When you decide to work in Australia, whether you are a backpacker or not, some paperwork must be done. In most cases, you will only need to create a TFN (Tax File Number). It is a requirement to work legally in Australia. However, an increasing number of travellers decide to be self-employed. To make it happen, they have to create an ABN (Australian Business Number). We will explain here what an ABN is and which procedure to follow for obtaining it.
What is an ABN?
However if you have a trade for example and you want to be self-employed while living in Australia, it is totally feasible. For that, you will need to register for an ABN. An ABN is a unique 11 figure number. It identifies your business to the government and community. It is necessary to get it when you are willing to work for yourself. Indeed, it is nothing else but your business number. Your ABN gives you the right to be your own boss and work freelance in the sector of your choice (cleaning, delivery, construction as a contractor, etc.). With an ABN you are actually invoicing your clients instead of receiving a payslip. You cannot invoice anyone without having an ABN.
Start your freelance activity
To determine if your activity is an activity requiring the creation of an ABN, it must have the following characteristics:
- it must be commercial, you must sell products or services
- you must intend to make a profit from this activity – unlike a hobby
- the activity must be repeated regularly and be organized in a professional manner
- you must have the relevant knowledge or skills.
Thus, you can ask for an ABN to work as a consultant, web designer, graphic designer, gardener, cleaner, driver, teacher, etc. as long as you have several clients to whom you sell your services.
Employee or self-employed?
On the other hand, if a company offers to hire you for a given job but asks you to obtain an ABN, beware!
It is illegal for a company to treat its employees as sole traders. Companies that do this illegally reduce their labour costs. Indeed, by doing so, they are not paying the taxes and superannuation for you. In addition, you do not have the same rights as an employee.
Keep in mind that although it is easy to obtain an ABN, an employer does not have the right to ask you to obtain one as a condition of employment.
Steps to obtain an ABN
How to get an ABN?
Applying for an ABN is free. The application is to be made online, on the Australian Government website:
You will need to complete a series of questions to make sure your activity is eligible for an ABN. You will be asked for the type of business (usually individual sole trader) and the nature of your activity. People working on a construction site will for example answer “labourer”, for those wanting to be freelance will answer “in a kind of business”. You will then have to add your personal information: name, address, date of birth and TFN.
To resume you will need to provide:
- the nature of your main activity
- the structure of your business
- your Tax File number (TFN)
- your contact details (address, email, phone number in Australia)
If you receive a reference number it may mean the government need to check some details in your application or more information is needed. If the application is processed successfully, a letter confirming your ABN and ABN details will be sent within 14 days.
ABNs do not have an expiry date. However, it can be cancelled if your ABN comes under review and it is evident that you are no longer eligible for an ABN.
How to update or cancel your ABN?
You are responsible for updating your ABN contact details. You will need to do this within 28 days of the change in circumstances. Likewise, if your business structure changes, you may need to cancel your ABN and request a new one.
If your business has been sold or has gone out of business, you will need to cancel your ABN.
The fastest way to update your information or cancel your ABN is online using the myGovID app.
What is the go with taxes?
Declare your income at the end of the financial year
When you are an employee, taxes are deducted directly from your pay. At the end of the financial year you only need to report on the ATO website the amount paid by your employer. This amount is written on your payment summary(ies).
When you are self-employed, the procedure is totally different. You will have to pay for the taxes earned yourself at the end of the financial year. Technically, you will be receiving a payment from your client and then it is your responsibility to pay for your taxes. For this reason it is extremely important to save money all year long to pay your taxes at the end of the financial year.
For this you need to:
- Estimate your annual income
- Define your tax status and the tax rate that applies
- Calculate the amount of your taxes.
Keep in mind that you will be asked to pay for your tax at the end of the financial year instead of paying all year long.
If you have been working under both TFN and ABN during the financial year, you will have to declare all your income on the same declaration.
How much to put aside to pay my taxes?
Depending on your situation, three tax rates are possible:
Tax rates residents 2021-22
You will be considered a tax resident as soon as you have your main residence or live more than 6 months per year in the country at the same address.
|Taxable Salary Class||Tax rate|
|0 – $18,200||0|
|$18,201 – $45,000||19 cents for each $1 over $18,200|
|$45,001 – $120,000||$5,092 plus 32.5 cents for each $1 over $45,000|
|$120,001 – $180,000||$29,467 plus 37 cents for each $1 over $120,000|
|$180,001 and over||$51,667 plus 45 cents for each $1 over $180,000|
Non-resident tax rate 2021-22
If you do not work enough in Australia to be considered a tax resident, the tax rate on your Australian salary will be higher.
|Taxable Salary Class||Tax rate|
|0 – $120,000||32.5 cents for each $1|
|$120,001 – $180,000||$39,000 plus 37 cents for each $1 over $120,000|
|$180,001 and over||$61,200 plus 45 cents for each $1 over $180,000|
WHV holders rate 2021-22
These rates apply to working holiday maker income regardless of residency for tax purposes. You are a working holiday maker if you have a visa subclass 417 (Working Holiday) & 462 (Work and Holiday).
|Taxable Salary Class||Tax rate|
|0 – $45,000||15%|
|$45,001 – $120,000||$6,750 plus 32.5 cents for each $1 over $45,000|
|$120,001 – $180,000||$31,125 plus 37 cents for each $1 over $120,000|
|$180,001 and over||$53,325 plus 45 cents for each $1 over $180,000|
Specific rate for WHM from NDA country
In Addy v Commissioner of Taxation  HCA 34, the High Court has found that the ‘backpacker tax’ is not in accordance with Australia’s treaty obligations with the United Kingdom, violating the non-discrimination article (Article 25(1) of the UK DTA).
So if you are considered an Australian resident for tax purposes and from an NDA country, you may be eligible to be taxed on the same basis as a Australian resident. Here is the list of countries concerned: Chile, Finland, Japan, Norway, Turkey, the UK, Germany and Israel.
If you are planning to stay in Australia for a while, consider saving some money for your retirement. Open a superannuation account to deposit money.
ABN and GST
Some people wonder what GST is. In Australia, GST is 10% of a product or service. However, you only start paying GST if your income is superior to $75 000 per year. Under $75 000 you don’t have to worry about it.
If your income will be over $75 000, you can register for GST once your ABN has been created. You will then have to include the GST in the price you charge your clients. You can also claim reimbursement of the GST on the products or services you buy for your business.
What jobs can I do under an ABN ?
Whether it’s a full-time job or a simple income supplement, working under ABN has many advantages!
Most often, being self-employed means choosing your schedules, working at your own pace, remotely… Many people only see benefits in developing their personal activity.
From those looking to start their own small business, to those working in services, to those drawn to the digital nomad life… ABN is an easy way to simply get started on your own.
Among the jobs most often done under an ABN, we find:
- cleaning (for individuals or professionals)
- delivery (Ubereats, Deliveroo…)
- personal consultants or coaches
- graphic design (webdesign, photographer, editor, etc.)
- work on construction sites (carpenters, plumbers etc).
- home assistance, baby sitting, sports coaches…
Updated on 07/06/2022