ABN Requirements for Sole Traders
You will need an ABN if your turnover is over $75,000. You need one if providing goods or services to other businesses. You need an ABN if registered for GST. You may still choose to register for an ABN even if below these requirements.
Operating as a Sole Trader
Operating as a sole trader is a popular way to structure businesses in Australia. It is the easiest way to start a trade business. A question that comes up is if a sole trader needs an ABN. We’re an insurance brokerage, so we can’t provide advice on whether you need an ABN. If you need specific advice, speak with an accountant.
ABN Registration and Benefits
An ABN is a unique 11-digit number assigned to your business by the ATO. Once registered, it stays with your business.
You do not need an ABN unless your annual turnover exceeds $75,000. Despite this, it is encouraged to acquire an ABN due to benefits like confirming your business identity and claiming back GST credits.
You must register for GST if your annual turnover is over $75,000 or you provide goods/services to other businesses regardless of turnover.
Additional Information for Sole Traders
As a sole trader you are NOT required to acquire an Australian Business Number unless your expected annual turnover will exceed $75,000. Although applying for an ABN as a sole trader is free, not everyone is eligible for an ABN. The Australian Business Register has an ABN eligibility tool on their website, and one of the main questions asks if your planned activities include an intention to engage in commercial activity and make a profit from the activity.
A sole trader can only hold one ABN in its own right but can have multiple businesses operating under that ABN. However, you can still have another ABN in a partnership as that is also a separate entity to yourself.
Conclusion
Despite not being legally required, it is encouraged that sole traders acquire an ABN due to the many perceived benefits of an ABN. Some key benefits to having an ABN as a sole trader include legitimately confirming your business identity to others; avoiding business clients withholding Pay as You Go tax on payments; claiming back Good and Services tax credits; and acquiring an Australian domain name.