Andrew Conway

IPA heralds ABN reform, flags black economy pitfalls

The government’s moves towards reforming the Australian Business Number system will address its current deficiencies and provide greater system integrity, says the Institute of Public Accountants.

Earlier this week, Treasury opened for public consultation its proposals to strengthen the ABN system, of which submissions close on 31 August.

IPA chief executive Andrew Conway said the ABN plays a critical role in the tax system, but registering an ABN without planning and forethought may be contributing to the black economy rather than acting as a deterrent.

He said that while he applauds a simple and efficient ABN system, there aren’t enough checks and balances to ensure the registration of an ABN is appropriate or not.

“When the ABN system was introduced in 2000, it was supposed to hinder the black economy by strengthening the integrity of the tax system but that has simply not been the case,” Mr Conway said.

“The ease of applying for an ABN online by applicants who do not understand the legislative test for eligibility and their obligations has resulted in many obtaining one when not entitled.

“People involved in sham contracting who would otherwise be employees of a company fall into this category. There are also individuals applying for an ABN to legitimise a business that does not fully comply with its tax obligations.”

Mr Conway added that the extension of reportable payments to high-risk industries illustrates how the ABN system has been deliberately misused with the cash economy alive and well.

“When the building and construction sector was subjected to mandatory reporting in 2012, a whopping $2.3 billion of revenue was reported in its first 12 months,” he said.

“Mandatory reporting is being extended to other high-risk sectors to reign in the cash economy.”

Further, Mr Conway said applying for an ABN is an important step, and there needs to be more rigour in the process as it is effectively an applicant’s ‘licence’ to do business.

“Accountants are well-placed to educate applicants of the rights and obligations of having an ABN and, more importantly, to vet the applicant’s credentials for commencing a business that meets ABN eligibility criteria,” Mr Conway said.

“This check and balance function will no doubt help the government and the ATO in the longer term.

“We urge individuals considering starting a new business not to just jump online and apply for an ABN but to have a meaningful discussion with their accountant first and to understand what it takes to run a business and your obligations.”

2 thoughts on “IPA heralds ABN reform, flags black economy pitfalls

  • July 27, 2018 at 2:55 pm

    If an ABN application is not submitted by a tax professional I believe it should be mandatory for the applicant to complete a short online course (similar format to a work safety online course) so they are aware of their obligations as a business owner such as tax compliance, employment etc. I have so many ‘tradies’ come to me with outstanding tax and BAS because they plead ignorance, they simply didn’t know what they were supposed to do.

  • July 31, 2018 at 2:31 pm

    I have been a registered tax agent since 1987 and seen many changes. I understand the purpose and function of the ABN system and the ignorance surrounding associated obligations but many of these “sub-contract” laborers face the situation where if they don’t have an ABN then they don’t have a job. They need to look after their families etc and are forced into there situations by the system – more specifically, employers/payers who are trying to minimize costs and or regulatory obligations – ie it is much easier for them to receive and pay an invoice from the worker than to jump through all the other hoops. As far as I am concerned the system is the problem and it goes further then just the ABN application process. So who is going to tell the worker they don’t get a job because they don’t have an ABN? I am at the cool face and see it a lot in my practice and feel it is very unfair on the workers.
    If I have to tell them that I will also tell them to visit their local federal member immediately to demand a solution.

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