• ABN entitlement

    You're entitled to an ABN if you're either:

    You should ensure you're entitled to an ABN before you apply. If your employer has asked you to get an ABN it is highly likely you're not entitled to an ABN. Typically, workers engaged under an ABN when they're legally in an employment relationship are being underpaid and missing out on superannuation, paid sick leave and annual leave. They may also miss out on the safeguards of the Fair Work Act such as protection from unfair dismissal.

    Employers that require their workers to be engaged under an ABN when they're really employees are engaging in 'sham contracting' and can be penalised by the ATO, the Fair Work Ombudsman and state and territory revenue offices and workcover agencies.

    Before applying for an ABN, you need to have settled on the right structure for your business (for example, sole trader or company).

    If you get an ABN you must continue to meet the entitlement requirements. If your business situation changes you may need to update or cancel your ABN.

    We regularly review people who have been issued with an ABN to check that they're entitled and their details are up to date. Even if you've already been issued with an ABN, your entitlement may be reviewed.

    When you apply for an ABN online, you will be asked a series of questions to check if you're entitled. If you're not entitled, your application will be refused.

    You can also check your entitlement before starting an application. If you want to apply after answering the questions, your answers will be transferred to your application so you don't have to answer the questions again.

    Check ABN entitlement

    What carrying on an enterprise means

    An enterprise includes activities done in the form of a business, as well as some other activities such as acting as the trustee of a super fund or other trust, operating a charity and letting property.

    While there is no single test to determine if you're carrying on a business, the following features are indicative of activities in the form of a business:

    • the activity is a significant commercial activity, involving commercial sales of products or services, and is of a reasonable size and scale
    • there is an intention to make a profit from the activity as demonstrated by a business plan (unlike with a hobby)
    • the activity is repeated
    • the activity is systematic, organised and carried on in a business-like way and records are kept
    • the activity is carried on in a similar way to that of other businesses in the same or similar industry
    • the entity has relevant knowledge or skill.

    See also:

    Employee or contractor?

    Employees are not entitled to an ABN. This means you're not entitled to an ABN for work that you carry out as an employee (including as an apprentice, trade assistant or labourer), even if you or your employer calls it contracting. An employer can't ask you to get an ABN as a condition of employment.

    A genuine contractor is running a business, which means they:

    • pay their own income tax and GST directly to the ATO
    • source their own clients by, for example, advertising their products or services
    • are able to delegate work to others if they choose without approval from an ‘employer’
    • quote for work, including setting or negotiating their own prices
    • invoice for work
    • maintain a business bank account separate from their own personal account
    • pay for their own business insurance such as public liability

    If you engage a worker

    If you operate a business and engage a worker, you're responsible for determining whether they're an employee or contractorExternal Link under the law.

    To determine whether a worker can be engaged under an ABN you need to look at the whole working relationship. To find out if your worker should be engaged as an employee or contractor use the employee/contractor decision toolExternal Link.

    We regularly review businesses that engage workers using an ABN to identify 'sham contracting' arrangements and check the worker's entitlement to an ABN. Such cases may also be referred to the ATO and other government agencies to review the business's compliance with broader employer obligations.

    Renting out an investment property

    While renting out an investment property may constitute an enterprise, renting out a residential property doesn't generally give rise to GST or pay as you go withholding obligations, so residential property investors don't need an ABN.

    See also:

    Foreign businesses operating in Australia or its indirect tax zone

    If your business or organisation is located outside Australia you may be entitled to an ABN if carrying on an enterprise:

    • in Australia, or
    • that involves making supplies connected with Australia's indirect tax zone – defined as including Australia but not its external territories or certain offshore areas (section 195-1 of the GST Act).

    See also:

    Start-up activities

    If your business or other enterprise isn't yet underway, you'll need to have undertaken start-up activities such as:

    • consulting with financial, business or tax advisors
    • completing a business plan, feasibility study or financial projections
    • buying a business
    • advertising, setting up a social media account or a website for the business
    • purchasing business cards or stationery for the business
    • applying for finance
    • obtaining business licences or insurance to operate (such as public liability and professional indemnity)
    • registering with professional/industry associations
    • registering a patent/copyright
    • leasing or purchasing premises, equipment or stock for the business
    • recruiting staff
    • issuing quotes or bidding for work.

    While you don't need to have undertaken all of these start-up activities, you would be expected to have undertaken at least several of them.

    Business structures

    When setting up your business, you need to be aware of the advantages and disadvantages of different business structures. Consider getting advice from a professional business adviser such as an accountant. Be aware that if you change your entity type after getting an ABN, you'll generally need to cancel your ABN and apply for a new one. There may also be impacts on your tax obligations and other business registrations.

    Before applying for an ABN, you also need to have your business structure in place – for example, a company must have already been registered with ASIC.

    There are specific requirements for each type of entity:

    • Individual (sole trader) – You must be carrying on an enterprise – you're not entitled to an ABN for an activity if you've been engaged to carry it out as an employee (see Employee or contractor?).
    • Partnership – you must be carrying on an enterprise.
    • Company – A Corporations Act company is entitled to an ABN without meeting any other conditions, whereas other incorporated and unincorporated entities must be carrying on an enterprise in Australia.
    • Trust – A trust must be carrying on an enterprise in Australia.
    • Superannuation entity – A superannuation entity must be set up properly with the relevant authority.
    • Deceased estate – A deceased estate is entitled to an ABN if the executor or administrator is carrying on an enterprise of the deceased in order to finalise the affairs of the estate, including disposing of or terminating the enterprise.
    • Non-profit organisationsExternal Link – Non-profit organisations must be carrying on an enterprise in Australia.

    See also:

  • Last modified: 03 May 2017QC 332