ABN registration: draft legislation to enforce compliance
Treasury has released draft legislation which proposes two new grounds under which the Registrar of the Australian Business Register may cancel an Australian Business Number (ABN), as well as containing corresponding provisions for the reinstatement of ABNs cancelled under these new grounds.
The government had earlier announced its intention to “strengthen” the ABN system by imposing new compliance obligations for ABN holders to retain their ABN. Currently, ABN holders are able to retain their ABN regardless of whether they are meeting their income tax return lodgment obligations or the obligation to update their ABN details.
As announced in the 2019–2020 Federal Budget, ABN holders with an income tax return obligation will be required to lodge their income tax return and confirm the accuracy of their details on the Australian Business Register annually. This measure stems from the 2018–2019 Budget measure Black Economy Taskforce: consultation on new regulatory framework for ABNs. The start date of the measure was deferred in the March 2022 Federal Budget.
It is worth noting that there are over nine million active ABN holders.
Cancellation for outstanding income tax lodgement obligations
If enacted, the amendments will provide that the Registrar of the Australian Business Register may cancel a person’s ABN if satisfied that they are required to lodge an income tax return in relation to an income year and the person has not lodged income tax returns in relation to two or more income years where the period specified by the ATO for lodgement has ended.
The income years in which a person fails to lodge their returns do not need to be consecutive years.
This ground for cancellation applies in relation to a failure to lodge tax returns beginning with income years commencing on 1 July 2022. Therefore, the earliest the Registrar may cancel an ABN under this ground is in the second half of 2024, following a person’s failure to lodge an income tax return for the income years beginning on 1 July 2022 and 1 July 2023.
If the Registrar cancels a person’s ABN because of a failure to lodge income tax returns, the Registrar must reinstate the ABN where the Registrar is satisfied that the person has lodged, or has made arrangements with the ATO to lodge, the relevant income tax returns. Where an ABN is reinstated in this way, the reinstatement has effect on and from the day on which the Registrar cancelled the ABN.
However, the draft legislation does specifically block attempts to side-step its intention. The Registrar must not register a person where the person has had a previous ABN cancelled due to failure to lodge income tax returns, but the person has not lodged those returns and has not made arrangements to lodge them. This will prevent a person from simply reapplying and being reregistered.
Cancellation due to failure to confirm accuracy
The amendments will also provide that the Registrar may cancel a person’s ABN if satisfied that the person has not notified the Registrar about still requiring the ABN and the currency of information given to the Registrar. The Registrar’s power to cancel an ABN in this way applies where the ABN holder has not provided a notification within the previous 12 months.
This ground for cancellation applies in relation to an ABN holder’s failure to confirm their details and their continued requirement for an ABN. It can be exercised after 1 July 2024. In effect, this requires an ABN holder to notify the Registrar at least once in the period between the commencement of these provisions and 1 July 2024, and at least once in each subsequent 12-month period.
The Registrar must reinstate the ABN if the person notifies the Registrar with the requisite details, and the reinstatement will take effect on and from the day on which the ABN was cancelled (ie retrospectively).
Proposed dates of effect and submissions
Cancelling a person’s ABN due to their failure to lodge two or more income tax returns applies from income years commencing on or after 1 July 2022.
The Registrar may cancel a person’s ABN from 1 July 2024 following the person’s failure to confirm their details and their need for an ABN within a 12-month period.
Submissions on the draft legislation are due by 29 November 2022.
Source: https://treasury.gov.au/consultation/c2022-332618; www.abr.gov.au/who-we-are/our-work/abr-integrity