How to get an ABN and when you need one

You need an ABN if you are carrying on an enterprise in Australia — running a business, freelancing genuinely on your own account, contracting to multiple clients, selling goods or services independently, or operating through a company, trust or partnership.

You do not need one to be an employee, a casual, or a labour-hire worker. Employees are paid through payroll with tax withheld, super paid and leave accruing.

The Australian Business Register asks whether you are carrying on an enterprise, and applying without one is a false declaration. Genuine indicators include quoting for work, invoicing, having multiple clients or the freedom to take them, providing your own tools and equipment, controlling how and when you do the work, and bearing the commercial risk of the job.

You do not need an ABN for a hobby. The ATO's own hobby-versus-business guidance turns on whether you intend to make a profit, operate in a businesslike way, repeat the activity and hold yourself out as a business.

If you are not carrying on an enterprise and a payer asks for an ABN, they may instead accept a Statement by a Supplier form, which prevents them withholding at the top rate without you obtaining an ABN you should not have.

Having an ABN does not require you to register for GST. GST registration is compulsory only above a turnover threshold, and separately compulsory for taxi and rideshare drivers regardless of turnover.

Sham contracting is where an employer engages someone as an independent contractor when the relationship is really employment — commonly by requiring them to get an ABN and invoice. It is prohibited by the Fair Work Act, and the employer faces penalties.

It matters because the entitlements lost are substantial: superannuation, paid leave, notice of termination, redundancy pay, minimum award rates, workers' compensation coverage and unfair dismissal protection.

Whether you are an employee or a contractor is determined by the totality of the relationship, and following recent High Court decisions the written contract carries substantial weight where it is comprehensive and not a sham — but the Fair Work Act was subsequently amended to require the real substance and practical reality of the relationship to be considered. This is an area that has moved recently, so check the current position.

The classic indicators of employment persist: you work set hours at the employer's direction, you cannot delegate the work to someone else, you use their tools and equipment, you do not bear commercial risk, you cannot work for others, and you are paid for time rather than for a result.

Superannuation is a separate question and is broader than employment. Where a contract is wholly or principally for your labour, super is generally payable even though you are a contractor for other purposes. Very large numbers of contractors are owed super they have never claimed.

Being paid on an ABN also means no PAYG withholding, so tax is your responsibility — including quarterly PAYG instalments once the ATO puts you into the system, which surprises people in their second year.

If you think you are misclassified, contact the Fair Work Ombudsman. It is free, and it can investigate and recover entitlements. Unpaid super goes to the ATO, which has its own recovery process.

Apply at abr.gov.au. It is free and usually issued immediately. Any website charging a fee to obtain an ABN is charging for something the government provides at no cost.

You will need your tax file number, proof of identity, your business structure (sole trader, partnership, company or trust), the date you started or will start, and a description of your main business activity.

Answer the enterprise questions honestly. Applications are refused or later cancelled where the register concludes no enterprise is being carried on, and the ATO periodically cancels inactive ABNs.

Decide your structure before applying. Sole trader is simplest and cheapest, uses your own TFN for tax and gives no liability protection. A company is a separate legal entity with limited liability, its own tax rate and substantially more compliance and cost. Most people starting out are sole traders.

Register a business name separately with ASIC if you will trade under anything other than your own name. It is a small annual fee and is not the same thing as an ABN, and it gives no trade mark protection.

Register for GST if your turnover exceeds the threshold, or if you drive taxi or rideshare. Below the threshold it is optional, and registering voluntarily means charging GST on your invoices and lodging business activity statements — worth it if your clients are GST-registered businesses, usually not if they are consumers.

Consider a separate bank account, insurance appropriate to your work (public liability, professional indemnity, income protection), and whether you need workers' compensation cover — as a contractor you are generally not covered by anyone else's.

Set money aside for tax from every invoice. Nothing is withheld for you, and the first year's tax bill arrives with the return — followed, once the ATO enrols you, by quarterly PAYG instalments toward the next year, which effectively means paying two years' tax across a single period. This is the single most common cash-flow shock for new sole traders.

Set aside for super too. Sole traders are not required to pay themselves super, but nobody else is doing it, and personal contributions are generally deductible.

Keep records for the period the ATO requires, including invoices, receipts and evidence for every deduction. Deductions must be genuinely business-related, with apportionment where an expense is partly private.

Invoice properly. A tax invoice needs your ABN, the date, a description, the amount, and the GST amount if you are registered. Without an ABN on the invoice, a business client must withhold at the top marginal rate.

Use ABN Lookup to check any ABN you are given — it is free and public, and shows whether the ABN is active, whether the entity is GST-registered, and the name it is registered to. Checking before paying a new supplier takes seconds and prevents a whole category of invoice fraud.

Chase unpaid invoices early. Small business has access to the state and territory small claims tribunals, and the Australian Small Business and Family Enterprise Ombudsman can assist with disputes.

If you stop trading, cancel the ABN. Leaving it active leaves you in the system for obligations you no longer have.