Tax File Number and ABN FAQ
Q: Why do I need a tax file number?
A: While it's not obligatory to have a tax file number (TFN), not having one will result in the following:
- Your employer must take 45.6 per cent of your pay due to tax.
- Financial institutions like banks and credit unions will tax your interest at 45.6 per cent.
- Your tax return or Australian business number application could take longer to process.
- Generally, Centrelink won't pay you an allowance such as Youth Allowance, Austudy or Newstart.
- The Australian Taxation Office will have difficulty accessing your records and discussing them with you.
- You won't be able to defer your higher education fees.
Q: Why do I need an Australian business number?
A: Like the TFN, it's not compulsory to have an Australian business number (ABN). However, there are several reasons why you should have one:
- Other companies you deal with must withhold 45.6 per cent of any payments made to you if you do not cite an ABN on invoices. Granted, you can claim back excess tax in your tax return at the end of the fiscal year, but the practice isn't good for your cash flow.
- If your business has an ABN, you can get back goods and services tax credits, provide fringe benefits to your employees, ask for fuel tax credits and deal with other businesses more easily
Q: Where do I apply for a TFN?
A: There are several places to apply for a TFN:
- Secondary school students can get their TFN through their school's TFN program, which is available through most secondary schools.
- Australian citizens 16 years old and above or residents without work rights who live in the greater Melbourne area and regional NSW (Albury or Wagga Wagga) can apply for a TFN by accomplishing a TFN form via online ordering, calling 1300 720 092, approaching an ATO shopfront or a newsagent, or by asking Centrelink a copy but only if you're applying for a pension or government benefit.
- Visa holders with work rights can apply for a TFN online. If you apply this way, make sure you keep a record of your receipt number.
Q: Where do I apply for an ABN?
A: There are three options:
- Apply online through the Australian Business Register.
- Via a tax agent.
- On-paper application:
Q: What are the benefits of having a TFN and/or ABN for university students?
A: Without a TFN, any income that university students earn from work will be taxed at 46.5 per cent. Furthermore, university students won't be able to defer higher education fees. If a university student has his or her own business or is an independent contractor, not having an ABN will cut into the student's earnings because of the substantial 45.6 per cent tax.
Q: What are the benefits of having a TFN and/or ABN for workers?
A: As mentioned earlier, employers would have to withhold 45.6 per cent of a worker's salary if he or she doesn't have a TFN. If unemployed, not having a TFN means you won't get any allowance from Centrelink. Having an ABN, on the other hand, would allow a worker to operate as an independent contractor.