Changes to Australian Business Number’s (ABNs)

As seen in Woopi News February 2024

Over the last 12 months many Sole Trader ABNs have been cancelled without prior notice. Generally, this is because the ABN holder hasn’t included business income in their Individual Tax Return for a few years. Many people applying for, or reactivating their ABN have been finding that the online application says they are not eligible for an ABN. So, what’s this all about? The ABR has undergone a big tidy up, to ensure that listed ABNs are all active and the ABN holders can be identified. For the past 6 months or so, when applying for an ABN as a trade’s assistant or labourer, a warning has popped up advising the applicant is not entitled to an ABN as they are an employee. Anyone who now selects ‘trades assistant or labourer’ when applying for an ABN as a sole trader, will not be eligible for an ABN. Those that are operating ‘in the form of a business’ will continue to be eligible to apply for and use their ABN.

In December last year, The ATO finalised Tax Ruling TR 2023/4 and Practice Compliance Guideline PCG 2023/2. These documents outline how to correctly classify workers as employees or independent contractors. Business owners now need to determine if their worker is servicing their business or running their own business. Simply saying someone is an independent contractor doesn’t mean they are, it depends on a variety of factors.

So where does this leave Subcontractors currently using ABNs to contract their labour to another business? Generally, the party engaging the worker will be the one responsible for ensuring that their worker is correctly classified as either an employee or an independent contractor. However, if you are a sole trader contracting to another business on a regular basis we recommend you seek advice from your accountant and if your arrangement with a particular business appears to be that of an employee/employer, initiate a conversation so that changes can be made prior to the ATO enforcing these new rules.