fbpx

Reform of the ABN System

The ABN system was originally introduced as a simple way to provide businesses with unique identifier when dealing with the government. It has since become a de facto licence to do business despite no substantial changes in the application process in the intervening two decades. The government is now seeking to reform the ABN system in response to the findings of the Black Economy Taskforce, and has started the consultation process on proposed measures including changes to ABN entitlement, conditions for ABN holders, and implementing a renewal process and fee.

In Australia, there are currently around 7.7m ABNs with over 860,000 new ABNs issued in 2017-18. The ABN system was originally introduced in 2000 as a way to provide businesses with a unique identifier when dealing with the government and to support the introduction and administration of GST. Over the years, the ABN has become a de facto licence to do business and a key business credential used by other businesses and consumers in general.

Despite this expanded role, the ABN system has not changed substantially since 2000, ABNs can still be obtained easily and quickly using intentionally simple processes to facilitate small businesses. There is concern that this ease of application has led the ABN system to being used for nefarious purposes by operators in the black economy.

This view was affirmed by Black Economy Taskforce which found that ABNs were being used to provide a false sense of legitimacy to dodgy businesses with the potential to deceive consumers and other businesses.

As a way to tackle this issue, the government has proposed changes to the ABN system to ensure that it remains fit to support the expanded range of purposes it is used for. It is currently consulting on changes including adjusting ABN entitlement rules, imposing conditions on ABN holders, and introducing a renewal process including a renewal fee.

The potential changes to ABN entitlement rules stem from the Taskforce finding that not everyone obtaining an ABN is entitled. This includes: inappropriate use of ABNs in phoenixing schemes; individuals working as employees but applying for ABNs as independent contractors; individuals incorrectly obtaining ABNs to avoid “no ABN withholding”, and individuals fraudulently claiming GST input tax credits.

In response, the taskforce recommended that certain groups (such as apprentices and individuals on tourist visas, as well as workers in certain industries) be excluded from obtaining an ABN. Another avenue to restricting ABNs that is currently being developed by the ABR and ATO include an application experience based on the applicant’s risk profile which may involve stronger entitlement checks before an ABN can be obtained.

In terms of potentially imposing conditions on ABN holders, the Taskforce had initially recommended that ABN holders should only be allowed to continue to hold their ABN if they comply with government obligations (ie tax obligations). Which would allow businesses and individuals to better identify compliant businesses and act as a deterrent to those wanting to engage in black economy behaviour. However, the government emphasised that the design of the ABN cancellation process would need to be fair and transparent and only occur where the business had not taken appropriate steps of rectify issues.

Finally, the government is also consulting on the proposal to make ABNs subject to periodic renewal for a fee as recommended by the Taskforce. While a renewal process would not directly address those who use the ABN system to engage in fraudulent behaviour, it would indirectly address fraudulent behaviour by prompting ABN holders to have a closer engagement with the ABN system. The fee would also assist the ABR to better support data needs and discourage people from holding an ABN when they do not need one or are not entitled to one.

Want to find out more?

Do you want to find out more about how this measure could affect your business? Does the pro of enabling regulators to weed out dodgy operators outweigh the con of potentially increased compliance costs? Contact us today, we can help steer you and your business in the right direction.

We Minimise Your Tax To Maximise Your Profit

Contact Rubiix and ask about our various business accounting services that will maximise your business profit!

Recent Blog Posts

Rubiix Breakdown: 2024 Federal Budget

by | Jun 6, 2024 | News | 0 Comments

If you missed it, the 2024 Federal Budget was announced on Tuesday 14 May 2024, with a heavy focus on cost-of-living including assisting States and Territories to build...

A cheerful barista handing a paper bag filled with baked goods to a customer in a cozy bakery, illustrating customer engagement strategies to increase foot traffic and customer satisfaction.

How to increase your customers

by | May 29, 2024 | News | 0 Comments

Blog Home How To Increase Your Customers Increase Your Customers: 2 Key Strategies for Business Growth Growing your business not only boosts your current cash flow but...

Launching New Products, Services or Business Ideas Into the Australian Markets

by | Apr 29, 2024 | News | 0 Comments

Blog Home Launching New Products, Services or Business Ideas Into the Australian Markets Navigating the growth of your business in Australia can indeed be a challenging...

Tax saving strategies

Top Tips For Tax Planning & Reduction

by | Apr 10, 2024 | News | 0 Comments

Blog Home Top Tips for Tax Planning & Reduction: Profits, Superannuation & Trusts Imagine what you could do with your tax saved.You could:Reduce your home loan.Top up...

Driving Profit Growth: A Holistic Approach for Business Success

by | Mar 12, 2024 | News | 0 Comments

Blog Home Driving Profit Growth: A Holistic Approach for Business Success Welcome to the journey of enhancing your business’s bottom line. Whether you're steering a...

Bitcoin tokens overlaid with fluctuating stock market graphs, symbolising the dynamics of Cryptocurrency and Tax return calculations.

Cryptocurrency and Your Tax Return

by | Jan 24, 2024 | News | 0 Comments

Blog Home Cryptocurrency and Your Tax Return In the evolving digital financial landscape, cryptocurrencies are more than just a trading asset; they're a new frontier in...

Exclusive New Client Offer

Contact our team today to get a FREE 30-minute meeting with one of our expert business accountants, including an ADDITIONAL free Financial Safety Checklist to help you on your journey to financial freedom.