An Australian Business Number (ABN) is an 11-digit identifier issued to businesses and sole traders operating in Australia. It is used when you are working as an independent contractor rather than as an employee. Whether or not you need one as a working holiday maker depends entirely on how the businesses paying you have structured the arrangement.
The difference between employment and contracting
If a business pays you a regular hourly or daily wage, deducts tax from your pay before it reaches you, and makes superannuation contributions on your behalf, you are an employee. You do not need an ABN in this situation. Your TFN is the relevant number and your employer handles your tax obligations on your behalf.
If a business asks you to invoice them for your work, does not deduct tax before paying you, and does not contribute to your super, you are likely being treated as a contractor. In that case, you need an ABN to invoice correctly and to meet your own tax obligations.
Why ABNs are common among working holiday makers
Certain types of work that are popular among backpackers are commonly structured as contracting arrangements rather than employment. Piece-rate fruit picking and harvest work through labour hire companies, gig economy work through platforms that operate in Australia, freelance creative or technical work, and some hospitality and cleaning roles are all examples where an ABN may be required.
What happens if you work without an ABN when you need one
If you invoice a business without quoting an ABN, that business is required by law to withhold 47% of the payment before remitting the rest to you. This is similar to what happens when you work as an employee without a TFN. The money is not lost permanently, but you will not see it until you can sort out the administrative situation.
How to get an ABN
ABN applications are made through the Australian Business Register website. The process is free and takes around 15 minutes. You will need your TFN, your contact details, and information about the type of work you will be doing. Most applications are processed immediately.
Tax obligations when you have an ABN
When you are working as a sole trader with an ABN, you are responsible for setting aside your own tax. No one withholds it for you automatically. You will need to include all income earned under your ABN in your tax return at the end of the financial year. Depending on your income level, you may also need to consider registering for GST.
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