Short answer: no, a sole trader does not always need an ABN, it’s almost always a good idea to have one. An ABN is required if your annual turnover is over $75,000 or if you need to register for GST. But even if you’re just starting out and not hitting those numbers yet, an ABN can make things a lot simpler. It helps with invoicing, claiming GST credits, and makes your business look more professional to clients and other businesses.
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.
What about a side gig or a hobby? You usually don’t need an ABN for those, at least not until you start turning a profit. If you’re unsure, an accountant can help you figure out if you’re a business or a hobby.
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 an 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?
Having an ABN is like having an official ID for your business. It identifies you to clients and the government, helps you claim GST credits, and lets you register for an Australian domain name. A big one is that it helps you avoid the 47% PAYG tax on payments you receive from other businesses. Basically, it adds a layer of professionalism and legitimacy to everything you do.
Can sole traders operate without an ABN?
Yes, if your turnover is under $75,000 or if your activity is a hobby, you can operate without an ABN. But, not having one can limit what you can do. You won’t be able to issue a proper tax invoice or claim GST credits, which can make things a bit clunky.
How do I apply for an ABN as a sole trader?
Applying for an ABN is pretty easy and it’s free. You just head to the Australian Business Register (ABR) website. You’ll need to have a few things ready, like your tax file number (TFN), some details about your business, and the date you plan to start. It only takes a few minutes to get it done online.
Can I operate without an ABN if I earn less than $75,000 as a sole trader?
Absolutely. You can operate without an ABN if you earn less than the GST threshold. However, having one can give you a real edge. It streamlines your business transactions and gives you a professional look. If your business takes off and you start earning more, you’ll need to register for both an ABN and GST anyway.
My take? It’s smarter to get it sorted early on so you’re ready for growth
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.