The top 4 benefits of being an ABN holder

Besides being a legal requirement in Australia for eligible businesses, operating under an ABN is crucial for long-term business success. From considerable tax-time savings, to being eligible for government grants, an ABN provides sustained benefits over the long-run for SMEs. Below, we’ve listed four key benefits that having an ABN provides to small business owners…

1. Avoid extra tax being withheld from your payments

If you are selling to other businesses, an ABN is essential to avoid your customers withholding 47% of any payments to you for failing to present them with your ABN. Your customers are obligated to give this money to the tax office under the “no ABN withholding rule”, and you’ll only be eligible to get it back at tax time depending on your personal tax position. This is very punishing for most businesses and a great reason to make sure you are trading with an ABN.

2. Claim tax deductions on business expenses

Being an ABN holder means that you’ll be eligible to claim tax deductions on genuine expenses and purchases made for your business. This includes day-to-day expenses, inventory, leases, and even the interest payments on finance you are using to grow your business! All of these expenses and purchases can be presented as tax-deductibles come end-of-financial-year, reducing your taxable income, saving you money and putting your hard-earned cash back in your pocket.

3. Benefit from government incentives and grants

Financial support and assistance from the government when disaster strikes, (such as grants, payment schemes and rebates), is often only accessible to ABN holders. For example, during the COVID-19 pandemic, various initiatives such as JobKeeper and the SME Loan Guarantee Scheme were only eligible for small business owners who held an ABN. That’s why we can’t stress enough how important having an ABN is for future-proofing and protecting 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 a vehicle for your business, or something else entirely, you’re going to need an ABN. This is because lenders use your ABN to help determine your financial history, creditworthiness, and whether or not you can be trusted to repay a loan. Without an ABN, you will need to apply for loans in your personal name, and the lender will expect the credit to be used for personal use, not for an unregistered business! You can read more about the pros and cons of using cash vs accessing credit here.

Ready to apply for an ABN?

It’s important before applying for an ABN that you understand how it will impact your personal reporting and tax situation. If you’re operating an unregistered business or “side hustle”, talk to your accountant about if ABN registration is legally required and if the above benefits above apply to you. If you’re ready to get an ABN, it’s quick, easy, and can take less than 10 minutes to set up. Simply ensure you have the following documentation on-hand to ensure a speedy registration process:

• Identification of your business structure
• Proof of identity
• Details of your business activities and associates

Once the above information is ready to go, start your application here.