GST Q&A – No-ABN withholding rules: A supplier hasn’t quoted their ABN. Do we need to withhold from their payment?

Question:

Our supplier has stated that they have been deemed ineligible to obtain a new ABN. They believe this is due to their business turnover being below $35,000 a year. The supplier has proceeded to carry on their business, issuing invoices for amounts exceeding $82.50 (GST inclusive). Because the invoiced amounts exceed $82.50 and the supplier is adamant they are carrying on a business, it appears we cannot rely on a Statement by Supplier. Please advise if this is correct and whether we need to withhold from the supplier payment.

Answer:

Entitlement to an ABN

There appears to be an element of confusion regarding entitlement to an ABN.

You have indicated that the supplier considers they are ineligible for an ABN due to only having an annual turnover of below $35,000. However, there is no annual threshold regarding entitlement to an ABN. If an entity is carrying on an enterprise in Australia, it is entitled to an ABN.

Therefore, it could be that the ATO have determined that the supplier’s activities do not constitute an enterprise or are specifically covered by one of the exclusions. Examples of exclusions are where the entity:

  • is acting as an employee;
  • is undertaking a private recreational pursuit or hobby; or
  • is an individual or partnership without reasonable expectation of profit or gain.

If this is the case, the supplier should be able to provide you with a Statement by Supplier because they would be able to tick one of the relevant boxes listing their reason for not quoting an ABN.

No-ABN withholding rules

If the supplier ticks the recreational pursuit/hobby box, your organisation would also need to meet the requirement that it ‘has no reasonable grounds to believe that the statement is false or misleading in a material particular’. Therefore, if the activities of the supplier are consistent with a hobby, then your organisation could rely on the Statement by Supplier and not withhold.

However, if you consider that the activities of the supplier do in fact constitute carrying on an enterprise, then it would be prudent for the supplier to re-apply for an ABN and then supply the ABN to your organisation. Otherwise, your organisation would be required to withhold from its payment to the supplier.

‘For further guidance on the no-ABN withholding rules (and exemptions from withholding), refer to s. 12-190 of Schedule 1 to the Taxation Administration Act 1997’.