TFN and ABN in Australia: A Simple Guide for International Residents

When moving to Australia, whether for work, study, or business, you’ll quickly encounter two important numbers: the Tax File Number (TFN) and the Australian Business Number (ABN). These numbers are fundamental to Australia’s tax and business systems, and understanding their differences is crucial for anyone planning to work or do business in Australia.

Think of the TFN as your personal tax identity and the ABN as your business identity in Australia. While they might seem similar at first glance, they serve their own purposes and come with different responsibilities. This guide will help you understand everything you need to know about these essential numbers, including when you need them, how to get them, and how they affect your work and business activities in Australia.

Tax File Number (TFN) 

A Tax File Number is a unique 9-digit number issued by the Australian Taxation Office (ATO) that serves as your personal tax identifier in Australia. This number remains with you for life, even if you leave Australia and return later, making it a crucial part of your financial identity in the country.

If you’re planning to work in Australia, including as an international student, you’ll need this number to ensure proper tax processing. It’s also required when applying for government benefits, lodging tax returns, starting a business, or making investments in Australia. Without a TFN, employers must withhold tax at the highest marginal rate (45% if you’re a non-resident!!), which could significantly impact your take-home pay. And if you’re like most people, you probably want to pay as little tax as possible!

The process of obtaining a Tax File Number is very easy, even for international visitors. You can simply go through the online application system on the Australian Taxation Office website. Once you complete your form, you can expect to receive your TFN within 28 days by post, to the address you’ve indicated in your application form, and much faster via email.

For international residents, several important considerations should be kept in mind when applying for a TFN. First and foremost, the application is completely free, and you must have a valid visa that permits you to work in Australia. Security of this is paramount – it should be kept private and shared only with authorised parties, as inappropriate sharing could lead to identity theft.

It’s also worth noting that if you leave Australia and return later, you won’t need to apply for a new TFN; your original number remains valid indefinitely. When starting a new job, employers are required to ask for your TFN within 28 days of your employment commencement. This gives you some time to get yourself organised, especially if you’ve already applied for the number but haven’t received it yet.

Australian Business Number (ABN) 

An Australian Business Number (ABN) is an 11-digit identifier that forms the backbone of business operations in Australia. This number serves as your business’s unique identifier in all dealings with government agencies and other businesses, making it an essential component for anyone planning to do business in the country.

The ABN system provides several crucial benefits for business operators in Australia. When you have an ABN, you can claim Goods and Services Tax (GST) credits, engage in business-to-business transactions more efficiently, and avoid Pay As You Go (PAYG) tax withholding. It’s also necessary for issuing valid tax invoices, which is fundamental to business operations in Australia. 

Eligibility for an ABN goes beyond simply earning income in Australia. To qualify, you must be actively carrying on business activities in Australia, in the process of starting one, planning to start, or making supplies connected with Australia’s indirect tax zone. This requirement ensures that ABNs are issued to genuine business operations rather than individuals seeking to avoid traditional employment arrangements.

Where many international students and immigrants use the ABN is if they are hired as “contractors” in a business. This essentially means you’re not an employee, you don’t get a full time salary, but rather get paid for the services you provide. This is a common structure for housekeepers in hotels, or physical trades workers. In such an arrangement, when you apply for your ABN, you are considered a “sole trader”. More on this in a bit!

The application process for an ABN involves several important steps. You’ll need to ensure you have a valid visa that permits business activities if you’re an international applicant. The application requires various pieces of information, including your TFN (if you have one), identification documents, detailed business activity information, and current contact details. While the application itself is free and can be completed online through the Australian Business Register (ABR), processing typically takes between one and fourteen business days.

Operating with an ABN comes with significant responsibilities. As an ABN holder, you become responsible for managing your own tax payments, maintaining accurate records of all business activities, and meeting regular reporting obligations. It’s crucial to understand that your business circumstances may change over time, and you must update your ABN details accordingly to remain compliant with Australian business regulations.

Key Differences Between TFN and ABN Numbers

The primary difference lies in employment status. When working with a Tax File Number, you’re considered an employee working for someone else, with your employer taking responsibility for many tax-related matters and paying your superannuation (if you want to learn more about superannuation in Australia, check out our post here). In contrast, an ABN means that you’re running your own business, or working as a contractor, taking on greater personal responsibility for your tax affairs and business operations.

Payment arrangements also differ significantly between the two systems. Under a TFN, you receive regular salary or wages, with your employer handling tax deductions and providing annual payment summaries. They’re also responsible for making superannuation contributions on your behalf. However, when operating with an ABN, you’re responsible for generating your own invoices, managing your tax payments, and tracking your income independently. You’ll need to arrange your own superannuation contributions and maintain detailed records of your business activities.

The tax implications of each system vary considerably. With a TFN, your employer automatically withholds tax from your payments, making the process relatively straightforward. You’ll be eligible for the tax-free threshold (at the time of writing, this is $18,200, which is equivalent to $350 a week, $700 a fortnight or $1,517 a month), and your annual tax return process is generally simpler.

ABN holders, on the other hand, must manage their own tax obligations, including making quarterly or annual tax payments, tracking and claiming business expenses, and potentially registering for and paying GST (this is only for businesses generating over $75,000 in revenue annually, so you may not need to worry about this at the beginning, especially if you’re using your ABN as a contractor). This system requires more detailed record-keeping and often involves more tax arrangements.

When deciding which number you need, consider your intended work arrangement in Australia. A Tax File Number is most appropriate if you’re seeking regular employment with predictable income and simpler tax arrangements. This is typically the case for most international workers and students. However, if you’re planning to start a business, work as a contractor, or provide services to multiple clients, an ABN would be more suitable. Keep in mind that some individuals might need both numbers, depending on their various work activities in Australia.

Special Considerations for International People

Visa requirements play a fundamental role in determining your eligibility for both TFN and ABN. Before applying for either number, you must ensure your visa permits the type of work or business activity you plan to undertake.

Student visa holders should be particularly mindful of their work hour restrictions (more on this here), while temporary visa holders may face limitations on certain business activities. It’s essential to verify your working rights through the Department of Home Affairs before proceeding with any applications.

To ensure a smooth experience in the Australian work force, applying for a TFN should be one of your first priorities upon arrival if you plan to work, as delays could affect your tax withholding rates. 

What Next?

All of the above should’ve given you a good idea of whether you need to apply for a Tax File Number or Australian Business Number – or both – to get yourself started when it comes to working in Australia. From here, you can explore everyone’s favourite topic – taxes! We cover taxes in great depth here, but here’s the most important thing you need to know:

What this basically means, is that you pay a certain tax rate between each income bracket. So if you earn, for example, $50,000/year, you don’t get taxed 30% for the whole amount. You only get taxed 30% on income above $45,001, and 16% on everything between $18,201 – $45,000. 

And remember – you only have to worry about taxes when you start making money! If you still haven’t found a job in Australia, you can check out our post on the best strategies to find the perfect job here.

Conclusion 

Taxes are confusing and always higher than we’d like them to be. Period. The aim of this article – and all of our articles, for that matter – is to help you stay informed and educated on what you need to do once you arrive in Australia to settle in and start your new life! 

Good luck—you’ve got this!