Sapna has completed a Bachelor of Arts/Laws. Since graduating, she's worked primarily in the field of legal research and writing, and she now writes for Sprintlaw.
Contents
A Practical Checklist: Should You Get An ABN For Your Business?
- 1) Are You Regularly Selling Goods Or Services For Profit?
- 2) Do Your Customers Expect Invoices With An ABN?
- 3) Are You Building A Brand That You Want To Grow?
- 4) Are You Planning To Register For GST (Now Or Later)?
- 5) Are You Trying To Avoid “No ABN Withholding”?
- 6) Do You Know What You’re Signing Up For When You “Work Under An ABN”?
- Key Takeaways
Starting a business in Australia can feel exciting (and a little overwhelming), especially when you start hearing about registrations, tax, and “official” business paperwork.
One of the first questions many founders ask is simple: can you run a business in Australia without an ABN?
In many cases, the honest answer is: yes, you can - but it depends on what you’re doing, how you’re getting paid, and how seriously you want to be taken by customers, suppliers, and the ATO.
Below, we’ll walk you through when you can operate without an Australian Business Number (ABN), when you really shouldn’t, and the practical (and legal) issues to think about before you start issuing invoices or taking payments.
(If you already have an ABN but you’re not sure what it means for tax, pay, or compliance, you’re not alone - these are common questions for new business owners.)
What Is An ABN (And What Does It Actually Do)?
An Australian Business Number (ABN) is an 11-digit number that identifies your business to the government and other businesses.
In practical terms, an ABN is used for things like:
- invoicing clients as a business (instead of as a private individual)
- avoiding “no ABN withholding” where the payer has to withhold tax from your payment in certain situations
- registering for GST (if required)
- setting up trade accounts with suppliers and wholesalers
- appearing more credible to customers and commercial partners
It’s also part of how the ATO and other organisations work out whether you’re operating as a business, and how your income should be treated for tax.
If you want a deeper overview of the topic, run a business without an ABN is a helpful starting point for understanding where the lines are commonly drawn.
ABN vs Business Name vs Company
It’s easy to mix these up, so here’s the quick clarification:
- ABN: identifies your business for tax and commercial purposes.
- Business name: the name you trade under (for example, “Coastal Web Design”). You may need it if you’re not trading under your own personal name.
- Company: a separate legal entity registered with ASIC (and it has an ACN). Companies often have an ABN as well.
So, not having an ABN doesn’t automatically mean you haven’t “started a business” - but it does change how you can operate and how others may treat you.
When Can You Legally Operate Without An ABN?
You can legally earn money in Australia without an ABN in a range of situations. The key is whether you’re genuinely operating a business, and what the payer requires from you.
1) You’re Earning Money As An Employee (PAYG)
If you’re employed and paid wages/salary through payroll (with PAYG withholding), you generally don’t need an ABN. Your employer handles the tax withholding and reporting obligations on their side.
This is different to contracting or freelancing. If you’re being paid as a contractor, the business paying you may ask for an ABN.
2) You’re Doing A One-Off Or Hobby Activity (Not A Business)
If you’re selling items casually (for example, you sell a few personal items online) or you’re earning small amounts from a hobby, you may not need an ABN.
But you should be careful here. A hobby can become a business faster than you think, especially if you:
- advertise or actively seek customers
- operate in a structured and repetitive way
- intend to make a profit
- keep business-like records
- have a “brand” and trade consistently
Once your activity looks like a business, the practical benefits of having an ABN usually start to matter (even if you technically could continue without one).
3) You’re Paid Under “No ABN Withholding” Rules (And Accept The Withholding)
If you supply goods or services and you don’t provide an ABN, the payer may be required to withhold tax from the payment under “no ABN withholding” rules.
That usually means you get paid less up front, and you may need to sort it out at tax time.
This issue catches many new freelancers and sole traders off guard, so it’s worth understanding early: no ABN withholding.
4) Your Client Or Platform Doesn’t Require An ABN (But That’s Not Always The Norm)
Some clients will pay an individual without an ABN (especially for small jobs). But many businesses have internal policies that prevent them from paying suppliers who don’t quote an ABN.
Similarly, some platforms and payment providers ask for an ABN as part of onboarding, especially if you’re receiving payments in a business capacity.
Why Running Without An ABN Can Create Problems (Even If It’s “Allowed”)
Even when it’s legally possible to operate without an ABN, there are some very real commercial and compliance issues that can make it risky or impractical.
It Can Affect How You’re Taxed And Paid
The biggest immediate impact is often cashflow. If a payer applies no ABN withholding, you may receive significantly less than expected.
Also, depending on your situation, your overall tax position can look very different when you’re running a business versus earning income in another way. If you’re trying to forecast what you’ll actually take home, it helps to understand the basics of ABN tax rate concepts (and why it’s not always a simple flat rate).
You May Look Less Established (Which Matters More Than People Admit)
When you’re starting out, credibility matters. Some customers and suppliers will check whether you have an ABN, especially if they’re paying invoices, signing contracts, or booking higher-value work.
If they can’t verify you as a business, they may:
- ask for extra reassurance (like ID checks or upfront delivery)
- refuse to onboard you as a supplier
- choose a competitor who looks more “formal”
It Can Make It Harder To Separate Personal And Business Life
Even as a sole trader, getting your “business admin” set up early (including an ABN) helps you separate your finances, invoicing, and records from your personal affairs.
This becomes even more important when you:
- apply for finance or equipment
- take on a commercial lease
- work with larger clients who require compliance checks
- hire staff or contractors
You Still Need To Comply With The Law
A common misconception is that “no ABN” means “no rules”. In reality, many legal obligations apply regardless of whether you have an ABN, including consumer law, privacy rules (depending on your business), and employment obligations if you hire.
A Practical Checklist: Should You Get An ABN For Your Business?
If you’re on the fence, it often helps to step back and ask a few practical questions. Here’s a quick checklist we often run through with clients.
1) Are You Regularly Selling Goods Or Services For Profit?
If your activity is ongoing and profit-driven, an ABN is usually a sensible move. It aligns the way you operate with the way customers and the ATO expect a business to operate.
2) Do Your Customers Expect Invoices With An ABN?
If you’re dealing with other businesses (B2B), the answer is often yes. Many businesses will not process payments unless there’s an ABN on the invoice.
3) Are You Building A Brand That You Want To Grow?
If your goal is to scale beyond a side hustle - even if you’re starting small - getting the foundations right early can save you a lot of admin later.
This also tends to go hand-in-hand with choosing the right business structure. For example, if you’re starting with a co-founder, bringing on investors later, or taking on higher risk work, you might consider whether a company structure makes more sense than operating informally as an individual.
4) Are You Planning To Register For GST (Now Or Later)?
You can’t register for GST without an ABN. So if your turnover is reaching the GST threshold (or you want to register voluntarily for commercial reasons), you’ll need an ABN as part of that process.
5) Are You Trying To Avoid “No ABN Withholding”?
If clients are withholding tax because you don’t have an ABN, that’s often a sign you’ve outgrown the “operate without one” stage.
6) Do You Know What You’re Signing Up For When You “Work Under An ABN”?
If you’re moving from employment into contracting, it’s important to understand what changes when you start invoicing under an ABN - including who is responsible for tax, super (in some cases), and insurances.
This is exactly the kind of issue that comes up in working under an ABN arrangements.
What Else Do You Need To Set Up (Even If You Don’t Have An ABN Yet)?
Whether you apply for an ABN today or you’re waiting until your business grows, there are still a few “baseline” legal and operational steps that can protect you.
Consumer Law: Be Careful With Advertising, Refunds, And Promises
If you sell goods or services to customers in Australia, you’ll usually need to comply with the Australian Consumer Law (ACL). This impacts how you describe what you sell, what happens if something is faulty, and how you handle returns or complaints.
Even simple marketing statements can create obligations, so it’s worth being cautious about “guarantees” and broad claims. (This is especially important if you’re trading informally without an ABN, because you may already be seen as less established - a consumer complaint can escalate quickly.)
Privacy: If You Collect Customer Information, You Need A Plan
Many businesses collect personal information early (even without realising it), such as:
- email addresses through a newsletter signup
- phone numbers for bookings
- delivery addresses for orders
- customer messages through social media DMs
Depending on what you collect and your turnover, you may need to comply with the Privacy Act and have a clear Privacy Policy and collection practices in place.
Employment: Hiring Without Paperwork Can Get Messy Fast
If your business grows and you start hiring staff, you’ll want to get your contracts and expectations in writing from the start. Otherwise, small misunderstandings can become expensive disputes.
Having an Employment Contract is often one of the simplest ways to set clear rules around pay, duties, confidentiality, and ending the relationship if it’s not working out.
Contracts: Use Written Terms, Even For Small Jobs
A lot of early-stage businesses start with informal arrangements: a few messages on Instagram, a quick quote over email, or a handshake agreement.
That can work - until it doesn’t.
Even if you’re operating without an ABN, consider using written terms (such as a service agreement, customer contract, or terms and conditions) that cover things like:
- what you’re delivering (and what’s out of scope)
- price and payment timing
- cancellation and rescheduling
- refunds
- liability limits (where appropriate)
This is particularly important if you’re charging deposits or cancellation fees. You’ll want your terms to align with consumer law and be clear from the outset.
ABNs Also Need Maintenance (It’s Not “Set And Forget”)
If part of your hesitation is that you don’t want another admin obligation, it helps to understand what happens once you register an ABN, and whether it can be cancelled or becomes inactive over time.
For example, people often ask whether they need to renew it, or whether it can lapse: does an ABN expire.
Key Takeaways
- Yes, you can run a business in Australia without an ABN in some situations, but it’s often not practical once you start operating regularly or dealing with business clients.
- Not having an ABN can trigger “no ABN withholding”, meaning clients may withhold tax from your payments and your cashflow can take a hit.
- An ABN helps with credibility and business setup, especially if you’re issuing invoices, setting up supplier accounts, or planning to grow.
- You still have legal obligations without an ABN, including consumer law compliance, and potentially privacy and employment obligations depending on how you operate.
- Good contracts and clear written terms matter from day one, even if your business is small and you’re just getting started.
- If you’re moving from employment into contracting, make sure you understand the practical difference between being paid wages and being paid under an ABN arrangement.
If you’d like a consultation on setting up your business properly (including whether you should get an ABN and what documents you need), reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.