ABN vs ACN: Key Differences Every Australian Business Should Know

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Starting and running a business in Australia means juggling many responsibilities – and one of the most crucial is ensuring your business is properly identified and registered from a legal and taxation perspective. Two essential numbers play a significant role in this process: the Australian Business Number (ABN) and the Australian Company Number (ACN). In this guide, we’ll walk you through what an ABN is, what an ACN is, and why understanding their differences can save you from legal headaches down the road. Whether you’re a sole trader, a partner in a small business, or thinking of incorporating your business, knowing these details will help you set a strong legal foundation.

What Is an ABN?

An ABN – or Australian Business Number – is an 11-digit identifier issued by the Australian Taxation Office (ATO). It’s your business’s unique calling card for tax purposes, invoicing, and day-to-day commercial transactions. Here are some key points about the ABN:

Identification for All Businesses: The ABN is required by all business entities – whether you operate as a sole trader, a partnership, a trust, or even a company.
Tax and GST Registration: You need an ABN to register for Goods and Services Tax (GST) and to ensure you’re meeting all your tax obligations.
Commercial Transactions: Displayed on invoices, quotes, and other business communications, the ABN helps avoid confusion by confirming your business identity to customers and suppliers.
Keeping It Updated: It’s essential to maintain up-to-date details on your ABN via the Australian Business Register website.

Having an ABN is not only a legal requirement but also a practical tool that builds trust and transparency with your stakeholders. If your business is already up and running, you should check regularly that your ABN details remain accurate and reflect any changes in your circumstances.

What Is an ACN?

An ACN – or Australian Company Number – is a 9-digit identifier issued exclusively by the Australian Securities and Investments Commission (ASIC) for companies. Unlike the ABN, which applies to nearly every type of business entity, the ACN is relevant only to incorporated companies. Consider these important points about the ACN:

Issued to Companies Only: Only companies, which are separate legal entities, need to have an ACN. This registration provides shareholders with a layer of personal protection against business liabilities.
Legal and Administrative Purposes: The ACN is essential for company documentation, public filings, and ensures that ASIC can efficiently monitor your company’s compliance with legal and regulatory obligations.
Included in Your ABN: A company’s ABN typically incorporates its ACN with a two-digit prefix, clearly linking the two identifiers.

Once your business is incorporated, you can’t run without an ACN. It not only signifies that your company is a legally distinct entity but also signals to regulators and trading partners that you are committed to upholding stringent legal standards.

Key Differences Between an ABN and an ACN

While both the ABN and ACN are crucial for properly identifying your business, they serve distinct purposes and are issued by different authorities. Here’s a closer look at their key differences:

Issuing Authority:

The ABN is issued by the Australian Taxation Office (ATO), whereas the ACN is issued by the Australian Securities and Investments Commission (ASIC).
Purpose:

The ABN primarily facilitates tax, GST registration, and commercial transactions. On the other hand, the ACN is used for legal and administrative processes concerning companies.
Number Format:

An ABN is 11 digits long, while an ACN is 9 digits. When you register a company, your ABN will generally include a two-digit prefix attached to your ACN.
Eligibility:

Every business in Australia needs an ABN, whether you’re a sole trader or a company. In contrast, an ACN is mandatory only for incorporated companies.

Understanding these differences is vital because it influences how you register your business, manage your compliance obligations, and interact with government agencies. For instance, if you’re operating as a sole trader, your ABN is all you need. However, if you’re creating a company, you will need both an ABN and an ACN to ensure that your business is correctly identified under the law.

The Registration Process

Getting your ABN and ACN in place is a critical early step for any business operating in Australia. Here’s a quick rundown of what’s involved:

Applying for an ABN

To obtain an ABN, you need to apply directly through the Australian Business Register. The process involves:

Completing an online application form that asks for details such as your personal information and business structure.
Providing information about your business activities to help determine your eligibility for GST registration.
Receiving your ABN immediately if your application is approved, which is usually a quick and straightforward process.

Registering for an ACN

If you decide to incorporate and form a company, you’ll need an ACN, which is provided as part of your company registration with ASIC. The process involves:

Choosing your company name and ensuring it complies with ASIC’s guidelines.
Submitting a company registration application with detailed information about your company structure, directors, and shareholders.
Paying the registration fee – currently around $597 (subject to change) – and receiving your ACN once your company is officially registered.

Both these processes are designed to streamline the way businesses are identified for legal, administrative, and taxation purposes. It’s important to remember that while the ABN is free to obtain if you apply through the official channels, registering your company (and thus obtaining an ACN) involves a fee, which reflects the additional regulatory oversight provided by ASIC.

Costs and Compliance

Understanding the cost implications and ongoing compliance requirements tied to your ABN and ACN is crucial. Here’s what you need to know:

ABN Registration: Applying for an ABN is free when done through the official Australian Business Register website. This makes it accessible for every business type.
ACN Registration: Incorporating your company and obtaining an ACN comes with a registration fee. As of July 2024, this fee is approximately $597, with potential annual increases linked to the Consumer Price Index.
Ongoing Compliance:

Once you have your ABN and ACN, you must ensure that your details remain up-to-date. For instance, any changes in your business structure, directors, or contact information should be promptly updated on both the Australian Business Register and with ASIC. Failure to maintain accurate records can lead to compliance issues and potential legal complications.

Regular reviews of your business documentation and a good understanding of your obligations will save you time and money. If you’re ever unsure about what needs to be updated, consulting with a legal expert can be a smart move.

How Your Business Structure Impacts Your ABN and ACN

Your choice of business structure significantly influences whether you need just an ABN or both an ABN and an ACN. Let’s take a closer look:

Sole Trader: If you operate as a sole trader, you only need an ABN. This structure is simple and often ideal for those just starting out or running a small operation. For more insights on this business structure, check out our article on Operating As a Sole Trader.
Partnerships and Trusts: Similar to sole traders, partnerships and trusts also require an ABN to engage in commercial transactions. Their regulatory requirements differ from companies, and an ACN is not necessary.
Companies: When you incorporate your business, you become a separate legal entity. This means you need both an ABN and an ACN. The ACN ensures that your company is properly identified by ASIC, while the ABN is used for taxation and business dealings. If you’re contemplating a switch from a sole trader to a company, our Sole Trader vs Company – Should You Make the Switch? article can help you weigh the pros and cons.

Choosing the correct structure not only affects your legal obligations but also influences how you manage risks, taxes, and everyday business operations. For a comprehensive approach to business registration in Australia, consider reading our guide on Registering a Business in Australia.

Additional Legal Considerations for Your Business

Beyond the ABN and ACN, there are several other legal documents and steps to keep in mind when setting up your business. Establishing a robust legal framework can protect you from disputes and ensure compliance with all regulatory guidelines. Some key aspects include:

Contracts and Agreements: Whether it’s service agreements with clients or contracts with suppliers, having legally sound contracts is essential. For a primer on this, you might find our discussion on What Is a Contract? to be very useful.
Legal Compliance and Documentation: As your business grows, so does your need for policies covering everything from privacy to employment. Staying on top of these requirements can help you avoid costly legal issues later on.
Updating Your Records: Ensure that you consistently update your business details on official registers such as the Australian Business Register and with ASIC, particularly if there are any changes in your company’s structure or management.
Planning for the Future: If you are considering expansion or diversification, understanding how your ABN and ACN impact other areas of your business is vital. Our article on How to Start a Courier Business in Australia offers additional insights into how business registration fits into a broader entrepreneurial strategy.

By taking a proactive approach to legal compliance and business registration, you protect not only your financial interests but also your reputation in the marketplace.

Key Takeaways

An ABN is an 11-digit number required for all business entities and is issued by the ATO – it serves as your business’s tax and commercial identifier.
An ACN is a 9-digit number issued by ASIC and is required only for incorporated companies, ensuring legal and administrative compliance.
While every business needs an ABN, only companies require an ACN; for companies, the ABN typically incorporates the ACN with a two-digit prefix.
The registration process for an ABN is free and straightforward, whereas company registration (and thus obtaining an ACN) involves a fee and more detailed documentation.
Choosing the right business structure – be it as a sole trader or a company – affects which identifiers you need, so make an informed decision based on your business goals.
Keeping your ABN (and ACN, if applicable) details up-to-date is essential to maintain legal compliance and smooth business operations.

If you would like a consultation on ABN and ACN registration or need help choosing the right business structure, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Alex Solo

Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.

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