Over the years, the ATO have tightened up the eligibility for owing an ABN.
When the ABN system was established it was meant for Australian businesses. Sounds pretty obvious doesn’t it!
Over the years it has been abused though and many individuals have applied for ABN’s when in fact they haven’t been running businesses.
The recent changes focus on:
- Identifying people going through the application process multiple times
- Helping people understand their obligations where there may be some doubt regarding their entitlement for an ABN
- Ensuring only those who are entitled for an ABN actually receive one
We have seen over the years the situation where an employer has requested that they will employ someone as a contractor and not as an employee generally in an attempt to rid themselves of any employer responsibilities such as leave entitlements, workers compensation and superannuation.
A client who is a bookkeeper by trade (but has always worked as an employee) was asked by a prospective employer to act as a contractor. She was going to work from home.
There are two problems with this:
1. Our client is not eligible for an ABN and if you answer the online application questions correctly will be denied an ABN as she was not actually carrying on the business of a bookkeeper.
2. Even if she was eligible ,the employer didn’t necessarily get out of his responsibilities for workers compensation and superannuation.
As per the ATO, the most common ineligible ABN applications are as a result of trade employers requesting their junior staff such as labourers, apprentices, etc apply for an ABN as a condition of employment.
If you are unsure whether you require an ABN for the services you provide, please see Peter Gill’s newsletter article published 27 April. 2018 on our website. The article is titled ‘Contractors vs Employees – ABNs being cancelled by the ATO”.
If still unsure, please see the below link published by the ATO for a comparison between employees and subcontractors:
This article appeared in our June 2019 newsletter. Author: Stephen Mason