When you start a business in Australia, you quickly come across a list of abbreviations: ABN, ACN, TFN, GST and PAYG. They all sound like part of "business registration", but they serve very different purposes.
Understanding the difference is important. If the wrong registration is used, invoices may be issued incorrectly, GST may be missed, BAS reporting may be wrong, or employer obligations may not be set up in time.
What is an ABN
An ABN, or Australian Business Number, is an 11-digit identifier used by businesses when dealing with government agencies, customers and suppliers. Sole traders, partnerships, companies and trusts may all need an ABN. However, having an ABN does not automatically mean that a company has been formed.
What is an ACN
An ACN, or Australian Company Number, is different. It is issued by ASIC when a company is registered. An ACN has nine digits and identifies the company. Not every business is a company. If you operate as a sole trader or partnership, you generally will not have an ACN unless a company structure is also involved.
What is a TFN
A TFN, or Tax File Number, is used for tax purposes. Sole traders generally use their individual TFN. Companies, trusts, partnerships and other organisations generally need their own business TFN. A TFN is not the same as an ABN, and it should not be treated as interchangeable.
What is GST
GST stands for Goods and Services Tax. Not every business needs to register for GST from day one. However, if your GST turnover reaches or is expected to reach the registration threshold, GST registration is generally required. Once registered, your business needs to issue correct tax invoices, account for GST on taxable sales, lodge BAS and claim GST credits only where the requirements are met.
What is PAYG (withholding vs instalments)
PAYG can refer to more than one obligation. PAYG withholding generally relates to withholding tax from payments such as wages. PAYG instalments are regular prepayments towards expected income tax. Because both can appear in the tax system and on activity statements, business owners often confuse them, but they are not the same.
Common confusions for new business owners
Common misunderstandings include:
- Having an ABN does not mean you have registered a company.
- Having an ACN does not mean you are registered for GST.
- Registering a business name is not the same as forming a company.
- Once registered for GST, pricing, invoices and accounting software should be updated.
- When hiring staff, PAYG withholding and STP should usually be considered before the first pay run.
Before trading, a new business owner should confirm three things: the business structure, the registrations required, and whether invoices, bank accounts, accounting software and BAS settings match that structure.
The goal is not to collect as many registrations as possible. The goal is to have the right registrations for the way the business actually operates.
