Amount of money from commission
Whether you qualify as a business or recreation can depend on how much money you generate from a commission. Whilst you may conduct business without an ABN, once you meet a $75,000 threshold, you must register an ABN. This is because that income is no longer viewed as proceeds of recreation and is subsequently business revenue. The Australian Taxation Office website contains a useful video on this. This is probably the most important factor as to whether you need an ABN to receive commission from referrals.
The frequency at which you provide referrals will dictate how much revenue you generate. Subsequently, then whether you qualify as a business. One feature of a business is that, despite whatever revenue is amassed, if the conduct has a distinctly routine and inherent purpose, then it may be viewed by the legal authorities as a business. At this time, you will need an ABN. Therefore, a one off referral of a nominal amount is unlikely to attract the need for an ABN. However, the more frequent it becomes, the greater the likelihood. It is possible for a business to have its sole purpose rooted in facilitating relationships and networks. This is essentially what recruiters, auction houses, real estate agents, and talent management agencies are: middle entity facilitators.
If the agreement that you have with the party your providing the referral for stipulates that you are conducting such a referral as part of a business, you must ensure that you are. Providing false information in contractual documents can have dangerous consequences and it is vital that if you are passing yourself off as either a business or working for a business, that you actually are.
Type of industry
The type of industry or nature of the referred service or commodity will likely determine the amount of money in the transaction, and also the frequency. Therefore, this will be a factor in whether you reach that financial threshold that qualifies you as a business. If you are dealing in high priced goods and services, this will be probably be the case.
You must also ensure that you satisfy any legal requirements for the purposes of trading as a business in particular industries. For example, certain professions require the appropriate professional qualifications and standards to be met in order for you to conduct business. Acting as a conduit or thoroughfare between the buyer of a house and the vendor basically means you are fulfilling the same function as a real estate agent. However, you may not be qualified to do so, without the appropriate certifications and business registration. This is just an example, but helps illustrate that it is very important to think about things should you consider seeking commission from referrals in any business like capacity.
Are you alone?
If you and somebody else make a referral collectively, it can be more complicated. If you are in an official partnership with another person, this would require an ABN. Therefore, other people involved in the referral can dictate how this process works. You must importantly consider how this impacts upon others, and reflect on any other parties privy to the agreement.
If you are seeking to offset any business expenses incurred through the course of your endeavours as a facilitator or referral merchant, you will need to register an ABN. There can be a broad range of tax implications for things of this nature, and any referral fee can still be treated as taxable income despite not being registered as a business. Speaking to a taxation lawyer may be of benefit.
As you can see, whether you need an ABN to receive commission from referrals depends on a variety of things. Therefore, it is always sensible to consider all of these points both prior and during the transaction. What starts with one or two can sometimes grow and progress to more. This is the nature of business, and is especially so if the networks you form prosper. If you are making an increased number of referrals, it is advised that you consult with a business lawyer for advice.