Do I Need an ABN to Sell on Amazon?

Selling products on Amazon can be a lucrative venture, especially in countries like Australia where e-commerce continues to grow rapidly. However, before you start listing your products and expecting sales, it's crucial to understand the legal requirements associated with selling on Amazon. One of the common questions that arise among new sellers in Australia is: Do I need an ABN (Australian Business Number) to sell on Amazon?

What is an ABN?

An Australian Business Number (ABN) is an 11-digit number that uniquely identifies your business to the government and community. It is issued by the Australian Business Register (ABR), which is operated by the Australian Taxation Office (ATO). The ABN serves various purposes, including:

• Taxation: It helps with the GST (Goods and Services Tax) obligations.
• Invoicing: Allows businesses to issue valid tax invoices.
• Identification: It identifies your business to other businesses and government agencies.

Do You Need an ABN to Sell on Amazon?

The short answer is yes, in most cases, you will need an ABN to sell on Amazon Australia. If you are conducting any business activity, you are required by law to have an ABN. This includes selling products online through platforms like Amazon.

Why is an ABN Important?

Having an ABN is crucial for several reasons:

1. Legal Requirement: According to Australian law, if you are carrying out business activities, you must have an ABN.
2. GST Registration: If your business has an annual turnover of $75,000 or more, you are required to register for GST, and an ABN is necessary for that registration.
3. Professionalism: An ABN lends credibility and professionalism to your business. Customers and other businesses may prefer dealing with a business that has a valid ABN.
4. Tax Invoicing: To issue valid tax invoices and claim GST credits, an ABN is essential.

What If You Don't Have an ABN?

If you decide to sell on Amazon without an ABN, you may face several challenges:

• Higher Taxes: Without an ABN, Amazon may withhold 47% of your payments, which is significantly higher than the standard tax rate for businesses with an ABN.
• Limited Functionality: Some features on Amazon, such as advertising, may require you to have an ABN.
• Legal Consequences: Operating a business without an ABN when you are required to have one can lead to legal issues and penalties from the Australian Taxation Office (ATO).

How to Get an ABN?

Getting an ABN is a straightforward process. Here are the steps to obtain an ABN:

1. Determine Eligibility: Most businesses and entities in Australia can apply for an ABN. This includes sole traders, partnerships, companies, and trusts.
2. Application Process: You can apply for an ABN online through the Australian Business Register (ABR) website. The process usually takes about 10-20 minutes.
3. Information Needed: You will need to provide details about your business, including your business structure, the type of goods or services you provide, and your contact information.
4. ABN Issuance: Once your application is approved, you will receive your ABN immediately, or within a few days if additional information is needed.

Sole Trader vs. Company: Different ABN Requirements

When you are selling on Amazon, your business structure will determine how you apply for an ABN:

• Sole Trader: If you are operating as a sole trader, you will need to apply for an ABN in your name. As a sole trader, you are personally responsible for all aspects of the business, including any debts or losses.
• Company: If you operate under a company structure, the company itself will need to have an ABN. A company is a separate legal entity, meaning it can own property, incur debt, and be sued in its own name.

ABN and GST: Understanding the Relationship

If your business earns $75,000 or more annually, you must register for GST. Here’s how ABN and GST are related:

• GST Registration: To register for GST, you must have an ABN. GST registration is essential if you want to collect GST on your sales and claim GST credits on your business purchases.
• Tax Invoicing: When issuing invoices, you must include your ABN if you are registered for GST. Failure to include an ABN may result in your customers withholding 47% of the payment, as per ATO guidelines.

ABN and Amazon Fees

When selling on Amazon, several fees are involved, including:

• Referral Fees: A percentage of each sale that goes to Amazon.
• Fulfillment Fees: Charges for storing and shipping products via Amazon FBA (Fulfilled by Amazon).
• Subscription Fees: The cost of having a professional seller account.

Having an ABN is essential for managing these costs effectively. It allows you to track expenses, claim GST credits, and accurately report your income to the ATO.

Conclusion

In summary, while it might be tempting to start selling on Amazon without an ABN, it is not advisable if you are conducting business activities in Australia. Having an ABN is not just a legal requirement; it also provides you with several benefits including tax advantages, increased credibility, and access to essential Amazon seller tools. The process of obtaining an ABN is straightforward and can be done online in a matter of minutes.

So, before you set up your Amazon seller account, make sure you have your ABN in hand. It’s a small step that can make a big difference in your business's success on Amazon.