ABN System turns 18! Treasury celebrates by launching a review

13 September 2018

Australia’s ABN System has turned 18, with The Treasury launching a review of its use as a key business credential.

The ABN system was originally introduced in 2000 to provide a unique identifier for businesses to use when dealing with government, and to support the introduction and administration of the Goods and Services Tax (GST). There are currently around 7.7 million ABN registrations, with over 860,000 new ABNs issued in 2017-18.

In its call for submissions - Designing A Modern Australian Business Number System – the Treasury department said: “the value and meaning of an ABN within the community has expanded over time, with the ABN now considered a key business credential.

“The underpinning ABN system is in need of reform to support the growing importance and expanded uses of the ABN and the consequences that come with this.”

BDO Australia has provided a comprehensive response to the review with a number of issues raised.

Lance Cunningham, BDO’s National Tax Director commented:

  • The design of the ABN system is generally good.  The problem is in how it is administered.  There is not enough ATO education on how it works or ATO/Federal Police compliance action against misuses of the ABN system (recommendations #1, #10 & #17)
  • The incorrect use of an ABN is punishable by two-years imprisonment, however there has been no evidence of anyone being prosecuted for this offence.  This is despite there being much recent media comment about some entities incorrectly using the Bunnings ABN when invoicing for goods or services provided (recommendations #1 & #10). 
  • There is no need to introduce a fee for renewal of ABN as it would discourage entities form registering for an ABN. Entities should be encouraged use of the ABN to assist with the tracking and record of financial transactions, rather than charging a fee on the bulk of taxpayers who have done the right thing and obtained an ABN (recommendations #9 & #17)
  • The ABN System could be improved by better linking the ABN with the income tax lodgement system. The requirement to lodge a tax return already applies to almost all ABN holders and most of the information that would be required for a ABN renewal is provided in the tax return or if it is not it would be a simple matter of including a request for such information in the tax return for relevant taxpayers. (recommendations #7 & #17). 
  • The tax return lodgement system is already in place so it makes sense to utilise this system instead of establishing a new ABN renewal system.  It would also act as an incentive for ABN holders to lodge their tax returns within the lodgement periods or apply for extensions of time to lodge.  In these circumstances the ABN should not be cancelled unless the taxpayer does not respond to the ATO reminded to lodge after the expiry of the original or extended lodgement date (recommendations #7 & #17).
  • There should be a requirement that online sales platforms clearly display the ABN of the business so customers can meet their legal responsibilities to ensure a valid ABN for payments over $75 to avoid withholding tax (recommendation #10).
  • The ABN system could be changed from the current system of an entity being ‘entitled’ to obtain and ABN if it carries on an enterprise, to a system of requiring an entity to obtain an ABN if it meets the appropriate tests for carrying on an enterprise and the application of penalties to an activity that constitutes a business or enterprise but does not obtain an ABN (recommendations #3 & #11).

Click here for the submission on the BDO website.