ABN & ACN

ABN and ACN are two separate identification numbers with different obligations.

The primary difference between ABN and ACN is determined by the businesses that are required to use them. All businesses (including a sole trader, partnership, trust or Pty Ltd company) are required to apply for an ABN, while only companies are required to apply for an ACN.

Other differences include:

• An ABN is issued by the Australian Taxation Office (ATO) while ACN is issued by the Australian Securities and Investments Commission (ASIC)
• An ABN is required for taxation purposes while an ACN is used for public records and legal compliance.
• An ABN is an 11 digit number while an ACN is a nine digit number.

An ABN (Australian Business Number) is a unique eleven digit number that every business in Australia must have. It is issued by the Australian Taxation Office (ATO).

An ABN used for tax registrations like GST, payroll tax and for lodging Business Activity Statements (BAS). It is important to note that this number is separate from a TFN (Tax File Number), which every taxpayer in Australia must have.

An ABN needs to be displayed on all your business documents such as invoices, receipts, letterheads, estimates, BAS, tax returns, statement of accounts and any other form of business communication. Anyone can check an ABN by using the ABN Lookup website.

How to apply for an ABN

You can apply for an ABN via the Australian Business Register (ABR) website or via a registered BAS or tax agent.

To apply for an ABN you will need to supply your:

• Name, date of birth, email address, and Tax File Number (TFN)
• Business address
• Business structure such as a sole trader, trust, partnership or company.

The no ABN withholding rule

The no ABN withholding rule aims to ensure that businesses, especially those not required to be registered for GST, cannot evade their tax obligations by requesting cash payments. 

Under this rule, if a seller does not quote an ABN, the buyer must withhold a specific percentage from the payment made to the seller.

The withholding rate is currently set at 47% under the Pay As You Go (PAYG) withholding system.

There is an exception to the no ABN withholding rule when a seller provides a valid reason why the rule should not apply.

In such cases, the seller must complete a Statement by a Supplier form, which outlines the reason for not quoting an ABN.

Before accepting the statement, the buyer must conduct reasonable inquiries to verify the reason provided by the seller.

Cancelling an ABN

You should consider cancelling your ABN if you are closing, no longer operating, or planning to change your business structure. This can be done through the ABR website.

If your ABN has been cancelled and you want it to be reinstated, you can do it in the same application as applying for a new one. Note that you will not receive a new ABN unless you change the business structure.

An ABN will remain active indefinitely unless you or the ATO decide to cancel it. Usually, it will be cancelled if you are not using it or if the Australian Taxation Office (ATO) finds issue regarding its use.

ABN for non residents

Non resident entities, despite not being physically located in Australia, may still be eligible to obtain an ABN under specific circumstances. To qualify, a non resident entity must meet either of the following criteria:

• Engaging in commercial activities or operating a business within the territory of Australia.
• Making sales connected with Australia as part of their enterprise.

An ACN (Australian Company Number) is a unique nine digit number issued by the Australian Securities and Investments Commission (ASIC) to all companies and must be displayed on all company documents.

The items on which it should be displayed include company invoices or receipts, written advertisements making a specific offer, statements of account, company website, all documents lodged with ASIC, business letterheads, official company notices and order for goods & services.

A company’s name and ACN must appear on the first page of any document. When multiple companies are on a document, for example a letterhead, the ACN for each company must be displayed next to each company’s name.

When applying for an ACN, you are essentially creating a company as a separate legal entity to yourself. It means that you will need to provide some key information that determines how your company is structured, and its important details. To register a company and receive an ACN you need to provide information such as company name, registered office address, place of business address, officeholder details and shareholder details.

How to register for an ACN:

• Choose your company name and check its availability on the ASIC Connect website.
• Reserve the name of your company using the ASIC Connect website. The reservation will last for two months.
• Register your company online using the Business Registration Service of the Australian Government or with the assistance of a private entity such as a lawyer, accountant or other businesses assisting with ASIC applications.
• Pay the registration fee and provide the necessary information for the company registration.
• Obtain your ACN from ASIC.

If your company has stopped operating a business, you should consider cancelling the ACN. To cancel the ACN, you must first deregister your company as it effectively ceases the company from operating as a legal entity.

If your ACN was cancelled and you want it to be reinstated, you can apply to ASIC for reinstatement or apply to the court to order ASIC to reinstate your ACN.

In case you lose your ACN details, you can retrieve it by just using the ASIC company search service.

An ACN has several benefits such as: 

• Using a company with an ACN means your company is a separate legal entity from you. In many situations, personal assets are protected from creditors and litigants who may sue a company.
• It enables the shareholders, partners and other interested parties to access information about the company via ASIC
• Having ACN is a proof of ASIC registration and sometimes used by potential clients to ascertain if a company is a legitimate business.

This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.