Short answer: no, a sole trader does not always need an ABN, but it is required if the annual turnover exceeds $75,000 or if the business needs to register for GST. Additionally, having an ABN can simplify invoicing, claiming GST credits, and identifying your business to government entities and other organizations.
Learn more: abn.gov.au
When does a sole trader in Australia need an ABN?
Sole traders must register for an Australian Business Number (ABN) if they are conducting business. Business activities include providing goods or services in exchange for payment, renting out property, or selling goods online.
Some businesses that begin as a hobby or sell private possessions on a marketplace do not require an ABN until they turn a profit. You can seek a lawyer or accountant for advice, if you’re feeling unsure about whether you should register an ABN for your sole trader business.
An ABN may still be required even if a sole trader does not meet the GST reporting threshold of turnover over $75,000. Sole Traders benefit from having ABN because they can register for GST, claim business expenses, and do business with other companies and government agencies easier.
Find out more about GST from the ATO website.
What are the benefits of having an ABN as a sole trader?
An ABN helps identify your business to others, allows you to claim GST credits, avoids PAYG tax on payments received, and enables you to register for an Australian domain name. It also adds legitimacy to your business operations.
Can sole traders operate without an ABN?
Yes, sole traders with turnover below $75,000 or those operating as hobbies can operate without an ABN. However, not having one may limit certain business activities like issuing tax invoices or claiming GST credits.
How do I apply for an ABN as a sole trader?
You can apply for an ABN through the Australian Business Register (ABR) website. You will need your tax file number (TFN), business details, and the date you plan to start your business activities.
The application process is free and straightforward, typically taking only a few minutes to complete online. Ensure you have all necessary information ready to avoid delays in processing your application.
Can I operate without an ABN if I earn less than $75,000 as a sole trader?
Yes, sole traders earning less than the threshold can benefit from an ABN for business operations and legitimacy. Even if you don’t meet the GST threshold, an ABN can help streamline business transactions and provide a professional image to clients and suppliers. Additionally, if your business grows and exceeds the $75,000 threshold, you will need to register for an ABN and GST, so it might be advantageous to set this up early.
Doing payroll for sole traders
If you have employees as a sole trader, you’ll need a simple but reliable STP approved payroll solution like Payroller. You can easily add or change your Australian Business Number (ABN) and other business details in the Payroller system.
