The Difference Between ABN and ACN

ABN vs ACN

ACN is an acronym for Australian Company Number and ABN is an acronym for Australian Business Number. Both of these are important to those who do business or intend to do business in Australia. Because they are so much alike, it is little wonder that anyone looking to start a new business in this country would get them mixed up. This is because it is hard to figure out if a person needs to have both numbers and if only one is necessary, which one is required. The reason for the confusion is that the numbers are intended for entirely different purposes and are issued by two different Australian government agencies.

What is the ABN?

The Australian Business Number is an eleven digit number issued by the Australian Tax Office (ATO). It is a unique number that businesses in the country must use when they are dealing with various government offices and departments and when they deal with other Australian businesses. Each business in the country has its own number, which is registered with the ABR (Australian Business Register).

The ATO handles the registration process and maintains the list of numbers. Australian businesses are required to add this number to all documents related to their business dealings, such as sales slips and invoices. This is essential so that they can avoid having payments withheld for the business.

Who should have an ABN?

In order to be issued an ABN, the company must meet one of three certain guidelines:

  1. be registered as a company under the corporation laws of Australia
  2. be a government agency, or
  3. be an entity that is conducting business in Australia.

A business of which the owners are not residents of Australia is entitled to an ABN if

  1. the company plans to conduct business in the country, or
  2. the supplies it makes as part of the business venture have some sort of connection to Australia.

A business does not necessarily need to have an ABN, but it is essential if the business intends to register for GST. Any business that has annual revenue of at least $75,000 is required by law to register for this tax. The same thing applies to non-profit organizations that have annual revenue of at least $150,000.  You must have an ABN in order to complete the GST registration.

Benefits of having an ABN

The benefits of having an ABN for Australian businesses are:

  1. helps in claiming any GST credits that the company is due
  2. helps in claiming credits for fuel tax
  3. helps business owners to have a single statement for their business activities
  4. payment may be withheld if the ABN is not quoted on all documents
  5. makes it easy to confirm orders and invoices

 

What is an ACN?

An Australian Company Number is a unique nine digit number that every company in Australia needs in order to carry out a business in the country. An Australian business that wants to do business overseas also has to have an ACN. This is part of the Corporation Act of 2001. This number is issued by the ASIC (Australian Securities and Investment Commission) but only after companies that apply for the number provide documentation that verifies their business activities.

The ACN is used on all documents that are associated with accounting, financial reporting, invoices, purchase orders – any correspondence from the company that has anything to do with business on a day to day basis.

What the ACN means?

Each digit of the ACN has a specific meaning. Although there are nine digits in the number, it is only the first 8 digits that have significance for the business. The final digit is intended to ensure that the number is correct. There is a formula to ensure the uniqueness and correctness of each number.

Let’s say that a company’s business number is 009567434

When you write this in a table, omit the last number. On the second line write the numbers from one to 8 starting from right to left. Multiply the numbers in each column.

0 0 9 5 6 7 4 3
8 7 6 5 4 3 2 1
0 0 54 25 24 21 8 3

 

Now add the numbers in the third row: 0 + 0 + 54 + 25 + 24 + 21 + 8 + 3 = 125

Divide 125 by 10 and find the remainder  = 5

Subtract 1 from 5 = 4 – this is the final digit of the ACN