Home – New Forums Starting your journey Starting Business: Questions on ABN & Tax

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  • #983619
    kirstenmichel
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    Hi everyone! I really love this sense of community and sharing on this website. Hope someone will be able to shed some light on my confusion.

    So I work from home over the internet and I have had some casual assignments that constitute more of a hobby in the past (irregular & $50 to $80 an assignment). Recently, I have gotten myself a few clients on a more longer term basis so am looking to get an ABN, set up a proper sole trader business etc.

    I went to see a tax consultant today and I got even more confused:

    1) I have been reading that it is not compulsory to get an ABN. But my tax consultant said I have to because “sooner or later somebody will ask for your ABN”. So is it compulsory… or not?

    2) At this point, even with my more long term assignments that are soon-to-start, I don’t think I will hit the $20,000/year income mark. I will probably be getting $600 a month ($7200/year) tops.

    So is there still a point in getting an ABN and getting registered and all that?

    My very brief (and shallow) understanding of the whole tax thing is it’s good to get registered and all that as it will help my tax refunds. But now that I realise I probably won’t even hit $20,000/year, is it even worth it to go through all the trouble? I won’t be able to claim anything anyway.

    Sorry if I’m all over the place. Am I understanding the whole thing correctly? I have been trying my best to educate myself and even went to see a tax consultant who confused me more. Help! And thank you in advance.

    #1143374
    KellyB
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    It is not compulsory to have an ABN, however businesses are supposed to withhold 46.5% tax on any payments they make to when if you have not quoted an ABN. So while it is not compulsory, you will end up having tax withheld (well if the people paying you are aware of this anyway!).

    And I woud suggest considering a new tax consultant – walking away more confused is probably not a good start :)

    #1143375
    Michael CA
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    Activities of a hobby (no profit motive) do not need an ABN but a business (profit motive) should have an ABN. You will not need to be registered for GST until your turnover exceeds $75,000 but if you are selling to businesses, they may prefer you to be registered. Once you have an ABN there should be no change in your compliance obligations until you register for GST (if ever).

    #1143376
    JacquiPryor
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    An ABN doesn’t cost anything to obtain and is pretty straight forward, so, can’t hurt to get one. You can apply for your ABN at http://www.abr.gov.au.

    This page of the ATO website can help determine if you are ‘in business’ in their eyes, and therefore eligible for an ABN (versus running a ‘hobby’).

    #1143377
    Candara
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    It can hurt to get one if you are not eligible for one.

    When I was setting up my business, I applied for one and was knocked back. I was so surprised. So I operated my business without one in its first year. This is perfectly legal.

    Once I had the further requirements stipulated by the ATO, I was then allowed to have an ABN. This surprised me as I thought anyone could just apply and voila but no so. And there are fines for those caught with an ABN and no entitlement to use one so it pays to make sure.

    I agree with KellyB. Ditch your accountant and get a new one. You should never be confused. The ATO take no prisoners in that they expect you to be aware of the rules and a good accountant will make sure that you do.

    #1143378
    JacquiPryor
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    Good point Candara – my sentence should have read:

    “An ABN doesn’t cost anything to obtain and is pretty straight forward, so, can’t hurt to get one if you are eligible

    Then leading to the ATO page to help determine eligibility… apologies for any confusion :)

    I would not suggest trading for too long without one though (assuming you are eligible to hold an ABN) – as Kelly noted, others may withhold a substantial portion of payment from you in tax if you don’t quote an ABN.

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