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If you’re thinking about doing business in Australia, then you’ve probably heard of an Australian Business Number (ABN). An ABN plays an integral part in setting up your business.
So, can you run a business in Australia without an ABN?
If you’re operating a business and doing trading of any sort, then you are going to need to have an ABN. There are a few instances where you don’t actually need an ABN – even then, it’s still a pretty good idea to consider getting one (if you qualify).
Let’s explore this in more detail below.
What Is An ABN?
An ABN is a number that consists of 11 digits. Each ABN is unique, so no two businesses will ever share the same ABN. This is important, as sometimes businesses can have pretty similar names! An ABN helps your business’s identity remain its own. As such, having an ABN can make the bureaucratic and legal matters a lot simpler as the process of identifying your business becomes much easier.
ABN’s have been around for some time now. They were introduced in the year 2000 and we’ve been using them ever since. If you’re running a business that does any sort of trading, then you are legally required to have an ABN. We’ve written more about whether an ABN is a legal requirement here.
To get an ABN, you simply need to apply for one on the Australian Business Register website. The entire application can be completed online – it’s not a particularly extensive form so you should be able to get it done in one sitting. Moreover, getting an ABN is completely free – no need to worry about paying an application fee.
When Won’t I Require An ABN?
If your activity is more of a hobby, then you don’t need an ABN. Even though there’s a distinct difference between a business and a hobby, it can be easy to get the lines blurred – especially as there’s no single definition of what constitutes a business.
It’s important to keep in mind that a business is usually done for profit. Therefore, any actions that lead towards your chosen activity earning a profit or being set up like a business, i.e having a business website, engaging in the activity consistently as if it were employment, establishing a brand identity – all point towards your craft being a business rather than a hobby.
On the other hand, a hobby is something that is done recreationally. While you may have ‘customers’ you only charge them for the cost of materials, instead of earning a profit. Moreover, a hobby is usually engaged in whenever you have time instead of on a day-to-day basis, like a job.
It’s important to know these distinctions, as a hobby can become a business. If you feel your hobby is turning into more of a business endeavour, then it’s a good idea to look into getting an ABN and setting up your new business accordingly.
What Is The Difference Between An ABN And An ACN?
An ACN is an Australian Company Number. Similar to an ABN, an ACN is a unique identifier consisting of 9 digits. Unlike an ABN, not every business is going to require an ACN. As the name suggests, an ACN is only required if you’re setting up a company.
To set up as a company, you’ll need to fill out an application form with the Australian Securities and Investments Commission (ASIC). Once you’ve successfully submitted your application and it’s been approved, then you’ll receive an ACN along with your company being legally set up. Keep in mind, once you get an ACN, in most cases you will still need to apply for your ABN. An ACN is generally not something you have in place of an ABN, rather it goes along with it.
Unlike getting an ABN, the application process for an ACN is a little more complicated, plus you will need to pay a fee (depending on the kind of company you’re setting up). Even though the process for setting up a company does take more time and effort, a company offers a lot more legal protection than a business would.
A company is able to function as a legal entity on its own, meaning it can own property, sell property and earn money or incur a debt. As such, your company doesn’t need to be legally attached to you personally. This is better for your liabilities plus, it’s a more beneficial structure if you want to expand your business operations in the future. To set up a company, it’s always a good idea to get a legal expert to help you out.
You can read more about setting up a company here.
Next Steps
Unless you’re engaging in a hobby, to run a business in Australia you will need to have an ABN. To summarise what we’ve discussed:
- An Australian Business Number (ABN) is essential for businesses operating and trading in Australia
- ABNs consist of 11 unique digits, aiding in business identification and simplifying bureaucratic and legal processes
- Obtaining an ABN is a free, online process through the Australian Business Register website, requiring a relatively simple application form
- Businesses engaged in activities for profit, with consistent trading, a business website, and brand identity, usually require an ABN
- Hobbies, conducted recreationally and charging only for materials, typically do not need an ABN, but it’s crucial to recognise when a hobby transforms into a business
- An Australian Company Number (ACN) is a 9-digit identifier for companies and is separate from an ABN, required for legal company setups
- Setting up a company involves a more complex process through the Australian Securities and Investments Commission (ASIC), although it does offer increased legal protection and independent functioning
If you would like a consultation on your ABN, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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