Millions of small business owners could be forced to pay ABN renewal fees

Millions of Australian small business owners could be forced to pay to renew their Australian Business Numbers under a government plan to reform the ABN system.

Approximately 7.7 million Australians currently hold an ABN, and there is no cost to apply for or continue to use the number.

However, that could change as part of the federal government’s ongoing work to take action against the black economy and fraudulent business activity.

Minister for Revenue and Financial Services Kelly O’Dwyer, this morning released a Treasury consultation paper about proposed changes to the ABN system, which draws on work undertaken by the government’s Black Economy Taskforce, and which is open for public feedback until August 31.

“The Taskforce highlighted that the ABN system is being used by some participants in the black economy to create a false sense of legitimacy to their business,” said O’Dwyer.

“This places businesses not prepared to do the right thing on the same footing as honest businesses. It increases the risk of people being misled and creates opportunities for tax avoidance.”

The paper poses a series of questions relating to whether ABN holders should be required to renew their ABNs, and if so, if there should be a cost for doing so.

The government’s Taskforce has recommended ABNs be subject to periodic renewal, and the consultation paper explains how such a process could “indirectly address fraudulent behaviour by prompting ABN holders to have closer engagement with the ABN system”.

“This would create opportunities to remind ABN holders of the ABN entitlement rules and the penalties for providing false information as part of applying for an ABN,” said Treasury.

“Having to renew ABNs would arguably also encourage honesty as dishonest behaviour potentially becomes more difficult to sustain if it is necessary to lie or mislead on multiple occasions”.

While the consultation paper does not specify how much it might cost to renew an ABN, it said “fees would cover the cost of the registration and renewal process, consistent with fee arrangements for similar registration and renewal processes”, such as renewing a company or business name.

To renew a business name in Australia, it currently costs $36 for one year or $84 for three years.

The Black Economy Taskforce believes imposing a renewal fee could “further discourage people from holding an ABN when they do not need one or are not entitled to one,” said Treasury.

“This could help restrict the ABN system to genuinely active businesses and other entitled entities. This in turn would have flow-on effects for the quality of the ABN data.”

However, Treasury has suggested a single renewal fee could be appropriate in situations where a business entity has multiple identities, with the ABN renewal process aligned with other business renewal processes, although it acknowledges that this may not be a straightforward process.

The consultation paper also poses the question of what the consequences should be if ABN holders do not renew their ABN on time.

“This could include late fees, a change in ABN status published on ABN Lookup, eventual suspension and/or cancellation,” it said. 

A “holistic view” needed

Speaking to SmartCompany this morning, Australian Small Business and Family Enterprise Ombudsman Kate Carnell says the issue of ABN renewals can’t be looked at in isolation — and small business owners shouldn’t be forced to pay more to simply establish their business.

There is work underway on a number of fronts when it comes to the process of registering a business in Australia, says Carnell, including the government’s consultation on creating a single business registration agency and proposed changes to the use of trading names.

“Our view is that you can’t look at this separately,” she says.

“We don’t think it’s reasonable for there to be a new charge on top of other charges; you already have to pay for an ACN [Australian Company Number] from ASIC.

“We need a more holistic view of the cost of registering a business and to rationalise the whole system. Instead of lots of little changes, we need to look at streamlining.”

While Carnell acknowledges there’s plenty of work to be done to address the inappropriate use of ABNs, her office does not support “there being a new cost for registering a business”.

Ideally, she says, all the registration processes involved with establishing a business in Australia would be housed together in the one place, making it straightforward for new business operators to access everything they need in one go.

“There’s an opportunity to create more efficiency out of all of this,” she says.

Care should be taken with ABN cancellations

While the consultation paper is largely concerned with improving the system for obtaining ABNs, it also warns that care should be taken when ABNs are cancelled.

A number of small business operators have spoken to SmartCompany in recent months about the devastating effects of their ABNs being cancelled with little or no communication as to the reason why.

While cancelling an entity’s ABN does not automatically cancel or deregister a business, Treasury said in the paper, such an action may affect that business operator’s “ability to run a viable business as an ABN enables many key business functions, such as remitting GST and avoiding tax being withheld on payments received”.

“Faced with these impacts, a business owner might decide to operate without an ABN in the black economy,” said Treasury.

“Care would also need to be taken to ensure ABNs are not cancelled for minor issues, issues under dispute, or where the business has agreed to take corrective action in relation to their government obligations”.

Fair treatment of ABN holders should be a “key priority” of any reform to the system, said Treasury.

“For example, a process such as cancelling an ABN for not meeting the prescribed conditions would need to be fair and transparent and only occur where the business had not taken appropriate steps to rectify the issues.”

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