13 September 2024

Taxes
Tips

ABN vs TFN: Understanding the differences

A TFN is your private tax identifier and you need one if you earn money in Australia. An ABN is your business's public identifier and you only need one if you run a business. Many people hold both.

A TFN and an ABN are both issued so the tax system can tell who is who, but they identify different things and follow different rules. The short version: your TFN is private and personal, your ABN is public and belongs to your business. If you earn money in Australia you need a TFN. You only need an ABN if you are running a business – and if you are a sole trader, you will use both.

TFN – keep it confidential

Your Tax File Number is a private number. It is never published, and only your employer, bank, super fund, registered tax agent and Services Australia have any right to ask for it. Treat a request from anyone else as a warning sign.

ABN – meant to be public

Your Australian Business Number is designed to be seen. It goes on every invoice you issue, and anyone can look it up on ABN Lookup to check that your business is real and whether it is registered for GST.

You may need both

A sole trader trades under an ABN but still lodges a personal return under their TFN. The ABN identifies the business; the TFN identifies you.

What is an ABN?

An Australian Business Number (ABN) is a unique 11-digit number issued through the Australian Business Register (ABR) to businesses, organisations and individuals carrying on an enterprise in Australia. It is used for tax and administrative purposes, and it is a matter of public record.

Who needs an ABN?

Anyone carrying on a business in Australia should have one – sole traders, partnerships, companies and trusts alike.

Thinking of setting up a business? Talk to us and choose your business structure – the structure you pick decides your tax, your liability and how easily you can bring in partners later.

It is worth being precise here, because it is widely misunderstood: holding an ABN is not legally compulsory. The catch is what happens without one. If you invoice another business and cannot quote an ABN, that business is required to withhold 47% of the payment and send it to the ATO. You get it back at tax time, but you have handed over almost half your income in the meantime. In practice, that makes an ABN essential for anyone trading.

Benefits of having an ABN

Credibility. An ABN shows you are a registered business. Unregistered operators are harder to find, harder to verify, and harder to pursue if a job goes wrong.
GST registration. Once your turnover reaches $75,000 a year – $150,000 for not-for-profits – you must register for GST, and an ABN is a prerequisite. Registration also lets you claim GST credits on business purchases.
Clean invoicing. Your ABN identifies you on every invoice, and clients can confirm on ABN Lookup that you are active and whether you charge GST.
Grants and programs. Many government grants and support programs are only open to businesses with an ABN.

How to get an ABN

Apply free through the Australian Business Register. You will need your business structure, your business details and, ordinarily, your TFN.

Can you get an ABN without a TFN? Yes – but expect friction. The ABR uses your TFN to confirm your identity automatically, so an application without one drops into manual review: you supply additional proof of identity, and processing takes considerably longer. If you are entitled to a TFN, apply for it first and the ABN becomes straightforward.

Keep your details current. Update your ABN record with the ABR whenever your structure, address or contact details change. Stale details are a common trigger for ATO correspondence.

What is a TFN?

A Tax File Number (TFN) is a unique 8 or 9-digit number issued by the Australian Taxation Office to individuals and entities. Older numbers run to eight digits and newer ones to nine – both remain valid, so a shorter number is not a sign of a problem. Your TFN stays with you for life, through every job, name change and move.

Who needs a TFN?

Anyone earning money in Australia. Employees, sole traders, investors, students working part-time, and every company, trust and partnership that lodges a return.

As with the ABN, holding one is not technically mandatory – but the consequence is decisive. Without a TFN, your employer must withhold at 47%, your bank withholds on interest, and your super fund cannot accept personal contributions. There is no practical scenario in which not having one works in your favour.

Benefits of having a TFN

Identification. Your TFN is how the ATO, your employer, your super fund and your bank know your tax records are yours. It ties every piece of your tax history to one person, which is what makes a correct assessment possible.
Confidentiality. A TFN is a confidential number, and that is a feature rather than a limitation. Only a short list of parties may lawfully ask for it, so it cannot be used to profile or track you the way a public identifier could.
Being taxed at the right rate. Quote your TFN and you are taxed according to your actual income and circumstances, including the tax-free threshold. Withhold it and you are taxed at the maximum rate until you claim the difference back.
Superannuation that lands correctly. Your employer uses your TFN to direct contributions to your fund. Without it, contributions can be rejected or sit unallocated, and your fund cannot accept after-tax contributions from you.

How to get a TFN

Apply through the ATO – online, or in person at a participating Australia Post outlet or Services Australia centre. You will need proof of identity such as a passport, driver's licence or birth certificate. Applying is free, and the number arrives by post.

Protect it. Give your TFN only to your employer (after you start, never on a job application), your bank, your super fund, your registered tax agent and Services Australia. No one else is entitled to it, and you are free to decline.

Not sure whether you need an ABN, a TFN, or both? Talk to us – a short conversation now is cheaper than unpicking it after your first invoice.

Key differences at a glance

ABN

Identifies your business. Public – printed on invoices and searchable on ABN Lookup. Eleven digits, issued through the Australian Business Register. Needed by anyone carrying on a business. Without one, payers withhold 47%.

TFN

Identifies you. Confidential – never published, and only a short list of parties may ask for it. Eight or nine digits, issued by the ATO. Needed by anyone earning money in Australia. Without one, payers withhold 47%.

The pattern to remember: an ABN is something you show people, a TFN is something you protect.

Staying compliant

Keep details current. Update both records when your circumstances change, so ATO correspondence reaches you and your reporting stays accurate.
Cancel an ABN you no longer use. A dormant ABN still carries lodgement obligations, and leaving one open is a common cause of unexpected ATO letters.
Watch for scams. Applying for either number is free through the ABR and ATO. Services that charge a fee to "register" one for you are reselling something you can do yourself, and requests for your TFN by text or email are not legitimate.

Do I need a separate TFN for my business?

There is no such thing as a general business tax file number you apply for once. Whether your business needs a TFN of its own depends entirely on your structure, and this is where the ABN/TFN distinction stops being academic and starts costing money if you get it wrong.

Sole trader – no

You use your personal TFN. There is no separate business TFN, because there is no separate entity: you and the business are the same taxpayer. You get an ABN for the business, but the business income goes on your individual return under the TFN you already hold.

Partnership – yes

The partnership has its own TFN and lodges its own return. It does not pay tax itself – each partner reports their share on their personal return, under their own TFN. So a partnership involves three numbers or more: one for the partnership, one for each partner.

Company – yes

A company is a separate legal entity with its own TFN, its own ABN, its own return and its own tax rate. Your personal TFN has no part in the company's lodgements – you use yours only for what the company pays you, as salary or dividends.

Trust – yes

The trust has its own TFN and lodges its own return. Income is generally distributed to beneficiaries, who then report it under their own TFNs. The trustee company, if there is one, has a TFN of its own again.

The rule underneath all four: a TFN belongs to a taxpayer, and an ABN belongs to a business. A sole trader is one taxpayer running one business, so one TFN and one ABN. Every other structure creates a new taxpayer, and a new taxpayer needs its own TFN.

This is also why the structure decision matters more than it first appears. Changing structure later means new registrations, new lodgement obligations and, often, capital gains consequences on the assets you move across.

Deciding between a sole trader, a company and a trust? Talk to us before you register – we set up the entity, its TFN, its ABN, GST and PAYG together, so the numbers are right from the first invoice.

Which one do you actually need?

If you are starting out, we register your ABN, TFN, GST and PAYG together as part of setting up your business – so the numbers are right before you send your first invoice.

If you are already trading and just need the return lodged, that is our tax returns work, from sole traders through to companies and trusts.