Among the many changes introduced with the GST, one of the more far reaching income tax changes was the establishment of the Australian Business Number system. From July 1, 2000 strict regulations have required businesses to quote their ABN on official documentation, especially on invoices that they issue.
Like many things to do with the Australian taxation system, the responsibility has been put on business owners to comply with the ABN regulations, and if they breach these regulations the ATO can impose massive penalties.
When a business pays an expense, and the supplier has not quoted an ABN, they are required to deduct 46.5 per cent from the amount being paid. Businesses are also required to keep their ABN details up-to-date.
The penalties imposed by the ATO differ depending on the seriousness of the breach of the regulations. Penalties are imposed in penalty units, which for the 2018 financial year are $210. Penalties can range from five penalty units for not registering for PAYG withholding tax when required, 20 penalty units for not issuing a tax invoice when required, up to 60 penalty units for making a false or misleading statement when applying for an ABN.
In addition to the penalties, breaches of the PAYG withholding income tax regulations can result in a business paying the amount that should have been deducted to the ATO, plus an interest penalty.