Step by step guide - Australian business number (ABN)
Anyone carrying on an enterprise (this is usually a business) should quote their ABN for goods or services they supply to another enterprise. If they don’t, the payer must withhold an amount at the top marginal rate of tax plus Medicare levy (currently 46.5%) from the payment to the supplier and send the withheld amount to the Tax Office. Some supplies are excluded from this rule.
When you purchase something for use in your business, you must do the following:
The supplier must quote their ABN to you before you make any payment for the supply. Normally, an ABN will be quoted on the supplier’s invoice and you keep this invoice in your business records. A supplier may also quote their ABN to you on another document as long as it relates to the supply they are making.
You should not withhold if the supply is excluded from the ABN rule. If you are unsure, ask the supplier to give you a written statement that the supply is excluded. There is a form that you or your supplier can print for this purpose. You must keep their statement for five years.
If a supplier does not quote their ABN to you and you are not satisfied that one of the exclusions applies, you must withhold 46.5% of the total payment.
You should also withhold if you doubt that the ABN quoted to you is correct.
Before you withhold, you could offer to hold back payment until the supplier has obtained and quoted their ABN. Delaying the payment is a matter for you and your supplier to work out.
You should not make full payment to the supplier on the understanding that an ABN will be quoted later. If you fail to withhold from the payment, you can be held liable for the amount not withheld. You may also be prosecuted.
Add the withheld amount to any tax you may have withheld from your employees and send the total payment to the Tax Office with your next activity statement.
Complete a payment summary form and give it to the supplier at the same time you pay them the net amount, or as soon as possible thereafter. The supplier will need this form to claim the withheld amount as a credit in their income tax return.
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