Business Tax

How to Prevent The ATO From Cancelling Your ABN

Written by Nick Dorogavtsev

Have you ever worried that the ATO might cancel your ABN? Most people haven’t, but it is a distinct possibility. Here’s one reason why:

The taxation office might think you are not an active business anymore.

Sounds crazy, but it does happen.

And having the ATO cancel your ABN is the last thing you want to have happen to your business.

After all, you are working so hard at creating your business, trying to make customers happy and fulfill your dreams.How would you feel if the incredible sacrifices you make for your business success suddenly went up in a puff of smoke?

Put it this way:

If the ATO cancels your ABN, within a few seconds, you will no longer own a legal business. As a result, you will be operating illegally.

Now ask yourself:Would you do business with an illegal business? Would you partner with a company and create expenses you cannot claim as a legitimate tax deduction because they’re not compliant with the law?

The answer is simple: You wouldn’t. And neither will your customers.

ABC and Fairfax have recently revealed cases of the ATO cancelling ABNs, and one quote from Kathryn Little on a program called Four Corners aired by the ABC says it all:

“They were literally taking away my capacity to live my life, and they had no concern whatsoever for the repercussions.”

The ramifications will be just as devastating for you if the ATO cancels your ABN, but before it gets to that stage let’s look at the ways you can can save your business

Let’s start with something every business owner in Australia needs to know: how to avoid ABN cancellation.

Australian Business Register (ABR) periodically checks its records for Australian business numbers (ABNs) and automatically cancels those that appear inactive.

Are you a sole trader, partnership, or trust? If yes, read carefully.

Did you declare business income for the last two years in your tax returns? If not, you might be at risk, or even worse, have you forgotten to lodge business activity statements or income tax returns for more than two years?

 The solution is simple: Contact your bookkeeper to bring your BASes up-to-date and lodge your outstanding tax returns with a Tax Agent. Consistent compliance with taxation office rules is a must and with proper help from a qualified bookkeeper, you’ll always be covered.

Avoid The Business-Destroying Sole Trader Myth

Business owners encounter a lot of bad information about maintaining their ABN with the ATO.

Most times the advice comes from either family members who know nothing about running a business.

Either way, even when these myths are circulated with good intentions, many businesses suffer as a result.

One particularly bad myth involves the tax-free threshold.

Let’s be clear about the Tax-Free Threshold once and for all. Over the last two decades, the thresholds have been:

  • 1991-2000  – $5,400
  • 2000-2012 – $6,000
  • 2012-now* – $18,200

Bookmark this page or commit these numbers to memory.

Misunderstanding the guidelines is dangerous. And when people hear bad advice around this issue, it causes people to forget about their compliance obligations.

Regardless of the income, the truth is simple. Sole traders ALWAYS need to:

  • Lodge individual tax return, including the supplementary section.
  • Lodge business and professional items schedule for individuals.
  • Pay their IAS, and if Nil they must lodge a Nil.

There are other myths that can do a lot of harm. To help you further, we have debunked them in How Bad Bookkeeping Advice Can Destroy Your Business (And What To Do Instead).

Now that you are aware of some of the things to look out for to keep your business safe, it is important to make sure that the ATO never cancels your ABN due to non-compliance issues you are probably unaware of.

* As at August 2018.

“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."

About the author

Nick Dorogavtsev

Nick Dorogavtsev is a Data Engineer / Accounting Automation Specialist.

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