ABN or TFN? Nanak Accountants Clarifies Australia's Tax Identity System for Workers and Business

MELBOURNE, Australia - July 4, 2025 - PRLog -- As more Australians juggle multiple income streams, the question of whether to use a Tax File Number (TFN) or an Australian Business Number (ABN) is more important than ever. From Uber Eats drivers to freelance designers and side hustle entrepreneurs, knowing which identifier applies can make a major difference in how income is taxed — and how compliant you are with the Australian Taxation Office (ATO).

Nanak Accountants & Associates is helping individuals make sense of this often-confusing area of tax, with a simple framework that distinguishes between the two.

"Your TFN is for personal income from employment. Your ABN is for running a business or invoicing as a contractor," explains Puneet Singh, Director of Nanak Accountants. "Many people need both, but few understand when and how to use them correctly."

What's the Difference?

• A TFN is your private identifier with the ATO. It's used for employment, superannuation, bank interest, and tax returns.
• An ABN is a public 11-digit number used when running a business, freelancing, or contracting. It's required to invoice clients, register for GST, and avoid 47% withholding tax on payments.

Failing to provide a TFN to your employer can result in tax being withheld at the highest rate. Similarly, operating a business without an ABN means clients may withhold payments or consider the arrangement non-compliant.

When You Might Need Both

It's common for Australians to hold both a TFN and an ABN — for example, a teacher employed full-time (TFN) who also sells custom crafts on Etsy (ABN). Each income stream must be reported separately, and deductions, GST, and super responsibilities vary.

The ATO expects individuals to:

• Apply for a TFN as early as possible for employment.
• Only apply for an ABN if they are genuinely starting a business or offering services independently.
• Keep clear records of income, expenses, and the purpose of each identifier.

Avoiding Costly Mistakes

Nanak Accountants warns that misunderstanding these identifiers can lead to serious compliance issues. Common errors include:

• Sham contracting — being forced to get an ABN to avoid employee entitlements
• Under-reporting income earned under an ABN
• Not registering for GST once turnover exceeds $75,000
• Having an inactive ABN cancelled by the ATO

"We see people get caught out by small mistakes that grow into big problems," says Singh. "The best protection is knowing your obligations and seeking help early."

Need Help Choosing Between ABN or TFN?

Nanak Accountants & Associates provides personalised advice to employees, sole traders, and contractors across Australia. Their team simplifies the process of tax registration, compliance, and annual reporting.

🌐 Visit: www.nanakaccountants.com.au