ABN & Contractor Status

An ABN is the first thing a builder asks for — but it is widely misunderstood. Having one does not make you a contractor, and it does not put you over the GST line. Here is how to get an ABN, when you must register for GST, what a tax invoice needs, and the contractor-status reality.‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍

Getting an ABN

You apply for an Australian Business Number free through the Australian Business Register (ABR) — usually online in one sitting. You are entitled to one if you are carrying on an enterprise (running a business, not doing a one-off private job). You will need your legal name, date of birth, addresses, contact details and TFN (it speeds approval), plus your business details — structure (sole trader), any trading name, your main activity (carpentry, plumbing, electrical) and start date. Clean applications are often approved immediately.

Having an ABN does NOT make you a contractor

This is the big misconception. An ABN does not determine whether you are an employee or a contractor — the ATO and the courts look at the real relationship. The approach is two steps: identify the contract, then read its terms to see whether it is employment or independent contracting. The multi-factor test weighs several things together (no single one decides it):

Control — who decides how, when and where the work is done?
Delegation — can you genuinely subcontract or send someone else?
Tools — do you supply your own major tools and bear the running costs?
Risk and reward — do you carry commercial risk, profit from efficiency, and fix defects at your own cost?
Integration — do you run your own business serving clients, or are you part of theirs?
Payment — paid for a result you invoice, or wages with leave and super?

Get this wrong as a principal and it is sham contracting — with serious Fair Work and ATO consequences (the full penalties and the "reasonable belief" test are in Employee vs Contractor & Sham Contracting). And remember: even a genuine ABN contractor can be your employee for super if they are paid mainly for their own labour (see Super for Contractors & PSI).

GST — the $75,000 line

You must register for GST once your GST turnover (gross business income, excluding GST) hits or is expected to hit $75,000 over a 12-month period — measured on either the last 12 months or the next 12. Register within 21 days of realising you will cross it, via ATO online services, by phone, or through your agent. Below the threshold it is optional (and usually not worth it — you would charge 10% more without having to).

Once registered:

Charge 10% GST on your taxable supplies, and say in quotes whether the price is "inclusive of GST" or "plus GST".
Issue a tax invoice that shows: the words "Tax invoice"; your identity and ABN; the date; a description of the work; and the GST amount (or a statement that the total includes GST).
Report and pay via your BAS, and claim input tax credits on the GST in your business expenses.
If you are not registered, you must not charge GST, cannot issue a "tax invoice", and cannot claim GST credits.

Keep your records — 5, 7, 10 years

You must keep complete, accurate records (in English), and not alter them:

At least 5 years for most tax records, from the later of when you prepared them or completed the transaction.
7 years for employee and company records.
Up to 10 years for some super records.

Keep income (invoices, accepted quotes, bank statements), expenses (supplier invoices, materials, tools, fuel, vehicle, phone, insurance), GST and BAS workpapers, payroll and super, and asset records for CGT and depreciation. (More in Record Keeping.)

Common mistakes

Thinking an ABN makes you a contractor — it does not.
Charging GST before you are registered, or not registering when you cross $75k.
Issuing a "tax invoice" without your ABN or the GST detail.
Binning records before the retention period is up.

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