Home – New Forums Starting your journey Self Employed, ACN or ABN

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  • #981997
    BigLeon
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    Hi all,

    I have tried to read up the forums and trying to get the answer I need, but no luck :(. I am new to be a self employed worker and I am new to work force plus I am a temporary resident who have been in Australia for 4 years only. I really need help.
    What is happening is I worked as a temp contractor in a company, by the end of my contract, I found that one of the department is hiring people.
    Well, in that department, the company outsource the service to another lady. And it is the lady which hire me.
    She wanted to hire me as a contractor, and required me to obtain an ACN. It was kind of a rush and since I really needed a job and wanted to stay in that company, I obtained an ACN anyway. After that, I read up more about ACN and ABN, and found that if i work through ACN, I am not only dealing with my own tax but also company tax (which is 30% tax rate). And since I m not earning a lot, the company tax rate is a lot higher than my personal income tax rate. I am in panic. Then found that actually it should be the same if I work as a sole trader holding an ABN.
    At this point, I want to convince her to let me do it under personal ABN instead of ACN. But I would also want to know about why does she wants me to have an ACN instead of an ABN?
    Please help me, I know I may confuse you but I am trying to use my best english to explain my complicated situation.
    I hope you can give me some advice.

    #1134131
    MyGreatIdea
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    The only way you could have received an ACN is to have registered a company. Are you sure that this is what you did? It would require lodging a lot of documents and probably going through a lawyer or accountant.

    Wendy :)

    #1134132
    procnetservices
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    They probably want you to be a company so they can try to get around PAYG and Super which you would have to manage yourself. If you go as a sole trader they will still be liable for everything as if you were an employee.

    As a company you would only pay company tax on profits i.e. after you have yourself salary etc. You should talk to an accountant. You will need one anyway for the different returns you would need to do.

    cheers

    Scott

    #1134133
    Past-Member
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    ACN means Australian Company Number. It only applies if you are a registered company and that involves a lot of paperwork and you should have an accountant preparing it correctly. (Some people who know what they are doing could do it on their own, but you are new to all of this.)

    ABN means Australian Business Number. It is a number given to a business. A sole trader can register for an ABN which is applied to their own tax number.

    Some people want their workers to use an ABN so that they do not have to pay superannuation, taxes, sick pay, etc. This is illegal for people working only for that one company/person.

    I urge you to talk to someone at the ATO (Australian Tax Office) http://www.ato.gov.au/ – preferably go to an ATO office and get all the paperwork done there.

    If you don’t set up correctly now you will run into problems doing your tax at the end of the financial year (July to June is Australia’s financial year).

    Please do not be caught by unscrupulous people. Go and get the correct help you need from the ATO or a good accountant. And do it now, as soon as possible, before problems begin.

    Best wishes.

    #1134134
    Divert To Mobile
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    Hi BigLeon,

    ACN = Australian Company Number
    ABN = Australian Business Number

    ACN does not get taxed 2 times.
    ACN will pay 30% tax on what it keeps at the end of the financial year.
    Your company, (ACN) will pay you all its income so no money left in the company to pay 30% company tax.

    You have to pay personal tax on the money you get from your company.

    You will pay the same tax with ACN or ABN

    Yes she could have asked you to only get ABN but there is some reason why she wants you to use ACN. I dont know, you could ask her but now you have the ACN anyway.

    Find an accountant who speaks your first language to explain it all to you to be sure you understand completely. Make a new post in the “referrals” thread to ask for one.

    Good luck.

    Steve

    #1134135
    JacquiPryor
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    Just to add to this… If you have an ACN (i.e. registered company to get the ACN) then your ACN (Company) will also need its own ABN. It is the ABN required to do business with people – without it, they can withhold even more tax.

    A company (ACN) is a separate legal entity to you as a person. It is responsible for its own business transactions and taxes. If you get an ABN as a person/sole trader, then you are responsible.

    #1134136
    al.giffard
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    • Total posts: 97
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    Hi there,

    Just to add further, it sounds like your income would be “personal services income”, which is treated differently and, very generally, it’s treated as your income for tax purposes, not the company’s income. The ATO provides more info: http://www.ato.gov.au/businesses/pathway.aspx?sid=42&pc=001/003/092

    It’s not uncommon for industries that use subcontractors to ask you to set up a company. The main reason is to avoid paying you an extra 9% of your pay into superannuation – if you use your own ABN, they usually still have to pay it, but a company avoids this. It’s important to let an accountant get involved to make sure it’s managed properly and meets all its obligations, because companies are different beasts altogether.

    One more caution, in your first year operating through your company, no money is being put away from your wages for your tax at the end of the year – this automatically happens for employees, but not through a company. This means you’re taking home more money now, but you’ll likely have a big tax bill at the end of the year. It’s best to plan for that.

    Hope that helps,

    Al.

    Standard Disclaimer: This is general information and not advice.

    #1134137
    BigLeon
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    • Total posts: 6
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    Couple It, post: 152723 wrote:
    The only way you could have received an ACN is to have registered a company. Are you sure that this is what you did? It would require lodging a lot of documents and probably going through a lawyer or accountant.

    Wendy :)

    Yes Wendy, I did it through ecompanies.com.au and opened up a pty ltd.

    #1134138
    BigLeon
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    • Total posts: 6
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    KarenC, post: 152729 wrote:
    ACN means Australian Company Number. It only applies if you are a registered company and that involves a lot of paperwork and you should have an accountant preparing it correctly. (Some people who know what they are doing could do it on their own, but you are new to all of this.)

    ABN means Australian Business Number. It is a number given to a business. A sole trader can register for an ABN which is applied to their own tax number.

    Some people want their workers to use an ABN so that they do not have to pay superannuation, taxes, sick pay, etc. This is illegal for people working only for that one company/person.

    I urge you to talk to someone at the ATO (Australian Tax Office) http://www.ato.gov.au/ – preferably go to an ATO office and get all the paperwork done there.

    If you don’t set up correctly now you will run into problems doing your tax at the end of the financial year (July to June is Australia’s financial year).

    Please do not be caught by unscrupulous people. Go and get the correct help you need from the ATO or a good accountant. And do it now, as soon as possible, before problems begin.

    Best wishes.

    Okay, I will call the ATO and probably make an appointment with them asap

    #1134139
    BigLeon
    Member
    • Total posts: 6
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    Divert To Mobile, post: 152732 wrote:
    Hi BigLeon,

    ACN = Australian Company Number
    ABN = Australian Business Number

    ACN does not get taxed 2 times.
    ACN will pay 30% tax on what it keeps at the end of the financial year.
    Your company, (ACN) will pay you all its income so no money left in the company to pay 30% company tax.

    You have to pay personal tax on the money you get from your company.

    You will pay the same tax with ACN or ABN

    Yes she could have asked you to only get ABN but there is some reason why she wants you to use ACN. I dont know, you could ask her but now you have the ACN anyway.

    Find an accountant who speaks your first language to explain it all to you to be sure you understand completely. Make a new post in the “referrals” thread to ask for one.

    Good luck.

    Steve

    Sorry but I could not find “referrals” thread. Would you please show me where it is?

    #1134140
    CindyK
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    • Total posts: 155
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    Hi BigLeon,

    Your English is quite understandable however, as Divert to Mobile mentioned, you might be best finding an Accountant who speaks your native language because business and tax in Australia can be quite complex. I know even native speakers who get confused with our legislation.

    There are lots of things to consider here.

    Another main reason that companies can require an ACN (which I don’t think has been mentioned) is Insurance. Once you have registered a Company then you absolutely need to have your own Public Liability Insurance etc. Usually then the hiring company can not be liable for your mistakes, whereas as an sole trader you have to battle it out in court.

    The ATO can help with tax issues, but you would also benefit from broader advice and a Tax Agent should be able to assist you with finding the right professionals.

    It might be a little expensive but at the moment you risk losing alot of money by making uninformed decisions. That way your money is spent saving you time and effort.

    Good Luck!

    #1134141
    BigLeon
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    • Total posts: 6
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    Hi all,

    Just an update of my current situation.
    I have talked to my client, and she mentioned that she required me to have an ACN due to insurance and technical issues.

    Well, I started anyway. So I guess I will have to stick with this ACN. I will try to get an accountant, (I hope that wouldn’t be too expensive since I am really short of cash after being un-employed for a while).

    From here, may i have some more questions?
    1. If I am gonna pay the income to myself as my wage and get rid of the company profit, how do I withhold my own tax (just like what the employer did for me before), and how to I pay for my own super?
    2. I heard of BAS, what’s this? Must I do this (I do not have GST because my company turnover would be less than $75000)? must I hire an accountant to do it?
    3. I read a bit about PSI (Personal Service Income), and found that my work will be considered as that, does it mean that I do not have to do the “pay myself wage” way?

    I know I may be being annoyed, but I would like to have a brief idea before I go to an accountant so that I can know what exactly I should ask.

    I really appreciate your helps.

    #1134142
    Anonymous
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    • Total posts: 11,464
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    Hi Big Leon,

    You really will need to talk to an accountant about all this, because there are many factors to be considered, and the answers to your questions will depend on your personal circumstances, so people here can really only offer you general advice.

    The referrals section of the forum is here, if you’d like to ask for recommendations for one. If you can tell us what your native language is, we’ll see if we can find any accountants that speak it for you – no promises, but we’ll do our best!

    Good luck with it all,
    Jayne

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