The government’s plan to reform the ABN system, including a proposal to introduce a registration and renewal fee, have been met with backlash from the accounting industry, with calls to consider alternatives such as utilising tax returns and accountants to facilitate compliance.
While conceding that the current ABN system is no longer fit for purpose, Pitcher Partners executive director, Craig Whatman believes that each ABN should be linked to a tax file number to prevent the proliferation of ABNs, while making it easier to search and assess the status of a business.
“The current law says that all taxpayers other than companies (such as trusts) need to be carrying on an enterprise in order to be entitled to an ABN. The problem is that this threshold requirement has never been policed as part of the application process or at any stage afterwards,” said Mr Whatman.
“By linking to an underlying tax file number of the relevant entity, this process would ensure that an entity could only ever obtain one single ABN.
“It would also allow the ATO to review and monitor tax-related information associated with the relevant ABN. This simple change would allow anyone to determine whether an entity has an ABN, and the current status of an entity’s tax registrations and whether they are still active.”
Mr Whatman also believes other registrations, such as GST, PAYG withholding, or being a deductible gift recipient, should also be attached to the ABN.
Further, he believes an annual verification process should be based off the completion and lodgment of tax returns and business activity statements, where data in those forms are used to verify the validity of a registration.
Correspondingly, if a business has failed to keep up with its necessary tax lodgments and respond to any contact made by the ATO, the ABR could display a note that the relevant registration is currently subject to verification.
“The existing registration system has no checks and balances to prevent illegitimate entities from initially getting an ABN, retaining that ABN, or getting multiple ABNs for one trading entity,” he said.
“Having ABN is not a reliable indicator of whether the relevant entity is carrying on an enterprise and certainly provides no indication of whether the entity is a good corporate citizen from a tax and other compliance perspective.”
“By linking other registrations directly to the ABN, it would shift the onus onto the other linked registrations which should be more rigorously policed on an ongoing basis.”