Do I need an ABN, a business name and GST to sell online?

Hobby or business

The ATO's general test: a business involves a set of continuous and repeated activities you do for the purpose of making a profit, and profit can be in money or through other means, like being paid with goods or services such as a barter deal. Not everything done to make money is a business, and the main exception is an activity that is a genuine hobby or recreational pursuit.

The ATO's definition of the other side: a hobby is an activity that is undertaken primarily for personal enjoyment, recreation or leisure rather than to make a profit, and while a person may occasionally receive amounts from a hobby, those receipts are generally incidental to the pursuit rather than the reason for undertaking it. The consequences differ: amounts received from a hobby are generally not assessable income and associated expenses are not tax deductible.

business.gov.au puts its test on paper: there is no single factor that determines if you are in business, but the factors include intending to make a profit, having made a decision to start a business and done something about it to operate in a businesslike manner, such as registering a business name or obtaining an ABN, repeating similar types of activities, and keeping business records and account books.

An ABN

Other businesses may ask a seller for an ABN when they pay. business.gov.au's eligibility line: you are not eligible for an ABN for a hobby, but if you sell goods or services to businesses they may ask you for one when they pay you, and you can use a Statement by a supplier form to avoid the business withholding an amount from the payment for not having an ABN. And the reason the form matters: without an ABN, other businesses must withhold 47% from payments they make to you for tax purposes.

For a business, the framing is lighter: it is not compulsory for businesses to register for an ABN, but getting one is free and makes running your business easier, particularly if you have to register for other taxes like GST. Where the ABN also has to appear: a registered business name holder must put the registered business name and the ABN on business documents, for example invoices and purchase orders.

A business name

The registration duty comes from business.gov.au: before you start operating, you must register a business name if you are trading under a name that is not your own. ASIC describes the same thing: a business name is the name a business trades under, and registration is needed when you run a business under a name other than your own.

Two limits on the choice come from business.gov.au: you cannot register a business name that is identical or too similar to the registered name of another Australian business or company, and registering a business name does not stop someone who has registered the name as a trade mark from using it.

The display duty: the business name must be visible to the public wherever you do business, and it must also appear on all written communication such as invoices and quotes. ASIC adds that your business name must be shown prominently anywhere the business is open to the public, a storefront for example, and that there is no need to display a certificate of registration.

GST registration

The ATO gives the rule in its own words: you must register for GST when your business or enterprise has a GST turnover, gross income from all businesses minus GST, of $75,000 or more (the GST threshold). business.gov.au gives the clock: you have to register within 21 days of becoming aware that your GST turnover will go over the threshold. If you've started a new business, you should register if you expect your GST turnover to reach $75,000 in the first year, and before you register you need to have an ABN.

The ATO's list of when you must register also names income earned through the sharing economy or digital platforms, for example food delivery services or other platform-based work, and points to its sharing economy page for the detail. The ATO also puts the consequence plainly: once you are required to register for GST, you need to do so within 21 days.

A worked example

The ATO's own worked example, in its figures: if you sell $80,000 worth of clothes in a year, you'd have to register for GST, because your GST turnover is over the $75,000 threshold, even if you only make $40,000 in profit. The reason the example works the way it does is in the definition: GST turnover is your business income, excluding certain sales, not your profit.

Business name, trade mark and domain name

Three names, three different things, and only one of them is the address. The comparison, each cell in its source's words:

The practical consequence sits with the seller: if you want exclusive rights to your business name, you'll need to protect it with a trade mark, and this will help you get exclusive use of that trade mark throughout Australia, with protection in all Australian states and territories for an initial period of 10 years. The domain, by contrast, gives only the address a customer visits, which is why the three belong on three different lines of a plan.