In the last few years, Australia has not only become one of the fastest-growing economies but has also strengthened its startup ecosystem significantly, with a whopping 5.8% growth. As a result, there is a dramatic surge in the number of new businesses, and existing startups are experiencing rapid growth. That makes Australia one of the best places to start your own business.
However, like anywhere else, there are a few critical steps you need to undertake before you get a business up and running in Australia. First, you need to understand whether you need an ACN vs. ABN number when forming your new business. Knowing what your business requires beforehand can ensure it operates legally from the beginning.
If you’re looking to start a business in Australia, here are the main differences between ABN and ACN numbers to help you know what applies to your business:
What is an ABN?
An ABN is an 11-digit number unique to every business for identification purposes. An ABN number is issued by the Australian Taxation Office. If you’re looking to start a business in Australia, you must register for an ABN number, no matter the size or structure of your business. All businesses must have an ABN number, including non-profit organizations, partnerships, trusts, companies, and even sole traders. Your ABN is used by the government primarily for taxation purposes and for tracking your business operations.
Failure to apply for an ABN can mean that it’s operating illegally. You must register for an ABN and have it displayed on all your company documents, including
- Tax returns
- Statement of accounts
- Any other business correspondence
How to apply for an ABN
You register for an ABN with the Australian Tax Office. The registration process is usually easy since you can do it online, and you don’t need to pay any fee to register. You can also have a tax agent or BAS agent register for the ABN on your behalf, but for a fee.
The information you’ll need to complete your ABN registration will often depend on the business structure you’re applying for. However, you’ll typically need to provide your name, date of birth, email address, physical address, and the TFN of associated persons.
Once you’ve registered, the ATO will take less than 24 hours to review your application and issue you with your ABN number, which will apply for the lifetime of your business. You must update any changes to your ABN, like a physical address change, within the first 28 days.
You should cancel your ABN immediately should your business get closed, sold, or end its operations in Australia. Once canceled, you should lodge outstanding returns and activity statements and fulfill any payment obligations.
Benefits of an ABN
Besides enabling you to run a business legally in Australia, other advantages of acquiring an ABN include;
- Makes easy for the government, community, and stakeholders to identify your business
- Allows the government to easily track your business operations
- It makes you eligible for GST registration, helping with GST credits claims, or claiming business costs like stationary
- Stakeholders, such as suppliers, can easily confirm details in business invoicing and orders
- It also gives you access to government services
- If your business doesn’t pay taxes, such as non-profits, your ABN helps confirm your business structure
What is an ACN?
While you need to have an ABN regardless of your business structure, you should only apply for an ACN number if your business is structured as a company. An ACN is a unique number consisting of nine digits to identify your company. If your business registers for both the ACN and ABN numbers, your ACN number will be the last nine digits of your ABN number.
Unlike the ABN, you register for an ACN with the ASIC or Australian Securities and Investments Commission. Like an ABN, your ACN is used to identify your company and track its day-to-day business operations. Other stakeholders can also use it to know about your company’s information, like the business structure. Your company’s ACN number must be displayed on all your official documents and online information, including
- Order for services and goods
- Your company’s website
- Statements of accounts
- And any other documentation related to your company
How to apply for an ACN
Registering for an ACN is done through the Australian Securities and Investments Commission. You pay a fee to register for ACN. The fee is subject to change, so ensure you confirm the exact fee to pay before applying. You can also ask your accountant or lawyer to help you with the ACN registration.
Some of the critical things you need to consider when registering for an ACN include your company structure, company name, business operational model, and obligations to fulfill as a company. Apart from the ACN, you need to also apply for an ABN number.
Benefits of an ACN
Registering your business as a company automatically makes it a separate legal entity. As a business owner, this benefits you hugely since it lowers your risk and liability. Other benefits of having an ABN number include:
- It gives stakeholders access to any information about your company.
- Your ACN helps legitimize your business
- You require it for legal compliance
To legally operate a business in Australia, it’s crucial that you know whether you need to apply for an ABN or ACN number. And as you’ve seen, both the ABN and ACN are identification numbers but with completely different purposes. For instance, no matter the structure or size of your business, you must apply for an ABN with the Australian Tax Office before starting operation.
Applying for an Australian Business Number or ABN helps identify your business to the government and the community. It’s also for tracking your business operations by the Australian Tax Office and ensuring you stay compliant with the tax laws at any given time. On the other hand, you’ll need to register for an ACN number if your business is structured as a company. Understanding the differences between these identification numbers can help ensure your new business or company fulfills its legal obligations.