Under the ATO’s ABN Intent to Cancel program, a legitimate and active business could see its ABN be the subject of review (and potentially cancelled) if it has fallen behind on the lodgement of tax returns and activity statements.

If an ABN is cancelled for a genuine business, the business owner is said to have no legal business and is thus held to be operating illegally. Among other things, this will cause problems for customers and suppliers who use the ABR to verify that they are dealing with a legitimate business (particularly at the commencement of a business relationship). If there is no ABN appearing on the register because it has been cancelled, then that customer or supplier may withhold 45% of any payments due to the business and may subsequently cease to deal with the business.

Moreover, customers will need a valid ABN on tax invoices to claim GST credits in relation to purchases made.

Considerations for the cancellation of an ABN

The reality is that some ABNs are no longer needed. In these cases, it is best to take a proactive approach to avoid later contact by the ATO.

If your client’s business is no longer operating, consideration should be given to the cancellation of the ABN. Likewise, if a business structure has changed – for example, a client’s business has changed from being a sole trader to a company – then the old structure’s ABN may need to be cancelled.

Before any action is taken to cancel an ABN, it is imperative to check with both the client and the tax agent. Sometimes an ABN will be in existence for reasons unbeknown to the BAS Agent (or, for that matter, the client). Indeed, it is not always the case that just because an ABN exists, a business in the usual sense of the word is being operated. The GST Act uses the notion of “enterprise” to determine GST registration requirements (and, in turn, the requirement to hold an ABN). Enterprise is a broader term than business and extends to commercial activities, charitable activities, religious and government activities, and non-profit activities.

Two common examples of undertakings where ABNs are required, despite arguably there not being a business in the usual sense of the word, are self-managed superannuation funds and commercial property ventures (including those where two or more parties are deriving income from a commercial property).In the case of genuine businesses that have ceased (such as through an outright cessation, sale or change of structure), it may still be the case that the ABN needs to be preserved for a reasonable period to deal with the finalisation of the business’ expenses.

Cancelling an ABN

The fastest way to update your ABN is online through the ABR. or contact us and we will help you sort it out

For businesses that have cancelled an ABN,  you will need to lodge an income tax return for the structure which held the ABN regardless of the result of the business. Even in the case of a sole trader, there is no tax-free threshold for sole traders with an ABN and they will need to report all business income greater than $1.

What to do if contacted by the ATO

If your ABN is identified for cancellation, the ATO may contact you and advise what actions you need to take to prevent them cancelling it. This may include lodging outstanding returns of activity statements showing business income.

The ATO have also introduced a new automated process which allows you or your BAS agent to confirm if the ABN is still required via a secure voice response system, so it is possible your contact from the ATO could be by this means.

If you are no longer in business and the ABN is no longer required, no action is needed apart from the attendance to any outstanding activity statement and tax return requirements.

Reactivation of a cancelled ABN

If your ABN is cancelled (voluntarily or otherwise) and you need it a later point in time, you can reapply to reactivate it via the ABR. If successful, this will bring back to life the former ABN as opposed to a new ABN being issued.

When reactivating a cancelled ABN, you can list your previous ABN on the application for a new ABN. Reactivating a cancelled ABN is free.

Bear in mind that reactivation of a former ABN is only possible if a business structure remains the same. If a business structure has changed, you will need to apply for a new ABN (for example, if your client was a sole trader but now operates through a company structure).

The ATO may conduct a manual review when you reactivate a cancelled ABN. Generally, this will be to determine eligibility and entitlement for an ABN. Eligibility depends upon whether you are carrying on an enterprise.

Maintaining accurate ABN details

Quite aside from the issue of cancelling unneeded ABNs, it is also best practice to ensure that accurate details of genuine ABNs are maintained on the ABR. It is common for ABN holders (or their agents) to forget to update their ABN details in the ABR when their circumstances or details change.

The ABR promotes the maintenance of accurate details on the register for three reasons:

• ensuring the right people have the right permissions to act on behalf of a business;
• enabling government agencies to have current information, for example, if emergency services need to contact businesses during natural disasters; and
• ensuring businesses are ready for new government services when they become available.

Your ABN details will be most effective if you also list your own address and business details, not just your BAS agent’s address as your agent. This allows ABN holders to be located and contacted quickly with direct updates, critical information and financial support in times of emergency or natural disaster.

Details must be updated with the ABR within 28 days of becoming aware of changes. Once again, the fastest way to update your details is to contact us so we can update it online through the ABR’s Tax professional’s services.