TFN and ABN Explained

freelance tax

TFN and ABN can be confusing, especially when you are just starting out with your work. Most people are unsure on the difference between the two and their purpose. This article is a quick and easy guide for you to understand them a little better:


What is Tax and Why Do We Pay?

Tax is basically a compulsory contribution to the government. It is enforced on individuals and businesses alike. In the simplest terms, we pay to finance our country’s dealings. If you hated accounting, economics, and politics then, you would probably focus on it more as you get older and pay your taxes so that you know where it is going towards.


What is a TFN?

TFN stands for Tax File Number which is exactly what it is used for; filing your tax with the government. When commencing any type of work in Australia, you need a TFN. This helps with declaring your deductions and paying any tax requirements that your employer will legally need to do for you.

freelance tax


Getting your TFN

The easiest way to get your TFN is to complete the TFN Declaration Form and visit your nearest post office.


How Much Tax Do I Have To Pay?

In Australia, the amount of tax you must pay depends on how much you have earned within the financial year. This is what they call tax thresholds and the government may also decide to change them. For individual residents of Australia, there is a tax-free threshold which means earning below this amount does not require you to pay taxes. Information on the thresholds can be found within the Australian Taxation Office (ATO). This year’s tax threshold is as follows:


Taxable income

Tax on this income

0 – $18,200


$18,201 – $37,000

19c for each $1 over $18,200

$37,001 – $90,000

$3,572 plus 32.5c for each $1 over $37,000

$90,001 – $180,000

$20,797 plus 37c for each $1 over $90,000

$180,001 and over

$54,097 plus 45c for each $1 over $180,000

If you want to find out exactly how much tax you would be required to pay, you would need to know the total amount you earned (the complete total especially if you are working several jobs) this financial year. Then compare it to the tax threshold. Luckily as an employee, you do not need to calculate this as your employer has to deduct this from your pay according to the law.

If you are curious how it works, skip to the calculation example.


What is an ABN?

ABN is the acronym for Australian Business Number which allows the Australian government to recognise your business financial dealings. You need this if you are classified as a business; this of course includes the sole-trader which is what you would be if you are a freelancer.


Do You Need Both TFN & ABN?

The simple answer is: No. You will only need the ABN if you are a business entity of your own. However, you must first get a TFN before you can apply for an ABN. ABN’s are listed publicly on the Australian Business Register (ABR) and Australian Securities and Investments Commission (ASIC)  websites. If you ever need to check a business, the first step is to look up their ABN in these two websites. This means if you want your freelance business or company to be recognised as registered in Australia, then you need an ABN.


Getting your ABN

There are a lot of companies that offer to register your business for you, but it is easier than you think! Simply visit the ABR website and answer the questions in the online application.


How Much Tax Do I Have To Pay on ABN?

The tax threshold remains the same, if you are a sole-trader. This is because you are still classified as an individual even though you are running a business.  The main difference however, is that you are responsible for paying your own tax requirements. This is when you would need to calculate how much you would have to pay.

Calculating Tax Example:

Sally’s earned $45,000 in the financial year.


$18,200 of what she earned is tax free.

$45,000 - $18,200 = $26,800 of her income is taxable.


She is in the third tax bracket according to the table.

$45,000- $37,000 = $8,000 of her income is going to be

charged 32.5 cents per dollar.

0.325 x 8,000 = $2,600

Plus the $3,572.

$2,600 + $3,572 = $6,172 of tax.