The Australian Treasury on Friday launched a consultation process on the Australian Business Number (ABN) system in response to the Black Economy Taskforce findings, which found that participants in the black economy are using the ABN system to facilitate fraudulent activity.
Below are some key extracts from Treasury’s consultation paper:
The Taskforce expressed concern that not everyone obtaining an ABN is entitled to one. Some of the examples provided to the Taskforce included:
Applications for multiple ABNs over time for what is essentially the same enterprise, to facilitate avoidance of employee, creditor, consumer and tax obligations (referred to as phoenixing);
Individuals working as employees (and not entitled to an ABN) but applying for ABNs ostensibly as independent contractors, often due to a demand from their employer (referred to as sham contracting). – This allows the employer to avoid responsibility for employee entitlements, thereby reducing their labour costs and potentially offering the employer an advantage over their competitors. Examples of employees driving the use of sham contracting were also provided to the Taskforce, such as visa holders seeking to circumvent their visa work conditions.
Individuals incorrectly obtaining an ABN when not entitled to avoid the ‘no ABN withholding’ rules.
Individuals not carrying on an enterprise and therefore not entitled to an ABN obtaining an ABN in order to register for GST and fraudulently claim GST input tax credits…
ABR figures show a large increase in individuals applying for an ABN (see chart below). However, it is possible that flexible work preferences and increased entrepreneurship, including the rise of the sharing or gig economy, play some part.
Nevertheless, the sharp increase in individuals applying for an ABN raises the question whether the ABN entitlement rules remain appropriate…
The Taskforce proposed that ABNs should not be ongoing, but should be subject to periodic renewal. A renewal process would address some of the issues outlined above…
A renewal process would indirectly address fraudulent behaviour by prompting ABN holders to have closer engagement with the ABN system…
For those applicants or ABN holders who are determined to engage in the black economy, a regular ABN entitlement check as part of a renewal system would provide more evidence for prosecutions. A renewal process would also provide more data points on an ABN holder, making it more difficult to argue that they answered the ABN application correctly at the time but their circumstances had since changed…
A fee may further discourage people from holding an ABN when they do not need one or are not entitled to one. This could help restrict the ABN system to genuinely active businesses and other entitled entities. This in turn would have flow-on effects for the quality of the ABN data…
The due date for responses to this consultation is 31 August 2018.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
