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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When you’re starting a business, it’s normal to want to keep things simple. You might be testing an idea, doing a few early sales, or taking on your first client while you build momentum.
One of the first “official” questions that comes up is: do I need an ABN?
An Australian Business Number (ABN) can feel like a big step - but in most cases it’s a practical tool that helps you operate smoothly, get paid properly, and look credible. At the same time, there are situations where you might not need one yet, and applying too early (or using it in the wrong way) can create confusion around tax, invoicing, and your overall business setup.
Note: This guide is general information only, not tax or accounting advice. ABN, GST and withholding rules can be nuanced - if you’re unsure about your specific situation, check the ATO guidance or speak with an accountant.
Below, we’ll walk you through how ABNs work in Australia, when you should apply, when you may not need one, and what to think about next so your startup is set up properly from day one.
What Is An ABN (And What Does It Actually Do)?
An ABN is an 11-digit number that identifies your business to the government and other businesses.
In practical terms, having an ABN helps you:
- Invoice customers and clients as a business (not as an employee)
- Reduce the risk of “no ABN withholding” (where a payer may be required to withhold tax from your payment in certain situations)
- Register for GST if/when you need to
- Register a business name (if you want to trade under a name that isn’t your personal name)
- Open business accounts or set up payment providers that require an ABN
It’s also worth clearing up a common misunderstanding: an ABN is not the same as registering a company. You can have an ABN as a sole trader, partnership, trust, or company.
If you’re deciding on your overall setup (sole trader vs company, etc.), it helps to understand the pros and cons before you lock anything in. If you’re weighing up whether you even count as “running a business activity”, this is a key part of the ABN decision too.
Should I Get An ABN? The Quick Answer For Most Small Businesses
For many startups and small businesses, the practical answer is yes - you’ll generally want an ABN once you’re genuinely operating (or about to operate) a business.
But the better way to think about it is: do you need an ABN to do what you’re about to do?
You’re likely ready for an ABN if you’re doing things like:
- charging for products or services (even if it’s small amounts at the start)
- issuing invoices (or being asked to issue invoices)
- setting up a website and checkout
- running paid ads and actively marketing your offering
- signing up suppliers, platforms, or payment providers that ask for an ABN
On the other hand, if you’re still at the “idea stage” - researching, building a prototype, having early conversations, or doing unpaid trials - you might not need one yet.
The ABN system is designed to support genuine businesses. So the decision really comes down to whether your activity looks and feels like you’re carrying on a business (even a small one), rather than a hobby or a one-off.
Signs You Probably Need An ABN (Common Startup Scenarios)
If you’re asking “should I get an ABN”, you’re usually in one of these real-world situations. Here’s how to think about them.
You’re Providing Services To Clients (Consulting, Freelancing, Agencies)
If clients are paying you for ongoing services (design, development, marketing, coaching, trades, bookkeeping, etc.), an ABN is often expected.
Many businesses won’t onboard you as a supplier without an ABN, because they need to properly record your invoices and payments.
This is also where it’s important to be clear about whether you’re a contractor or an employee in disguise. If you’re working like an employee but invoicing like a business, that can create risk for both sides.
If you’re putting clear terms around the work you deliver, a tailored Service Agreement can help set expectations and reduce misunderstandings early.
You’re Selling Products (Online Or In-Person)
If you’re selling products - whether it’s through your own website, marketplaces, or in-person - having an ABN makes it easier to operate professionally and consistently, especially when suppliers or platforms ask for it.
It can also be a stepping stone to other compliance tasks you’ll likely need as you grow, like consumer law compliance, warranty and refund processes, and marketing rules.
Many product businesses use clear online terms to set the rules for orders, delivery, returns, and acceptable behaviour on the site. Depending on your model, you might consider E-Commerce Terms and Conditions as part of your early setup.
You Want To Register A Business Name
If you want to trade under a name that isn’t your personal name (for example, “Bright Studio” instead of “Jordan Lee”), you’ll generally need an ABN in order to register that business name.
That’s often one of the first “growth” steps startups take - because you want to build brand recognition and appear consistent across your website, social media, invoices, and contracts.
You Want To Look Credible (Banks, Suppliers, B2B Customers)
Even if you’re only just starting, many banks, suppliers, and B2B customers see an ABN as a basic “this is a real business” marker.
It doesn’t guarantee trust on its own - but it does reduce friction when you’re trying to open accounts, apply for credit, negotiate supply terms, or win your first business clients.
When You Might Not Need An ABN Yet (And When You Should Be Careful)
There are a few situations where you might not need an ABN right now, or where you should pause and double-check your position.
It’s Truly A Hobby (Not A Business)
If you’re making something occasionally (for fun), not actively marketing it, and not seeking regular profit, it may be a hobby rather than a business.
In that case, an ABN may not be appropriate.
The tricky part is that many hobbies turn into businesses quickly once money starts changing hands regularly. If you’re ramping up marketing, setting prices, taking repeated orders, or building systems, it’s a good time to reassess.
You’re Being Asked For An ABN By One “Client” Who Controls Everything
If one business is effectively treating you like staff - controlling your hours, where you work, and how you work - but asking you to invoice through an ABN, this may be a warning sign of a misclassification issue.
This matters because it can affect:
- tax and super obligations
- entitlements (leave, minimum pay, unfair dismissal protections)
- liability if something goes wrong
If you’re unsure, it’s worth getting advice early so you don’t accidentally set up a structure that causes problems later.
You’re Not Ready For Any Admin Yet
An ABN itself doesn’t create heavy admin - but it’s often the first domino that leads to:
- invoicing properly
- record keeping
- tax and BAS planning (especially if GST becomes relevant)
That’s not a reason to avoid it, but it is a reason to be deliberate about your setup. Getting your structure right early can save you a lot of headaches later.
How Getting An ABN Fits Into Your Business Structure (Sole Trader vs Company)
A big part of deciding “should I get an ABN” is understanding who the ABN will belong to - you personally (as a sole trader) or a separate legal entity (like a company).
Sole Trader ABN
This is often the simplest way to start.
- You and the business are legally the same
- You use your personal tax return to report business income
- It’s usually quick to set up and low-cost
But the key trade-off is that you generally take on personal responsibility for the business’s debts and liabilities.
Company ABN
A company is a separate legal entity. That separation can be valuable, especially if you’re taking on higher risk, hiring staff, or planning to scale quickly.
- The company can enter contracts in its own name
- It may offer a level of personal asset protection (limited liability)
- It can be easier to bring in co-founders or investors cleanly
If you’re setting up a company, you’ll likely also be thinking about governance documents like a Company Constitution (or whether you’ll adopt replaceable rules).
Partnerships, Trusts, And Other Structures
Some businesses also operate through partnerships or trusts.
These can be useful in the right circumstances, but they can also add complexity. If you’re considering a partnership, it’s a good idea to put the basics in writing early with a Partnership Agreement, especially around decision-making, profit splits, and what happens if someone wants to exit.
If you’re not sure which structure fits your startup, it’s worth getting advice before applying for an ABN - because changing structures later can create admin and tax complexity.
What Else Should You Set Up After You Get An ABN?
Getting an ABN is usually just one part of building a strong foundation. Once you have it, it’s a good time to think about the other legal building blocks that protect your time, revenue, and brand.
1. Contracts That Match How You Make Money
Your contracts don’t need to be long to be effective - but they do need to match your business model.
Depending on what you do, you might need:
- Client/service terms (scope, payment terms, deliverables, delays, liability)
- Supplier terms (pricing, lead times, quality control, IP ownership)
- Platform terms (if you’re running a marketplace, subscription, or app)
For many service-based startups, starting with a clear Consulting Agreement is a practical way to reduce scope creep and late payment issues.
2. Privacy Compliance If You Collect Personal Information
If you collect customer information (names, emails, delivery addresses, payment details, or even analytics identifiers), you should think about privacy compliance early.
Some businesses will need a Privacy Policy (and many choose to have one anyway), to explain what information you collect, how you use it, and how customers can contact you about privacy questions.
Whether you must comply with the Privacy Act from day one depends on factors like your turnover, what information you handle, and whether an exception applies. Getting privacy practices in place early can still build trust and make growth smoother (especially if you scale, partner with larger clients, or expand your marketing).
3. Australian Consumer Law (ACL) Basics
If you sell products or services to customers, you need to comply with the Australian Consumer Law (ACL). This impacts how you:
- advertise and price your offering
- handle refunds and returns
- respond to complaints
- manage warranties and guarantees
It’s not just about avoiding problems - clear consumer-facing terms can also reduce disputes and improve your customer experience.
4. Hiring Plans (Even If You’re Not Hiring Yet)
Many startups begin with founders doing everything, and then hire quickly once sales pick up.
If you’re planning to engage staff or contractors, it helps to think early about the right documents and processes. For example, if you bring on employees, a tailored Employment Contract helps set expectations around duties, confidentiality, and pay.
Getting this right early can protect your business if a relationship breaks down, or if you need to enforce confidentiality and IP ownership later on.
Key Takeaways
- If you’re actively selling products or services, invoicing clients, or trading under a business name, you’ll often want an ABN.
- An ABN can help you invoice properly, avoid “no ABN withholding” issues in some situations, and operate more smoothly with suppliers, platforms, and business customers.
- You don’t always need an ABN at the idea stage or if you’re genuinely running a hobby - but many side projects become businesses quickly once you start marketing and making regular sales.
- Before you apply, think about your business structure (sole trader vs company vs partnership), because the ABN will attach to that structure.
- After getting an ABN, it’s smart to set up the foundations that protect your business: clear contracts, privacy compliance, and customer-facing terms that reflect how you operate.
If you’d like help setting up your business properly (including your structure and the contracts you’ll actually use day-to-day), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
