What is an ABN?
The Australian Business Number (ABN) was introduced on 1st July 2000 and is a public identification number, like a Tax File Number. It enables businesses or business owners throughout Australia to deal with a range of government departments and agencies using a single identification number. It’s absolutely free to get an ABN.
When can I use an ABN?
What can you do if you find your ideal job but they insist on paying you cash in hand? There are employers out there who don’t want to be responsible for paying your tax and superannuation. Interestingly, when you have an ABN, YOU can invoice your employer. So, while they will still be paying you cash, you will take on the responsibility of paying your own income tax. Why would you want to do that and not work for cash? Here are a few reasons:
1) It is completely unlawful;
2) You won’t be accruing superannuation;
3) You won’t be able to submit an accurate annual tax return;
4) You won’t be able to apply for a credit card or for loans because you won’t be able to show your true earnings.
You may also want to use an ABN if you have several jobs.
How to apply for an ABN?
My understanding of using an ABN as a student (and I am not an expert!) is that you would be using it as a sole trader. Check out the Australian Business Registry (ABR) website about who is eligible for an ABN.
Note: you will need a Tax File Number before you apply for the ABN.
Saving up to pay your tax
Years ago when I used an ABN, I called the Australian Tax Office (ATO) and asked them to send me a voucher booklet. The booklet was linked to my tax file number and each month I would pop into the post office and deposit money which meant that at the end of the year, I had enough money in my account to pay the amount of tax I owed.
The amount of tax will also depend on whether you are going to invoice your employer weekly, fortnightly or monthly. There are links below to the various tax tables to provide you with a guide for how much tax you may have to put away to ensure you have enough money at tax time.
Do I have to pay superannuation as a sole trader?
I found this link very helpful in explaining the pros and cons of superannuation as a sole trader.
Do I have to register for GST?
This question is better left to the experts but it seems to me that if you are invoicing less than $75,000 per year, you don’t have to register for GST.
Can I use the same ABN for more than one business?
You can conduct any number of businesses/activities under the same ABN provided they all operate under the same business structure. If your second or subsequent business operates under a different structure you need to apply for a separate ABN for these new businesses.
If you plan on opening your own business you should definitely consider getting an ABN for yourself and I hope this post has answered more questions than it has created. If not, please leave your question in the comments and we will try our best to answer it.