have an ABN.
ABNs have several uses, including:
- specifically identifying your business, for example, your company and a competitor could have the same name, but you would both have different unique ABNs;
- allowing your business to operate in the Australian GST system;
- stopping you from paying PAYG tax on payments received; and
- allowing you to access online government services.
An ABN is issued to any business that applies to the ATO.
Why Do I Need an ABN?
It is a requirement that if you are “carrying on a business”, you have an ABN. Unfortunately, no single definition explains what “carrying on business” means. However, the ATO considers whether:
- your activity or business is a significant commercial activity involving commercial sales or services;
- you are intending to make a profit from your business and the scale of your business;
- you are undertaking a repeat business;
- you conduct your business in a systematic and organised way, including keeping business records; and
- you are undertaking a business in a way that is similar to other businesses in your field or area.
If any of these features apply to your business, you may be “carrying on a business” and must have an ABN.
Continue reading this article below the formWhich Types of Businesses Only Need an ABN?
Sole Trader
A sole trader is a type of business where you are responsible for all debts and losses. This means that you are considered to be the business, and you will only need an ABN.
Partnership
A partnership is when two or more people, businesses or entities carry on business together and distribute income or losses between themselves. Therefore, if you are part of a partnership, you must apply for a separate ABN, and all partnership business must be conducted under this ABN.
What is an ACN?
An Australian Company Number (ACN) is a unique nine-digit number. It is issued to your company once you have registered through the Australian Securities and Investments Commission (ASIC). The difference between an ABN and an ACN is that an ABN is issued to a business, while an ACN is issued to a company. So, what is the difference between a business and a company?
A company is a specific legal entity that is separate from its owners (the shareholders). It is managed by directors, and these directors have their own legal liabilities. Unlike businesses, ASIC strictly regulates companies because they are separate legal entities.
Moreover, if your company is “carrying on a business” or undertaking one or more of the points mentioned above, then you will need an ABN and an ACN. This is because the legal entity, the company, is considered to be “carrying on a business.”
Why Do I Need an ACN?
As a company is its own legal entity, it is subject to oversight by ASIC. Part of complying with this oversight is ensuring that your ACN is on all relevant documentation. This includes:
- all documents that you lodge with ASIC;
- your companies statements of account, including your invoices;
- specific receipts that the company generates;
- any orders for goods and services;
- your business letterhead;
- company cheques; and
- any ads you put up making specific offers.
Furthermore, when registering your company, specific documents are necessary to formalise the process, such as a shareholders agreement and a company constitution. Notably, these documents must include your company’s ACN.
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Key Takeaways
An ABN is the unique identification number linked to your business. No matter your size, you must apply for an ABN through the ATO so long as you are “carrying on a business.” You only need an ACN if your business is also a company, meaning it is a separate legal entity with shareholders. If this is the case, you must register your company through ASIC. However, if your company is carrying on a business, you will also need an ABN. When a company has both an ABN and an ACN, the ACN will provide the base number for the ABN. This means the first nine digits of both numbers will be identical.
If you need help with your ABN or ACN, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
If you are or intend to operate a business in Australia, then you will need an ABN. If you want to run your business through a separate legal entity, then you will need to register a company through ASIC, and this will provide you with an ACN. An ACN is required by ASIC as it provides a unique identifier for your company and is required to be on certain company documentation.
An ABN is the unique 11-digit number issued by the Australian Tax Office (ATO) that is used to identify a specific business. All businesses in Australia must have an ABN.
An Australian Company Number (ACN) is the unique nine-digit number that is issued to your company once you have registered through the Australian Securities and Investments Commission (ASIC).
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