Do I need an ABN as a sole trader? (it depends)
As a sole trader, you need to apply for an ABN, regardless of your business size.
This article explores why sole traders benefit from having an ABN, but first, let’s clear up any confusion around definitions.
What is a sole trader?
A sole trader is legally responsible for every aspect of their business, as the only owner trading as an individual. This is the cheapest and easiest business structure to set up, out of all the options. If you choose to employ people, you’re responsible for their super (and your own super – although you can’t employ yourself).
Do I need an ABN for a hobby?
No, you should only apply for an ABN if you intend to make a profit from business activities (read about the differences between a business and hobby here).
What is an ABN (Australian business number)?
This unique eleven-digit ABN helps consumers, government bodies, and other traders to officially identify your business. It helps the Australian Tax Office to easily track your business activities and differentiate you from businesses with similar names.
Sole trader ABN benefits:
- Show others that your business identity is legitimate: This builds trust and encourages other businesses and consumers to trade with you.
- Put your ABN at the top of your invoice to avoid higher taxes: Did you know that your business clients can retain PAYG tax when they pay you, if you don’t put your ABN on your invoice? This means you’re losing some of your income, for something that can be avoided.
- Track your income and expenses with your ABN: Make life easier for yourself when the time comes to lodge your taxes (an activity that many people don’t look forward to).
- Add .au to your domain if you choose to launch a website to promote your services: Only businesses with an ABN have the option of using an Australian domain namespace.
How to apply for an ABN:
It’s free to apply for an ABN via the government website. This only takes 15 minutes to do. You’ll need your Tax File Number (not necessary if you don’t have one), business details and identity documents on hand (such as passport, driver’s license, and birth certificate).
When asked about your business structure, select the “individual” option (for sole trader).
Note: If you’re creating a business name (other than your legal name), first check that it’s available using this database, but this doesn’t apply to people using their own names.
After you submit the application, you will probably receive your ABN on the same day or within the week.
Do you need help registering for an ABN?
The Xperion accounting team loves looking after all the boring accounting details that go hand in hand with doing business. We’ve been doing this for decades!
Contact our team for a free no-obligation consultation.