What is the Difference Between ABN and ACN?
Every business in Australia is required to have an ABN but not every business needs an ACN. The purpose of this post is to help you understand the difference between ABN and ACN as well as the purpose of each. For you to better understand the difference, we have to look at each individually.
What is an ABN?
The first obvious difference between ABN and ACN is the purpose of each. ABN stands for Australian Business Number. This is a unique 11-digit number used to identify a business that operates in Australia. As aforementioned, every business that operates in Australia must have a valid ABN.
The ABN is issued by the Australian Taxation Office (ATO). It serves as an identifier that enables the ATO to keep track of a business’ tax obligations and activities in Australia. The number further enables businesses to identify each other because they are all listed on the Australian Business Register together with a few specific business details.
Whether you are a company, a partnership or a sole trader, you must register for an ABN if you plan on doing business in Australia. Your ABN must also be present on the following documents:
- Business letterheads
- Account statements
- Orders for goods and services
Who Can Get an ABN?
Not everyone can get an ABN. To be eligible, you must be carrying on a business in Australia. This means you must have started to trade or have undertaken a business-like activity towards the commencement of trading. If you are an employee or undertake activities as a hobby, you are not required to get an ABN.
What if You Are Asked to Get an ABN as an Employee?
There are situations in which an employee can be asked to apply for an ABN. This is done so that they are treated as businesses or contractors rather than employees. If you are asked to do this, you have to think carefully because having an ABN means you:
- May not receive superannuation payment from your employer
- Have entered the business tax system and will no longer be considered an employee
- May not be covered under the workers’ compensation
- Will have to pay your tax directly to the Australian Taxation Office
- May have to organize your own insurance
If you decide to apply for the ABN, you must ensure the information you provide is accurate. This is because making misleading or false statements can lead to penalties of up to $10,200. Consulting an accountant can help.
How to Register for an ABN
The fastest way to apply for the ABN is to do it online through the ABR website at abr.gov.au. You need to complete the simple web form and you will get an ABN immediately after the registration. The registration is free. However, if you use a tax practitioner or any other service provider to complete the application, they may charge you for their services.
As part of the online application process for ABN, you can:
- Apply for a national business name
- Get an AUSkey. This is a digital certificate that enables you to access several government online services.
- Register for taxes including PAYG withholding and GST.
Your Obligations as an ABN Holder?
As an ABN holder, you are required to notify the ABR within 28 days of any changes to your address, name and contact details. You must also comply if the ABR writes to you about your entitlement or to confirm any details in your registration.
If you are no longer a business, you have to request for the ABN registration to be cancelled. This can only be done after meeting all your tax obligations.
What are the Benefits of an ABN Registration?
The main benefit of having an ABN is that it allows other businesses to confirm your details easily. This will come in handy when placing orders or invoicing other businesses. Second, you will not risk having money other businesses pay you temporarily withheld as part of PAYG withholding system.
While it is straightforward to apply for an ABN, it is always a wise idea to consult a professional for help. The last thing you want is to make mistakes that cause you to be penalized or cause problems down the line.
What is an ACN?
Now for you to better understand the difference between ABN and ACN we need to focus on ACN. ACN stands for Australian Company Number. As aforementioned, the ACN is not issued to every business. It is issued only when a business has been registered as a company. It is a 9-digit number and is issued by the Australian Securities and Investments Commission (ASIC) and not the ATO.
The duty of the ASIC is to monitor the activities of companies. The ACN can also be used by members of the public or shareholders to monitor the activities of a company as well as find out more about the company’s structure.
The ACN has to be displayed on:
- All documents that are lodged with the ASIC
- Business letterheads
- Statement of account
- Official company notices
- Promissory notes, cheques and bills of exchange
- Written advertisements that make a specific offer
- Orders for goods and services
The ACN must appear on the first page of all company documents. If several companies are on a document, the ACN for every company has to be displayed next to the company name. The ACN must also be clear, easy to read and obvious as to which company it belongs.
You are not required to include the ACN on:
- Packaging and labelling
- Advertisements that don’t make a specific offer
- Credit card vouchers
- Business cards
- Items that are not documents such as television advertisement and vehicles
- Machine generated receipts including the cash register receipts
How to Register for an ACN
To be able to register for an ACN, your business in Australia must first register as a company. The key steps involved in registering a company include:
- Gauging if incorporating a company is a good idea for your business.
- Picking a company name
- Establishing your business’ operational model
- Understanding your obligations as a company
- Getting consent from occupiers, members and officeholders
- Registering with the Australian Government Business Registration Service
The registration of an ACN is handled by the ASIC. To register, you need to complete Form 201. This form can be lodged with the ASIC directly over the counter or by posting the completed form with payment to:
Australian Securities and Investments Commission
P.O. Box 4000
Gippsland Mail Center VIC 3841
The fee is outlined at the ASIC form 201 page. You will get a certificate of registration.
While it is possible to register online, you can only do so through a registered agent and not directly with ASIC. Registered agents can lodge the documents with ASIC on your behalf and provide you with an electronic means to complete the registration. These agents must use software that is provided by an accredited ASIC software provider. You can see the list of ASIC accredited software providers HERE.
The main difference between applying for an ACN directly with ASIC and through an agent is price. It is, however, a good idea to apply through an agent because when applying directly you will not have the documentation needed to be compliant with the Corporations Act 2001. Noncompliance is a serious offense that can result in 3 months’ imprisonment.
What is the Difference Between ABNs and ACNs?
The main difference between ABN and ACN is the purpose and the type of business they are used for. The ABN is required for any business that operates in Australia. The ACN, on the other hand, is only required by the ASIC if you have a registered company.
To distinguish between ABN and ACN you need to take note of the digits. The ABN has a unique 11-digit number whereas the ACN has 9-digits. With a company ABN, there will always be an ACN plus a 2-digit prefix.
The registration cost also makes the difference between ABN and ACN. When you register the ABN directly through the Australian Business Register, it is free. The cost of registering an ACN currently stands at $506. You should note that the cost goes up each year from the 1st of July depending on the Consumer Price Index. You can check the latest fees on the ASIC Website.
Another notable difference is that the ACN is issued by the Australian Securities and Investment Commission (ASIC) while the Australian Business Register (ABR) issues the ABN.
While they are unique in their own way, both the ABNs and the ACNs are essential to the operation of a regulatory compliant business in Australia. You have to register them correctly to avoid penalties that result from trading without sufficient identifiers or violating the company and tax law. The good news is you don’t have to complete the registration on your own. If you are not sure what needs to be done or need more information on the difference between ABN and ACN, you can always consult a professional for help. A reputable accounting firm can help.