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Do freelancers need an ABN?

Are you thinking about becoming a freelancer? Before you put your services up for sale, it’s important to make sure you’re properly set up first. This includes fulfilling any legal obligations, such as applying for (and using) an Australian Business Number (ABN). But, if you’re not operating a bricks-and-mortar business, or only taking on freelance work sporadically, do you still need one?

What is an ABN?

An ABN is a unique 11-digit number that’s given to businesses so they can easily communicate with the government and community. ABN’s are predominantly used when dealing with tax obligations. However, the government also uses them to understand more about the businesses operating in a particular area. This information helps them to provide services, and plan and manage infrastructure.

Do you need an ABN?

The short answer: yes. Any business – individual, company, or trust – that is paid for their goods and services needs an ABN to legally operate. Freelancers are classified as Individuals or Sole Traders in this context, provided they meet certain criteria. These criteria help to distinguish those who are genuinely operating a business as opposed to pursuing a hobby. If you’re not sure which one your activity is, start by asking yourself a few questions, such as ‘Is my goal to profit from my activities?’ or ‘Am I making consistent sales or income?’.

Why do you need an ABN?

Along with being an identifier for your business, you’ll need an ABN to invoice your customers. If you don’t include an ABN on your invoices, clients can withhold up to 47% of your total payment. Having an ABN is also pretty important come tax time. You’ll need it to claim deductions for business expenses incurred in the financial year. Plus, once you start earning over $75,000 a year, you’ll need it to register for Goods & Services Tax (GST) – a legal tax requirement.

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How do you get an ABN?

You can apply for an ABN via the Australian Business Register. As well as acknowledging your eligibility, you’ll also need to provide evidence of your identity. If you’re an Australian resident you can confirm your identity by providing you name, date of birth, and tax file number (TFN). If you aren’t an Australian resident, you must provide at least two documents to prove your identity, such as your birth certificate, passport, national photo ID card, marriage certificate, or drivers licence.

Where do you put your ABN?

Once you receive your ABN, make sure it’s added to your invoice template. Usually it’s placed at the top or bottom alongside your contact details. If you use accounting software, such as QuickBooks Self-Employed, add it to your estimates, invoices, and sales receipts templates. How do you update your ABN details? As a freelancer, it’s likely that the details associated with your ABN will change occasionally. For example, you might move to a new house or get a new business phone number. The fastest way to update your ABN details is online with your AUSKey or via Manage ABN Connections.

What if you no longer need your ABN?

If you decide to stop freelancing and you no longer need your ABN, you need to cancel it. You can cancel it online at the Australian Business Register, but only after you’ve met all the legal requirements and paid any outstanding debts linked to it, such as any tax owing. Now that you know whether you need an ABN and how to get one, you’re one step closer to fulfilling your freelance dream. So, what are you waiting for? For more advice on becoming self-employed, check out these resources.

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