What’s the Difference Between an ABN and ACN? (2024 Update)

What’s the Difference Between an ACN and ABN? (2022 Update)

Looking to start a business or register a business but not sure whether you need an ABN or ACN? You aren’t alone, and we assure you that knowing the difference between these two terminologies is easy, and is crucial information you should know and understand. 

In a nutshell, every registered business in Australia is required to have an Australian Business Number (ABN). However, not every registered business is required to have an Australian Company Number (ACN). Only businesses that have been registered as a company are required to have ACNs.

ABNs and ACNs are unique numbers that are used to identify your business. However, the number you use will depend on the type of business structure you have.

In this article, we’ll define what an ABN and ACN are, their benefits, how to obtain them and how they might apply to your business.

What’s the Difference Between an ACN and ABN?

The primary difference between the two is determined by the businesses that are required to use them. This is because all businesses are required to apply for an ABN, whereas only companies are required to apply for an ACN.

What is an Australian Business Number (ABN)

An ABN is a unique 11-digit number that is used to identify your business. 

The Australian Taxation Office (ATO) uses your ABN to keep track of your business activity and taxes. 

Whether you’re operating as a sole trader, a partnership, or a company, you will need to register an ABN. This is because operating a business without an ABN is illegal. You will also need an ABN to register for GST and payroll tax. Sole traders and partnerships are required to cite their ABN and Tax File Number (TFN) when dealing with the ATO. 

Benefits of having an ABN

There are a large number of benefits from your business using an ABN including the following:

  • Your ABN can function as an identifier for other businesses that you currently work with or intend on working with
  • It allows your business to be easily identifiable to other businesses during invoicing and ordering processes
  • It allows you to avoid pay as you go (PAYG) taxes in relation to payments you receive
  • Having an ABN allows you to receive goods and services tax (GST) credits
  • You can receive energy grants credits
  • Having an ABN allows you to obtain a domain name
  • Having an ABN allows your business to be easily identified 
  • Your business will avoid being misidentified as other businesses may have a similar business name to yours , but they won’t have the same unique identification number
  • You will avoid a temporary reduction in your pay as if you operate without an ABN you may be required to withhold 47% of your income and provide this amount to the ATO
  • Having an ABN for your business will allow you to claim for tax deductions for purchases your business makes whilst operating

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What is an Australian Company Number (ACN)

An Australian Company Number (ACN) is issued if and when you register your business as a company. Your ACN is a 9-digit number that is issued by the Australian Securities and Investments Commission (ASIC)

Your ACN will serve as an identifier to ASIC for the monitoring of your company activities. It also lets the public know your business’s structure. 

Company structures are separate legal entities, meaning that directors will not ordinarily be responsible if the company gets into financial or legal trouble.  Your ACN should be cited on all important business correspondence. 

Benefits of having an ACN

The benefits of having an ACN for your business include the following:

  • Through having an ACN, you can reduce your own personal liability and risks 
  • An ACN makes it easy for customers, partners, other businesses and shareholders to access company information and to easily identify your company
  • Having an ACN allows you to be legally compliant and shows that your company has been registered with ASIC legally and properly
  • It shows your business has been incorporated

How to apply for an ACN?

You will receive an ACN when you register your company. This nine-digit number is provided by and managed by ASIC upon company registration.

Where to display your ABN or ACN?

Generally, ABNs and ACNs (when applicable) must be displayed on most documents, including the following:

  • Tax invoices
  • Business Letterheads
  • Orders
  • Receipts
  • Account Statements
  • Legal documents
  • Bills of exchange
  • Negotiable instruments that meet certain criteria
  • Any document submitted to ASIC
  • Company documents
  • Promissory notes
  • Public documents
  • Cheques 
  • Written advertisements offering a specific product or service
  • Notices issued by your company

If you fail to include your ABN or ACN on the above documents, you’ll likely face a serious penalty from the Australian Tax Office (ATO) or ASIC.

Conclusion

Both ABNs and ACNs are integral to your business. If you trade without having the sufficient identifiers, you will be in breach of company and tax laws. 

Therefore, it’s crucial to know which number your business requires and when and how to use them in order to be legally compliant. 

You have a lot of legal obligations being a business owner, and this can be stressful. We’re here to make things easier for you. You can stay on top of legal requirements your business needs to know about by signing up for our newsletter.

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