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Have you ever worried that the ATO might cancel your ABN? Most people haven’t, but it is a distinct possibility. The reason why: the taxation office might think you are not an active business anymore.
You don’t want this to happen. After all, you are working so hard, creating your business, trying to make customers happy...
Exhausting nights in the office or a workshop, time spent away from your family and everything that matter. How would you feel if this incredible sacrifice were in vain?
If your ABN is cancelled, you have no legal business. Which means you are operating illegally. Would you do business with an illegal business and not being able to claim it as a legitimate tax deduction? You would not, so your customers wouldn’t either.
Joined investigation conducted by ABC and Fairfax revealed cases of this happening, aired in Four Corners by ABC.
Just one quote from that program says it all: "They were literally taking away my capacity to live my life, and they had no concern whatsoever for the repercussions," said Kathryn Little.
No doubt, the ramifications will be devastating.
Every business owner in Australia needs to be aware of the rules and how to avoid ABN cancellation.
Australian Business Register (ABR) periodically checks its records for Australian business numbers (ABNs) and automatically cancels those that appear inactive.
Are you a sole trader, partnership, or trust? If yes, read carefully.
Did you declare business income for the last two years in your tax returns? If not, you might be at risk.
Or even worse you have forgotten to lodged business activity statements or income tax returns for more than two years?
The ABR checks are happening throughout 2018.
The solution is simple. Contact your bookkeeper to bring your BASes up-to-date and lodge your outstanding tax returns.
Consistent compliance with taxation office rules is a must.
Sole Trader Myth
Who knows how myths are created. In a lot of cases they are created with good intentions. As Samuel Jackson said: “Hell is paved with good intentions”.
Sometimes sole traders have not lodged forms with ATO because they think they don't need to lodge if their income is below the tax-free threshold.
Tax-Free Threshold through the last two decades:
- 1991-2000 - $5,400
- 2000-2012 - $6,000
- 2012-now - $18,200
This myth is dangerous. It causes people to forget about their compliance obligations.
The truth is that regardless of the income, sole traders need to:
- Lodge individual tax return, including the supplementary section.
- Lodge business and professional items schedule for individuals.
- Pay their IAS, and if Nil they must lodge a Nil.
There are other myths that can do a lot of harm and we are debunking them in the other article: How Bad Bookkeeping Advice Can Destroy Your Business (And What To Do Instead)