When starting a business, it is important that you understand the things that need to be done. You need to register your operation with the relevant authorities to make sure that you meet the tax, legal and regulatory obligations. Whether you are operating as a sole trader, partnership trust or company, you must obtain an Australian Business Number (ABN) before your business can start to operate. You must also have an Australian Company Number (ACN) if you are operating as a company.
What is the difference between an ACN and an ABN?
ACN and ABN are two separate identification numbers with different obligations.
The primary difference between the two is determined by the businesses that are required to use them. This is because all businesses 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.
What is an Australian Business Number (ABN)?
An Australian business number (ABN) is a unique eleven digit number that every business must have. It is issued by the Australian Taxation Office (ATO) and must be accompanied by a registered business name. This is the key number used for tax registrations like GST, payroll tax and for lodging Business Activity Statements (BAS). It is important to note that this number does not replace a tax file number and must be obtained to operate a business.
ABNs are usually used to identify the business to others that you are currently working with or intend on working with , avoid pay as you go (PAYG) tax on payments a business receives, claim goods and services tax (GST) credits, claim energy grants credits, get an Australian domain name and it will allow you to claim for tax deductions for purchases your business incurred.
The 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.
There are two methods you can use to apply for an ABN:
- You can apply through Australian Business Register (ABR), or
- You can apply through a registered BAS or tax agent.
The general requirement needed include:
- Name, date of birth, email address, and Tax File Number (TFN)
- Physical address of your business
- Business structure you plan on operating such as sole trader, trust, partnership or company.
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.
In case that you lose your ABN details, you can retrieve it by just using ABN Lookup website. Just type in your full name (if sole trader) or business name (if company, trust, or partnership) to search your ABN.
Note: 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.
Before engaging in business transactions with a particular entity, it is essential to check its legitimacy by looking up their ABN through the ABN lookup or the ABR website.
An ABN has several benefits such as:
- It enables businesses to be easily recognised, as it’s unique to the business.
- Once your business has an ABN, you can apply for GST registration and payroll tax (if applicable)
- If you do not have an obligation to pay tax such as if you are a charity, your ABN will be used to confirm your charitable status.
- An ABN is needed to access government services, including the ATO.
What is an Australian Company Number (ACN)?
An Australian Company Number (ACN) 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.
Here is 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:
- Being registered for 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.
- It can be used as a proof of a company on what they say they are
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.