What is the Difference Between an ACN and an ABN?

What is the Difference Between an ACN and an ABN?

In order to legally run a business in Australia, you must register for either an Australian Business Number (ABN) or an Australian Company Number (ACN). Determining whether you need to register for an ABN or ACN is important as both have specific benefits – it just depends on what is most appropriate based on your business structure. 

Failure to register for an ABN or ACN will result in a breach of company and tax law, leaving you liable to legal action.

What is an ABN?

An ABN is a unique 11 digit number that is used to identify a business. Every business within Australia regardless of its business structure must be registered with an ABN. These include:

  • Sole traders
  • Trusts
  • Companies
  • Partnerships
  • Not-for-profits

ABNs are issued by the Australian Tax Office (ATO) and are used for tax related purposes and to track other business matters. Having an ABN is also required to register for GST. The company ABN must be displayed on all company documents and failure to register for an ABN will mean that your business is trading illegally. 

An ABN can also be used as a way to find information regarding your business. This can be found on the Australian Business Register and includes information such as:

  • The status of your ABN (valid, cancelled etc) 
  • What type of business structure it is (e.g. sole trader, trust) 
  • The trading name 

How to apply for an ABN

To apply for an ABN, you must register through the Australian Business Register. This can easily be done online and does not require a fee to register. Once you complete your registration, you should immediately receive your ABN – this ABN will be used for the lifetime of your business. 

It is also important to maintain any details regarding your ABN. Any changes that could affect your ABN such as a change of address, must be updated within 28 days of the change. 

In the circumstance where your business is closed, sold or no longer operates within Australia, you are required to cancel your ABN, lodge any outstanding tax returns and activity statements, and meet any payment obligations. 

Benefits of an ABN

Apart from being able to legally trade in Australia, the benefits of having an ABN include:

  • Your business is easily identifiable as the ABN is a unique code
  • You are able to apply for GST registration
  • Access to government services 
  • For businesses that do not pay tax (e.g. charities), an ABN is needed to confirm your status as a charity 

What is an ACN?

Unlike an ABN that is required for all businesses, a business only needs an ACN if they want to be registered as a company. An ACN is a unique 9 digit number that is used to identify the company. ACNs are issued by the Australian Securities and Investments Commission (ASIC) and can be used to:

  • Identify the company
  • Monitor company activity 
  • Inform other stakeholders about company information such as the business structure

Similarly to ABNs, a company ACN must be displayed on all company documents. If you intend to trade under the company, you will need to have registered for both an ABN and ACN. For any business that has an ABN and ACN, the same unique number will be used for both – the ACN will be the last 9 numbers of the ABN. 

How to apply for an ACN

To register your business as a company, you must apply through ASIC. At the time of posting, the current fee to register for an ACN is $506. However, this fee is subject to change so it is important to check this figure before applying. 

Before you apply for an ACN, there are important things to consider such as:

  • If a company structure is appropriate for your business needs
  • Deciding a company name
  • Establishing an operational model for your business
  • Understanding your obligations as a company 
  • Informing relevant stakeholders that you intend to convert your business to a company
  • If you are a new business and intend to trade as a company, you need to register for an ABN in addition to an ACN

Benefits of an ACN

One of the fundamental differences between an ABN and ACN is that when you register your business as a company, your business becomes a separate legal entity. One of the main benefits to this is that you are able to limit your risk and liability as a business owner. Other benefits of an ACN include:

  • It allows shareholders, partners and other stakeholders to obtain information regarding the company
  • An ACN is proof that a company is a legitimate business
  • It is required for legal compliance

Summary

It is important to understand whether an ABN or ACN is most appropriate for your business structure. All Australian businesses are required to have an ABN as they identify the business and are used for tax related purposes by the ATO. 

If a business owner wishes to convert their business into a company, they will need to register for an ACN under ASIC. This will effectively convert the business into a separate legal entity.

If you need assistance with any aspect of business or commercial law, organise a chat with one of our commercial specialist lawyers.

About Alex Oum

Alex is a fifth-year student studying a Bachelor of Laws and a Bachelor of Communication (Digital Social Media). He has been working in the not-for-profit sector for 3+ years, as well as spending 3+ years in customer experience and B2C sales. Alex is motivated about making the law more accessible to individuals and businesses so that they are able to achieve their goals.