Have you run a small business that has ceased or paused operations? Or perhaps you've been hired as an ABN contractor? The ATO is cleaning up the Australian Business Register and is on the lookout for people who may not be entitled to hold an ABN. Find out what the ATO's concerns are and understand your responsibilities as an ABN holder.
This year, the ATO has been focused on improving the integrity of the Australian Business Register (ABR). You may have even heard that the ATO has been "bulk cancelling" a large number of ABNs. So, what's the problem and how might this affect you?
When does the ATO cancel an ABN?
Only entities that "carry on an enterprise" are entitled to hold an ABN. An enterprise includes running a business, as well as other activities like leasing property or being the trustee of an SMSF. It does not include working as an employee. The ATO is focused on identifying the following types of ABN holders who are not entitled to hold their ABN:
- businesses that are no longer active
- businesses that hold multiple ABNs
- workers who are incorrectly classified as contractors rather than employees (discussed below).
If your ABN is cancelled by the ATO and you think they've made a mistake, you can object to the decision within 60 days. Alternatively, if you agree with the cancellation because your business has ceased, you can re-apply for an ABN at a later time if you need it. You will receive the same 11-digit ABN, provided your business has the same structure.
It's illegal to quote an ABN that has been cancelled, so make sure you're on top of any cancellation issues.
Concerns about "sham" contracting
The ATO is also concerned that some businesses are incorrectly classifying their workers as "independent contractors" when in fact they are likely to be "employees". In such cases, the employer may ask the worker to obtain an ABN and call the arrangement "contracting". Unfortunately, this illegal practice is sometimes done to avoid paying entitlements like award wages and superannuation contributions.
You're entitled to hold an ABN if you're legitimately an independent contractor – but not if you're really an employee. The ATO says it is sensitive to this issue and understands many workers in "sham" arrangements have been placed in that difficult position by their employer.
If you're currently being hired as an ABN contractor and have concerns this may not be legitimate, contact the Fair Work Ombudsman for help. If you're a business hiring workers as independent contractors, make sure you've got it right because penalties can apply for unlawful arrangements. The ATO publishes some useful online information to help businesses work out whether their workers are employees or contractors.
Responsibilities of ABN holders
If you hold an ABN, you must update the register within 28 days of becoming aware of a relevant change. This includes things like your contact details (including your business address) and your main business activity and business category.
If you need to cancel your ABN, you can do this online. You should cancel your ABN if your business has been sold or is no longer operating. However, before cancelling your ABN you should make sure you've complied with all of your lodgment and reporting obligations.
You may also need to cancel your ABN if you're changing your business structure (eg from a sole trader to a company) and then apply for a new ABN. Of course, you should get professional advice before changing your business structure to make sure you understand the associated tax consequences.
Don't stress over business administration – get help from the professionals. Whether you're thinking of starting a new business or need help sorting out a registration issue, we can handle all of your ABN registration needs, as well as related registrations like GST, PAYG and business names.
Call us at Robert Goodman Accountants on 07 3289 1700 or email us at Brought to you by Robert Goodman Accountants.