What Is an ABN? (And How It Really Works)

If you’ve just grabbed yourself an ABN, congratulations — you’ve officially stuck your toe into the small business pool. But before you cannonball in and start earning money, let’s clear up what an ABN actually is, what it isn’t, and what it quietly drags into your life behind the scenes.

Because here’s the kicker that no one tells you:

Getting an ABN is easy.
Understanding what it means is where most people fall over.

So let’s break it down properly — Derek-style — with plain English and zero government-speak.

So… What Is an ABN?

An ABN (Australian Business Number) is a unique 11-digit identifier for your business activities.
But here’s the part the ATO conveniently glosses over:

It doesn’t make you a company, it doesn’t give you magic tax powers, and it definitely doesn’t mean you can avoid tax.

An ABN simply tells the ATO:

“Hey, this person is earning money outside a normal job, so treat them like a business.”

That’s it.
It’s a label.
A flag.
A signal that you’re in business, even if you’re only doing a couple of jobs on the weekend.

But that small flag carries a big set of rules.

Why Do You Need an ABN?

You need an ABN if:

• You invoice customers

• You freelance or contract

• You run a side hustle

• You sell goods or services as a business

• You want to avoid having 47% tax withheld from your payments

Yes, that last one is real.
If you invoice without an ABN, the payer must legally withhold 47% and send it to the ATO.

So in many cases, an ABN isn’t a choice — it’s survival.

What an ABN Does NOT Do

Let’s clear up the myths quickly:

❌ An ABN does not make you a company

You’re still just you — but running a business.

❌ It does not mean you’re automatically GST registered

GST is a separate system entirely (we’ll get to that).

❌ It does not give you access to different tax rates

Your ABN income gets taxed at your personal tax rate.

❌ It does not replace your TFN

You need both — one for your personal tax, one for business activity.

❌ It does not make tax optional

No matter what your mate said at the BBQ.

What Happens After You Get an ABN?

Here’s where most people start sweating:
Once you have an ABN, you now have “business obligations.”

Nothing scary — just responsibilities the ATO expects you to fulfil.

✔ You must keep records

(Receipts, invoices, logbooks, bank statements — don’t worry, eCashBooks makes this painless.)

✔ You may need to register for GST

But only if you hit $75,000 or you’re in rideshare.

✔ You must finalise a tax return every year

Even with $0 income.
Even if you have a normal job.
Even if it was “just a couple of small jobs.”

✔ You must declare your ABN income

Every. Single. Dollar.

✔ You can claim tax deductions

Tools, supplies, phone, internet, home office, car costs — the works.

✔ You will likely need to put money aside for tax

Because no one is withholding tax from your ABN income.

Basically:
The ABN opens the door to earning — but it also opens the door to tax.

When You DON’T Need an ABN

Good news — sometimes people think they need an ABN, but they don’t.

You DO NOT need an ABN if:

• You’re doing a genuine hobby (not income-producing)

• You’re an employee only (no contracting)

• You sell second-hand items occasionally

• You earn pocket money without running a business

But if you’re invoicing?
If you’re getting paid for a service?
If you intend to make profit?

That’s business — and the ABN is mandatory.

ABN vs GST — Two Completely Different Systems

People mix these up constantly.

ABN = identifies your business to the ATO

GST = tax on goods and services IF you’re registered

Getting an ABN does not automatically put you into GST.
You can have an ABN for 20 years and never touch GST unless:

• You earn over $75,000

• You drive rideshare or taxi

• You voluntarily register

How Your ABN Gets Taxed

This blows minds every year:

ABN income isn’t taxed when you receive it.

• No tax withheld.
• No safety net.

At tax time, the ATO adds:

• your job income

• your ABN profit (income minus deductions)

…and taxes the total.

That’s why side hustlers get tax bills.
It’s not because you did anything wrong — it’s because:

ABN income has no tax withheld and pushes you up the tax ladder.

You avoid this problem by keeping good records and claiming the deductions you’re entitled to.

What You Should Do Next (This Is the Part That Helps You Most)

Now that you know what an ABN is — and what it isn’t — here’s your next move:

Step 1: Learn your full obligations

See the full First-Year ABN Guide.

Step 2: Keep your records tidy

Use eCashBooks if you want the bookkeeping done without the pain.

Step 3: Finalise your tax return properly

Use the GoTax ABN Tax Return to get:

• simple prompts

• deduction suggestions

• fewer tax bill surprises

You don’t need to be an accountant.
You just need the right tools.

Quick Answers (For AI Overviews & Featured Snippets)

What is an ABN?

An Australian Business Number that identifies your business activities with the ATO.

Do employees need an ABN?

No — only people earning business income.

Does an ABN change your tax rate?

No — your ABN income is taxed at your personal rate.

Do you need to lodge a tax return with an ABN?

Yes — every year, even with $0 income.

Does an ABN mean GST?

No — GST registration is separate.

What Next?

Running an ABN doesn’t have to be complicated.
Use the GoTax ABN Tax Return to get it right, and if you want to keep your records sorted without spreadsheets, grab eCashBooks and let it do the heavy lifting.