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Do I need a Separate Tax File Number (TFN) for my Business?

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A Tax File number (TFN) is an important requirement for Australian workers. It helps ensure we pay the correct amount of tax and supports us in various other government dealings. Without a Tax File Number, certain forms of business will not be eligible for an ABN. This article will explain what a TFN is, why you need one, and whether businesses need their own separate TFN.

Table of Contents

What is a Tax File Number?

TFN stands for Tax File Number, it is a unique 9 digit number issued by the Australian Taxation Office to both individuals and organisations. It serves as your personal reference in Australia’s tax and superannuation systems. When you receive your TFN it is yours for life. The TFN remains the same, and does not change in any other circumstance. Even if you change your name, job, move interstate or go overseas; your TFN remains the same.

TFNs are issued not specifically to just individuals and organisations, but to each taxpaying entity. In addition to individuals and organisations, this also includes; superannuation funds, partnerships and trusts.

Why do I need a Tax File Number?

A TFN is essential for a number of different reasons relating to tax, government benefits and your business. Owning itself is not essential, you do not need to have a TFN. Without a TFN, however, you will not be able to apply for government benefits, lodge your tax return electronically, receive an Australian Business number (ABN). Most importantly, without a TFN you will not be able to start working or change jobs.

A TFN is also necessary to ensure you do not pay too much tax. While you can be employed without a TFN, the government will deduct tax at the maximum rate. Even if you are earning too little to pay tax normally. While this can be adjusted and claimed when you submit your tax return, a TFN is more convenient, ensuring you have the correct amount deducted from the start.

Does my Business need its own Tax File Number?

Depending on the structure of your business, a TFN may or may not be needed.

Sole Trader

If you operate your business as a sole trader, a TFN on its own is not needed. As a sole trader, your individual TFN, or businesses ABN should be used for all your business dealings. Sole traders do not need a separate TFN for their business because it is not a separate or individual tax paying entity. When reporting your own income for tax and tax returns, your businesses income and expenses will be included in this as a section for ‘business items’. As a result, when dealing with the Australian Tax Office (ATO) as a sole trader, a separate TFN is not needed for your business.

Partnerships, Companies and Trusts

As a company, partnership or trust, there will need to be a separate TFN for these businesses. This is because they are considered their own separate taxable and legal entities. Even if you’re a shareholder or director of the company and have your own TFN, the company will also need its own. Your TFN can be given to investment bodies responsible for paying interest, dividends and unit trust distributions. A TFN is essential when dealing with Australian Government bodies. A TFN will be needed when applying for an ABN. Its also essential for lodging income tax returns.

Finally

TFNs are are required for all tax-paying Australians and for all businesses. For sole traders, you will be taxed based on your individual TFN. For partnerships and companies, a separate TFN is required. If you have further questions about business structures or TFNs generally, it may be worth contacting a taxation lawyer.

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