On Friday 20 July 2018, Treasury released a consultation paper for comment on the 2018-19 Budget measure to strengthen and modernise the Australian Business Number (ABN) system. This measure implements a recommendation of the final report of the Black Economy Taskforce, that the ABN system be strengthened to provide improved confidence in the identity and legitimacy of Australian businesses.
The Paper also seeks views on possible changes to the ABN system including adjusting ABN entitlement rules, imposing conditions on ABN holders, and introducing a renewal process including a renewal fee.
The Taskforce expressed concern that not everyone obtaining an ABN is entitled to one. Some of the examples provided to the Taskforce included:
- Applications for multiple ABNs over time for what is essentially the same enterprise, to facilitate avoidance of employee, creditor, consumer and tax obligations (referred to as phoenixing).
- Individuals working as employees (and not entitled to an ABN) but applying for ABNs ostensibly as independent contractors, often due to a demand from their employer (referred to as sham contracting).
The Taskforce also proposed that ABNs should not be ongoing, but should be subject to periodic renewal – annual renewal or at the longest, every 3 years.
- The Taskforce further proposed that fees be considered for ABN registrations and renewals. Fees would cover the cost of the registration and renewal process, consistent with fee arrangements for similar registration and renewal processes (eg renewing a company or a business name). The Consultation Paper said a fee may further discourage people from holding an ABN when they do not need one or are not entitled to one. This could help restrict the ABN system to genuinely active businesses.
- The length of the renewal period and the fee charged could be the same for all ABN holders or could vary. For instance, if a system of conditions were introduced, a renewal system could recognise ABN holders who meet their obligations with longer renewal periods or possibly lower fees.
The consultation paper does not suggest possible proposals, so much as explore the role and dimensions of the ABN system, in the current period, in light of the above (and other) concerns. It asks for responses to various questions, under each of the headings (below).
- a modern Australian Business Number system- Introduction
- What purpose does the ABN system serve?
- Who should be entitled to an ABN?
- Should there be conditions associated with an ABN?
- Should the ABN system be used to support more active verification of legitimate businesses?
- How should the ABN system support accurate information on businesses?
- Should ABNs be subject to renewal?
- Consolidated list of questions
SUBMISSIONS are due by 31 August 2018.
[Treasury website: Consultation Page, Consultation Paper; LTN 138, 20/7/18; Tax Month – July 2018]
Comprehension questions (answers available)
- Was this consultation paper about reforming the ABN system, as prompted by the ‘Black Economy’ Taskforce’s Report?
- Was ‘phoenixing’ (to avoid taxes and wage ‘on-costs’) one of their concerns?
- Was so called ‘sham contracting’ one of the their concerns, also?
- Did the Taskforce make some suggestions about what could be done?
- Was one of them renewable, for a fee, after a fixed period of validity?
- Did Treasury want consultation of a series of their proposed answers to these, and other, problems?
