Meet Jade*, one of my most recent clients. This is Jade’s story:
It may sound ridiculous, but I didn’t realise I was running a business.
I like to write, penning the odd article for people who want them from my laptop in the comfort of my home. I had scribbled a few pieces for a lady I met through a friend and was a little taken aback when she asked for an invoice so she could pay me.
I cobbled together something – name, bank details, work done – and sent it down the line, only to be rebuffed.
“I need your ABN” she said.
“Otherwise I am obliged by the government to tax you at 47% of what you charge me.”
Turned cold by the thought of half of my hard work being for the tax man and not for me, I dived online to find out what this elusive ABN was and how I could get hold of one.
It turned out ABN stood for Australian Business Number, a unique 11 digit number that “identifies your business to the government and the community”.
I jumped back on the phone.
“I don’t have a business.”
She laughed, not unkindly.
“Yes you do.”
And it seems she was right. I have created a business without even realising it.
According to the Australian Government, all people with an enterprise are entitled to register for an ABN, which not only allows you to avoid that nasty 47% tax rate, but also facilitates obtaining an Australian domain name, claiming energy credits and Goods and Services Tax credits, and confirming your business identity when ordering or (in my case) invoicing.
So what counts as an enterprise?
An enterprise is something you do repetitively that is not a hobby, with the purpose of making a profit.
If you think you may have a business (and be enterprising) but are not sure, just apply anyway, it takes all of five minutes and you will simply be rejected if deemed unsuitable.
Go online to the Australia Business Number website, fill in your personal details and some information about your area of expertise and what services you deliver (there are categories to choose from). Tap in your Tax File Number and promise that everything you have said is true, and then up pops a new screen with you ABN number on it. Done!
There are a few important things to remember:
You must update the ABN folk if anything about your business changes (i.e. your address or the services you offer or if you cease to be a business)
You will have to file your own tax return and list your earnings through your business alongside any from other sources.
The key thing to remember is not to feel overwhelmed by suddenly finding yourself in a business. Nothing changes really, you are just officially recognised and can score some benefits for your hard work.
Well it’s been quite a day – I woke up as a casual writer and went to bed as a business!
Jade is not alone. Many people are unaware they are running a business. One day they have a hobby and before they know it they have a business perhaps without realising.
If you are in Australia and in any doubt visit http://abr.gov.au for more information about registering for your ABN. If outside Australia check with your local government agency.