Invoicing without an ABN and your legal obligations in Australia

If you send an invoice without quoting your Australian Business Number (ABN), the person paying you is generally required to withhold 47% of the payment and remit it to the Australian Taxation Office (ATO). That rule sits at the centre of this article, and it has two sides. If you are the supplier, failing to quote your ABN means nearly half of every invoice can disappear into withholding. If you are the payer, paying an invoice without an ABN and without withholding can leave you personally liable for the amount.

This guide sets out the obligations that matter for invoicing in Australia: quoting your ABN on invoices, withholding and reporting when you pay suppliers without an ABN, issuing compliant tax invoices if you are GST-registered, and registering for GST when you cross the threshold. It also covers who these duties apply to, the limited exceptions, the consequences of getting it wrong, and a practical compliance checklist.

Who these obligations apply to and the thresholds that trigger them

The invoicing obligations fall on two groups. The first is suppliers: anyone carrying on an enterprise in Australia, whether a sole trader, partnership, company or trust, who issues invoices for goods or services. The second is payers: businesses that pay suppliers for goods or services and must apply the withholding rules at the point of payment.

The key figures to know are these:

• No-ABN withholding: a payer must withhold from a payment for a supply when the supplier does not quote an ABN and the total payment is more than $75, excluding GST.
• Withholding rate: the top marginal tax rate for individuals plus the Medicare levy, currently 47%.
• Tax invoices: a GST-registered supplier must give a customer a tax invoice within 28 days of a request, unless the sale is $82.50 or less including GST.
• GST registration: registration is compulsory once your current or projected GST turnover reaches $75,000, or $150,000 for a non-profit body.
• Registration timing: you must apply for GST registration within 21 days of becoming required to be registered.

Duty 1: Quote your ABN on every invoice

An ABN is an 11-digit identifier that is unique to your enterprise, registered on the Australian Business Register and free to apply for. On an invoice, it does two jobs. It tells the payer that you are carrying on an enterprise, and it signals that they do not need to withhold tax from your payment under the no-ABN withholding rules.

The withholding rule is in s 12-190 of Sch 1 to the Taxation Administration Act 1953 (Cth), which sits within the PAYG withholding system. In short, an entity that pays for a supply must withhold an amount if the supplier does not quote its ABN and the payment is more than $75 excluding GST. The amount withheld is the top marginal rate plus Medicare levy, which is currently 47%. The ATO's guidance on withholding confirms the practical position: if the supplier does not provide an ABN and the total payment is more than $75 excluding GST, you generally withhold the top rate and pay it to the ATO.

Two common misunderstandings are worth clearing up. First, writing "ABN pending" or "not registered for GST" on an invoice does not help. The obligation turns on whether a valid ABN is quoted on the document. Second, your GST registration status is irrelevant to withholding. Even a supplier who is not registered for GST and owes no GST must quote an ABN to avoid withholding, unless an exception applies.

The exceptions to withholding

The payer does not have to withhold, even without an ABN on the invoice, in the situations set out in the ATO's list of payments you don't withhold from:

• Payment of $75 or less: no withholding is required when the total payment for the supply is $75 or less excluding GST. You cannot avoid withholding by splitting one larger supply into several invoices of $75 or less, but a genuine series of separate small transactions does not attract withholding.
• Private or domestic supplies: no withholding applies where the supply is not a business transaction, for example a business buying a second-hand computer that another person used only at home.
• Hobbies and private recreational pursuits: a supply made as part of a hobby, such as a painting bought from an artist who paints for enjoyment, is not subject to withholding.
• Supplier not carrying on an enterprise: the definition of enterprise is broad, but an activity that is purely private or domestic, or a hobby, is not an enterprise and the supplier is not entitled to an ABN.
• Exempt income: no withholding applies where the whole payment is exempt income for the supplier, which covers bodies such as charities, religious institutions, schools and public hospitals.
• Statement by a supplier: the supplier can give a written declaration, in the approved form or equivalent, stating that the supply is not connected with an enterprise. This "Statement by a supplier not quoting an ABN" can be written on the invoice itself.
• Other cases: payments of $350 or less per week to a supplier who is an individual under 18, supplies made through an agent who has quoted their ABN, and supplies that are wholly input taxed.

These exceptions are narrow. If you are trading regularly, advertising for customers or seeking a profit, you are almost certainly carrying on an enterprise, and the correct answer is to obtain an ABN and quote it on every invoice rather than rely on an exception.

Duty 2: If you are the payer, withhold and report

The no-ABN withholding rule is not optional for the payer. Where a supplier does not quote an ABN and no exception applies, you must withhold the top rate from the payment and pay it to the ATO. The ATO's guidance sets out the practical obligations that follow:

• Give the supplier a payment summary: when you withhold, you must complete a PAYG payment summary for withholding where an ABN is not quoted and give it to the supplier at the time you pay the net amount, or as soon as possible afterwards.
• Report the withholding: amounts withheld are reported in your annual PAYG withholding report.
• Keep records: you must keep sufficient records to show why you did not withhold, including any supplier statement, for 5 years.
• Watch what you pay: you must not make full payment to a supplier on the understanding that an ABN will be quoted later. You may agree to hold the payment until the supplier obtains and quotes their ABN.
• Check statements: if you have reason to believe a supplier's statement is false or misleading, you must withhold the top rate from the total payment.
• No input tax credit: you cannot claim a GST input tax credit for amounts you have withheld from, so keep those transactions separate from your other payment records.

Many accounts payable teams simply refuse to pay invoices that do not show a valid ABN. That is a sensible commercial practice, and it is easy to support with a quick check of the supplier's ABN on ABN Lookup before onboarding.

Duty 3: Issue a compliant tax invoice if you are GST-registered

If you are registered for GST, your invoices for taxable supplies must meet the tax invoice requirements in s 29-70 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). The supplier of a taxable supply must give the recipient a tax invoice within 28 days after the recipient requests one, unless the sale is $82.50 or less including GST.

A valid tax invoice must contain enough information to clearly ascertain:

• that the document is intended to be a tax invoice
• the supplier's identity and ABN
• the date the invoice was issued
• a brief description of the items sold, including the quantity (if applicable) and the price
• the amount of GST payable, or a statement that the total price includes GST where the GST is exactly one eleventh of the total
• the extent to which each supply on the invoice is a taxable supply
• the buyer's identity or ABN where the total price is $1,000 or more.

The ATO's tax invoice guidance explains the same requirements in practical terms, including that tax invoices can be issued digitally. An invoice sent by email or generated through accounting software satisfies the requirements as long as it contains all the information above, and eInvoices issued under the Peppol framework are accepted.

If you are not registered for GST, you cannot call your invoice a tax invoice and you should not add GST to your prices. You can still issue an ordinary invoice, but the word "tax invoice" is reserved for registered suppliers.

Duty 4: Register for GST when you cross the threshold

GST registration is compulsory when you are carrying on an enterprise and your GST turnover meets the registration turnover threshold under s 23-5 and s 23-15 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). The threshold is currently $75,000 of current or projected GST turnover, or $150,000 for a non-profit body, with the higher figure set by regulation.

Two timing rules matter. You must apply for registration within 21 days of becoming required to be registered. And if you fail to apply, the ATO can register you anyway, with registration backdated to the day you became required, and penalties can apply for failing to register when required. Businesses below the threshold can choose to register voluntarily, which can be worthwhile if your customers are GST-registered and want tax invoices to claim input tax credits.

What happens when you get it wrong

The consequences differ depending on which side of the transaction you are on.

For the supplier who invoices without an ABN, the immediate cost is cash flow. The payer withholds 47% of each payment, so a $10,000 invoice yields only $5,300. The withheld amount is remitted to the ATO and credited against your income tax for the year, so it is not lost permanently, but it sits with the ATO until you lodge. For a supplier who is not registered for GST, there is no input tax credit to claim either, and the withholding still applies.

For the payer, the exposure is more serious. A payer who fails to withhold when required can be personally liable to the ATO for the amount that should have been withheld, with penalties and interest on top. There is also the lost input tax credit on any amounts withheld, and the administrative burden of payment summaries, annual reporting and record keeping for every un-ABN'd payment.

For both sides, statements matter. A supplier who gives a false or misleading statement to avoid withholding faces penalties under the tax law, and a payer who has reason to believe a statement is false must withhold regardless.

Compliance checklist for invoicing

Work through these steps before you issue an invoice or pay a supplier:

• Apply for your ABN before you issue your first invoice. It is free, and the application is straightforward for anyone carrying on an enterprise.
• Put your ABN and correct business name on every invoice, and keep them consistent with your website, contracts and bank details.
• Decide your GST position early. Registration is compulsory at $75,000 of turnover, and voluntary registration is worth considering if your customers are GST-registered.
• If you are GST-registered, label your invoices "Tax invoice", include the required details, and provide them within 28 days of a request.
• If you are not GST-registered, never call your invoice a tax invoice and never add GST.
• When you pay suppliers, check for an ABN on the invoice. If it is missing, confirm an exception applies, obtain a supplier statement where needed, and keep the records for 5 years.
• Verify new suppliers on ABN Lookup before onboarding so you are not paying invoices that will trigger withholding obligations later.

When a lawyer or tax adviser can help

Most of these obligations are administrative, but a few situations genuinely warrant professional input. If the ATO contacts you about unpaid withholding, or you have received a penalty for failing to withhold or register, a tax lawyer or accountant can advise on your options, including objecting to an ATO decision. A professional can also help with the borderline judgments: whether an activity is an enterprise or a hobby, whether to register for GST voluntarily, and how to structure your business so the right entity appears on your invoices in the first place.

Start with the ABN field on your next invoice

Of the four duties in this article, the one small businesses most often miss is the payer-side obligation. It is natural to think of withholding as someone else's problem, but the moment you pay a supplier's invoice without an ABN, it becomes yours. This week, take the two steps that prevent most of the pain: put your own ABN on every invoice you send, and set up a rule that no supplier invoice gets paid without a valid ABN quoted or a recorded exception. The 47% withholding rule is designed to be easy to avoid, and it is easy to comply with once your invoicing system handles ABNs by default.