An ABN is an eleven digit identifier for people who invoice for their work rather than being paid a wage. Most working holiday makers on a payroll do not need one.
What actually decides whether you need one?
The substance of the arrangement, not the label on it. An employee is paid a wage, has PAYG tax withheld by the employer, and has superannuation paid on top. A contractor invoices for a result, has nothing withheld, carries their own insurance and generally supplies their own equipment.
That distinction is a legal test rather than a choice either party makes. If a business tells you to get an ABN for a job where they set your roster, supervise your work, provide the tools and pay you by the hour, the arrangement is very likely employment regardless of what the paperwork says, and the employee versus contractor test is what settles it.
Why do so many backpackers end up with one?
Because several jobs most available to working holiday makers are genuinely contracting. Delivery and rideshare platforms engage riders and drivers as contractors, piece rate harvest work is often contracted through labour hire, and freelance trade, photography and content work is contracting by nature.
There is a second, less honest reason. Some employers push an ABN onto ordinary employment because it removes their obligation to pay superannuation, workers compensation and award rates. The saving is theirs and the cost is yours, and it is the most common way a working holiday maker loses money without noticing.
What happens if you invoice without one?
The business is required to withhold 47% from the payment before it reaches you. That is the no ABN withholding rule.
You get it back. The withheld amount is credited when you lodge your return, in the same way over withheld PAYG is. What you lose is access to almost half of that payment until the return is processed.
What changes about your tax once you have one?
Nothing is withheld for you, and that is the whole difference. On wages your employer takes tax out before you see the money. On ABN income the full invoice lands in your account and the tax is still owed, assessed at the end of the year when you lodge.
The working holiday maker rate of 15% on the first $45,000 applies to ABN income in the same way it applies to wages, so the amount is not the surprise. The timing is. Someone who earned $20,000 through an ABN and set nothing aside has a real bill at lodgement rather than a refund.
What can you claim against ABN income that you could not claim on wages?
Genuine business expenses, and this is the compensation for the obligations. Fuel and vehicle running costs where a logbook supports them, phone and data apportioned to business use, equipment, insurance, platform commissions and bank fees all reduce the income the tax is calculated on.
Deductions are also where ABN returns go wrong most often, because the substantiation rules are stricter than most people assume. A logbook is not a receipt, apportionment has to be defensible, and a car claim without records is the most commonly disallowed item in this category.
When does GST enter the picture?
Once your turnover reaches $75,000 in a year, registration is compulsory, and below that it is optional for most work. Rideshare driving requires GST registration from the first dollar, with no threshold at all.
Registration is not free of consequence. It brings a Business Activity Statement obligation, usually quarterly, and that continues until you cancel it. Registering when you did not have to is a common and avoidable way to acquire paperwork you will still owe after you have left the country.
Does an ABN earn its place in your year?
Whether you need an ABN at all is usually clear once you look at the arrangement rather than the offer. What it costs you, and what it is worth, depends on facts specific to your year.
- Whether the work is genuinely contracting or misclassified employment, which decides whether you are also owed super and award rates.
- Whether you have ABN income and wages in the same year, since they combine into one assessment and the wage withholding often covers the ABN tax.
- Whether the platform you work through requires GST registration regardless of turnover.
- How much you set aside as you went, because nothing was withheld for you.
- Whether your deductions are substantiated to the standard the ATO actually applies.
- Whether you cancelled the ABN before leaving, since an open registration keeps its obligations.
If you have both kinds of income in one year, the combined position is worked out in the working holiday tax return, and you can estimate your tax refund once you know roughly what each side of it came to.