Guides

Before you pay a subcontractor, check their ABN. If a supplier doesn't quote one, the ATO's rules can require you to withhold tax at the top rate from what you pay them. Here's what to check, and what to do if an ABN turns out to be cancelled.

The ATO rule in short

The ATO says that if a supplier doesn't give you an ABN and the total payment for goods and services is more than $75 (excluding GST), you generally need to withhold tax at the top rate from the payment and pay it to the ATO. Read the ATO page.

There are exceptions, for example when the supplier is doing it as a private hobby, or isn't in business and gives you a signed Statement by a supplier. The ATO lists them on its payments you don't withhold from page.

How to check an ABN

1. Search the ABN on ABN Lookup, the government's free register.
2. Check its status is Active, not Cancelled.
3. Check the name matches the business on the invoice and on their insurance.
4. See whether it's registered for GST. If it isn't, their invoice shouldn't charge you GST.

If an ABN shows as cancelled

A business can cancel its ABN when it stops trading, restructures or moves to a new company, and some forget to tell their clients. If a subcontractor's ABN shows as cancelled:

• Ask them about it before you pay. They may have a new ABN for a new company or trust.
• Make sure their insurance is in the same name. A policy held by the old business may not cover the new one.
• Check with your accountant or the ATO whether you need to withhold from the payment.

Check again from time to time

An ABN that was active when someone started can be cancelled later. UpToDocs checks each ABN on the government ABN Lookup when you add someone and again every 30 days, flags a cancelled ABN, and shows whether each one is registered for GST, so you see a problem before you pay an invoice. See how builders and trades use it.

This guide summarises ATO guidance current at the time of writing. It isn't tax advice; check with your accountant or the ATO for your situation.

This guide is general information, not legal or insurance advice. Rules differ by state and industry; check with your own adviser or the relevant regulator.