Whether you’re commencing employment, or starting a business – applying for a new Tax File Number (TFN) can seem daunting, but doing it online means it doesn’t have to be.
If you’re a working Australian, it’s mandatory that you have a Tax File Number (TFN). This is so that you can be taxed on your income, and this same number will stay with you throughout your life. Similarly, many businesses have their own separate TFNs as well. If you are setting up a small business or organisation, certain steps must be followed to ensure that you comply with the Australian tax system.
What exactly is a Tax File Number (TFN)?
Your Tax File Number (TFN) is an unique identification number used in the Australian tax and superannuation systems. If you have been employed or paid income tax before, you will have been allocated your own TFN.
Although you are not required to have a TFN when operating your business, it’s important to consider making an application. Having a separate TFN will allow you to separate your business and personal affairs and also legitimise your business.
TFNs for businesses
There are two types of TFNs. One type is for personal use and the other is for businesses. Whether you are legally required to have a separate for your business depends on what structure it is.
If you run your business as a sole trader, you can your personal TFN will be used for your business. If you do not have one, you can register for it here. This means that the income of your business will be taxed at individual rates. If your business becomes lucrative, this can mean you will be taxed more than if your business is taxed at a corporate rate. You will have to inform the ATO of your TFN when applying for your Australian Business Number (ABN).
If you want your business to have its own separate TFN, you will have to change its structure.
John runs a popular gardening business as a sole trader. John’s business is registered under his individual TFN which he has had since he was 15. John cannot register a new TFN unless he changes the structure of his business to a partnership or company.<
Partnerships and companies
Partnerships and companies are required to have a separate TFN for business use. This is because firstly, the profits of partnerships structures are distributed differently to sole traders, and secondly, companies are taxed at a different rate. Your business will also have to lodge a separate tax return to what you would lodge individually.
You cannot apply for a business TFN if you are a government organisation or superannuation entity.
Speeding up the process
The Australian Business Register allows companies and organisations to quickly apply online for their TFN if they provide the following information:
- Australian Company Number (ACN) or Australian Registered Body Number (ARBN) – if it applies
- Business/postal address
- Authorised contact details
- Associate details – including name, date of birth and TFN
- Business activity – the types of activities and the date by which the TFN is required.
Simply follow the prompts on the Australian Business Register page and you will be directed to the application form for your business TFN. Otherwise you may contact the Australian Business Register on their website.
Applying for a TFN online is a simple and quick process. However, if you’re a sole trader or individual who already has a TFN, you will not be able to register a new one. If you’re unsure whether you need a new TFN for your business, it is recommended that you contact a business lawyer.
Don’t know where to start? Contact a LawPath consultant on 1800 529 728 o learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.