What is ABN…ACN…AUSkey? – Enter the world of business registration acronyms
Starting a business in Australia means becoming used to business acronyms like ABN ACN, GST PAYG etc. Seasoned business owners might be well aware of these acronyms; what they signify and what their uses are, but a new business owner can find it a little confusing while dealing with so many of them. Though they might appear daunting, once you know their meaning, and understand when and why they are used, you will find them easy to deal with.
Do I need to know all of them?
The acronyms you will be dealing with also depend on what business structure you are choosing to operate in, for example, if you are planning to start a business under your own name instead of registering a company, you wouldn’t be dealing with acronyms like ACN, which are specifically used by companies. Regardless of the legal structure of your business and the acronyms you need to specifically know about, it’s always a good idea to understand other terms and acronyms commonly used by businesses, as you never know when you will have to deal with them.
Where shall we start? What is ABN?
The first acronym anyone thinking to start a business must know about is the ABN. ABN stands for Australian Business Number. It is an 11 digit number issued to any individual or entity as an identifier by the Australian Taxation Office (ATO). Getting an ABN is not mandatory, but anyone who wants to operate an enterprise in Australia must get one for the benefits associated with it and the sheer convenience it provides while dealing with other businesses. Without an ABN, your client or supplier can withhold 46.5% of the payment they owe you; you can’t register a business name and can’t apply for a GST registration. To know more about the benefits of getting an ABN, you can read “Can I remain quiet and not apply for an ABN” on the Bizify blog.
Wait…doesn’t ABN stand for Australian Business Name?
No, actually business name registration in Australia doesn’t have an acronym. The Australian Securities and Investment Commission (ASIC) registers business names for entities and individuals who hold an Australian Business Number (ABN), but it’s simply known as ‘business name’ and shouldn’t be confused with an ABN.
If I have an ACN, why do I need an ABN?
ACN stands for Australian Company Number. It is a 9 digit number issued to every company, as an identifier that registers in Australia. Whereas ABN is issued by the Australian Taxation Office (ATO), ACN is issued by the Australian Securities and Investment Commission (ASIC). ABN is issued to any individual or entity that runs an enterprise in Australia but ACN is issued only to companies. Moreover, the ABN of a company which is an 11 digit number always contains the ACN in its last 9 digits. If a company quotes its ABN in invoices and official documents, it does not require quoting the ACN. As soon as a company is registered, it gets its ACN; and though it’s not required to get an ABN immediately, a company whose annual turnover crosses $75,000 will require registering for GST, which can only be done if the company has an ABN.
What is this GST?
GST stands for Goods and Service Tax. GST is a broad based tax of 10% applied to all goods and services in Australia. Businesses need to collect GST from their customers and pay it to the government. For the GST that they pay for their business purchases, they can claim GST credits at the end of the financial year; hence, effectively in a chain of production, the GST is paid only by the final consumer. In Australia, it is mandatory to register for GST once the turnover of the business crosses $75,000 regardless of whether the business is run as a sole proprietorship, as a partnership or as a company. As mentioned above, one can’t register for GST without registering an ABN first. Another important thing to understand is that even though $75,000 is the turnover limit for GST registration, it can benefit your business immensely in the form of the GST credits that you can claim for your purchases if you get GST registration right at the start.
Ok I will pay GST, but then why do I need a TFN for the Company?
GST is a transaction based tax and as explained above, it’s only the final consumer who pays GST. For a business, GST is not a ‘tax’ per se, as whatever the business collects from its customers and pays to the government is reduced by the GST credits it claims. TFN stands for Tax Filing Number and as most people are aware, it is a 9 digit number quoted while filing your income tax return. TFN is issued to both businesses and individuals. Just like an individual pays taxes on the income he or she makes, a company needs to pay taxes on the profit it makes. TFN is issued by the Australian Taxation Office to individuals and commercial entities for administering tax and other Australian Government systems.
That’s all the tax related acronyms that I need to know?
No, another important tax related acronym is PAYG, which stands for Pay As You Go. There are two types of PAYG. PAYG Installment is a system which allows you to pay installments on your expected tax liability for the year, such that at the end of the year, you can claim refund if you have paid more taxes than the liability or in case of a shortfall, pay the tax balance. Businesses need to register for PAYG Installment not only for paying their own taxes but also for withholding tax payments from the salary of their employees by registering for PAYG Withholding. PAYG registration is done by the Australian Taxation Office (ATO) and the amount you need to pay each quarter is determined by the ATO from your most recent assessed income tax return.
Yes, the last acronym you need to know about is the AUSkey, which is a single key access to government online services like ASIC Connect, business name search etc. Registering an AUSkey is not mandatory but is advised, as in future it will be accepted by more government agencies and you won’t require remembering usernames and passwords for multiple government portals. The AUSkey registration is handled by the Australian business register and you will require furnishing your ABN details while registering for one.