Key Takeaways:
- Holding an ABN prevents your payments from being heavily taxed and lets you claim business expenses to reduce taxable income.
- An ABN gives you eligibility for grants, rebates, and business loans, helping future-proof and grow your business.
- With an ABN, you can register for GST, issue valid invoices, protect your business identity, and appear professional to customers and partners.
Besides being a legal requirement in Australia for eligible businesses, operating under an ABN—that's an Australian Business Number—is crucial for long-term business success.
From serious tax-time savings to eligibility for government grants, working under an ABN offers ongoing benefits for SMEs.
In today's article, we're diving into 8 advantages an ABN gives small business owners:
What is an ABN?
An ABN is a unique 11-digit identifier issued by the Australian Business Register (ABR) and operated by the Australian Taxation Office (ATO).
It’s basically your business’s official ID for the government, other businesses, and the public [1].
8 benefits of working under an ABN
1. Avoid extra tax being withheld from your payments
If you're selling to other businesses, an ABN is essential to avoid your customers withholding 47% of any payments just because you didn’t give them your ABN [2].
Customers are legally obligated to hand that money to the tax office under the “no ABN withholding rule”, and you might only see it again at tax time, depending on your personal tax position. That’s a huge hit for most businesses—and a solid reason to trade with an ABN.
2. Claim tax deductions on business expenses
Being an ABN holder means you can claim tax deductions on genuine expenses made for your business—think day-to-day expenses, inventory, leases, and more.
All of these can be presented as tax-deductibles at EOFY, reducing your taxable income and putting more of your hard-earned cash back where it belongs: in your pocket.
3. Benefit from government incentives and grants
Government support—like grants, rebates, and emergency payment schemes—is usually reserved for ABN holders.
For example, during the COVID-19 pandemic, initiatives like JobKeeper and the SME Loan Guarantee Scheme were only available for small business owners with an ABN [3].
Having one today helps future-proof your business in case disaster strikes the Australian economy again.
4. Become eligible for finance
If you’re looking for business finance to grow your business, consolidate debt, purchase new equipment, or something else entirely, you’re going to need an ABN. This is because lenders use it to check your financial history, creditworthiness, and repayment reliability.
Without an ABN, you'll need to apply for loans in your personal name, and the lender will expect the credit to be used for personal use, not your unregistered business.
{{first-banner}}
5. Register for GST
If your annual turnover hits $75,000 or more, registering for GST is mandatory—and you’ll need an ABN to do it [4].
Registering lets you charge 10% GST on your sales and claim GST credits on business-related purchases from another GST-registered business, like rent, equipment, and inventory.
This means less money left on the table and more cash flow to put back into your business.
6. Look legitimate and professional
An ABN signals to customers, suppliers, and partners that you’re the real deal. It helps establish trust, shows you’re serious about your business, and is often a requirement when bidding for contracts or setting up supplier accounts.
You can also pop it on your business cards and website for extra credibility points.
7. Protect your business identity
Your ABN is a unique business identifier—keyword being, unique.
Not only does it protect your name, but it makes it harder for others to impersonate your business, helps create a clearer line between “you” and your business when it comes to tax and compliance, and helps other confirm they’re dealing with the right entity (through the handy ABN Lookup tool).
8. Streamline your invoicing
With an ABN, you can issue valid tax invoices—something you legally can’t do without one. This helps you stay compliant, makes life easier for customers, and ensures you actually get paid (on time!).
Plus, tracking your business activity gets simpler, helping avoid admin headaches down the track. No ABN? Expect delays, disputes, and potentially less trust in your invoices.
Your responsibilities as an ABN holder
Having an ABN comes with perks, but it's not a set-and-forget. Here's what you need to do:
- Lodge your tax return every year
- Keep proper records of income and expenses
- If you employ staff, register for PAYG withholding
- Keep your ABN details up-to-date
- Cancel your ABN if you stop trading
Ready to apply for an ABN?
Before applying, make sure you understand how it affects your personal reporting and tax situation.
If you’re running an unregistered business or side hustle, talk to your accountant about whether you legally need an ABN and if the benefits above apply.
If you’re ready, getting an ABN is free, easy, and can take less than 10 minutes. Just make sure you have these docs on-hand:
- Identification of your business structure
- Proof of identity
- Details of your business activities and associates
Once you’ve got everything ready, start your application here.
