As a backpacker on a Working Holiday Maker Visa (417 or 462), you’ll need to get your Tax File Number (TFN) to gain employment. But what if you get work that requires an Australian Business Number (ABN)? Do you need to get one—or not?
In the first place—what’s an ABN?
An ABN (or, an Australian Business Number) is a unique 11-digit identification number used for tax purposes. Generally, self-employed professionals such as sole traders, independent contractors, and small business proprietors are required to get an ABN.
Is My TFN the same as an ABN?
No, they are not the same. While the process for applying for a TFN and an ABN are the same, the biggest difference is how tax is deducted from your income. To get an ABN, you’ll need to apply for your TFN first. With your TFN, your income tax is deducted by your employer. With your ABN, tax deductions are not taken from the income you earn. This means you need to set aside a portion of your income for when lodging your tax returns at the end of the fiscal year (and tax season begins).
Do I need an ABN?
Generally, backpackers do not need to get an ABN. However, there are some instances where the nature of your work or the preferences of your employer or client may require applying for one.
One of the instances would be if you take on another job on top of the one you’re currently employed for. For example, that your employer discovers that you are a professional interior decorator and would like to get your help and expertise (outside of the usual work you do for him/her) to design or remodel his/her home, or place of business. Another instance is when you take on a second job working for yourself, and thus, as an independent contractor as an interior decorator, architect, a sole trader, or a sub-contractor, among others.
Got an ABN? Start setting money aside for your taxes
If you are working with an ABN, you’re responsible for paying your income taxes. Employers are not held liable for withholding tax from you. This means you must make sure to save enough money to pay this tax at the end of the financial year (30 June). At this time, you must report your income to the ATO, who will add it up and assess tax. Or, you can get the help of chartered tax experts who can help you with lodging your tax returns.
Word for the Wise: Consult the experts
Also, getting an ABN isn’t a simple matter; it may have legal and tax implications for you as a Working Holiday Maker—not to mention the confusion it can cause when lodging your tax returns on both a TFN and an ABN. So before you do consider applying your ABN, take the time to ask for professional tax advice—that’s where we can help.