A Guide to TFNs and ABNs in Strata
What is a TFN?
A Tax File Number (TFN) is an entity’s unique reference number in the Australian Taxation System. It is assigned by the Australian Taxation Office (ATO) and may be either 8 or 9 digits long depending upon when the TFN was registered. No entity (individual or corporate) shares the same TFN as another.
A TFN is required by a strata company to lodge a tax return, and/or apply for an Australian Business Number.
In addition, TFNs are also widely used by the ATO as the means of identification when updating contact and financial institution details. It is therefore very important to keep TFNs secure and to not lose them.
What is an ABN?
An Australian Business Number (ABN) is another type of unique reference number used by the ATO. Unlike a TFN, eligibility for an ABN is restricted to business entities only. It does not replace a TFN but instead, must be linked to one.
An ABN is required by a strata company to register for and claim GST, take on employees (eg: caretakers) and avoid tax being withheld on some receipts.
ABNs are listed on a publicly available register called the ‘Australian Business Register’ (ABR). Whilst it is still recommended to keep ABNs securely stored, they can usually be sourced via the ABR if they do happen to be misplaced.
Does a strata company need an ABN and/or TFN?
Within the strata industry, it is commonly regarded as best practice for every strata company to have a TFN and an ABN in place.
A TFN becomes essential once the strata company earns assessable income, such as bank interest, or status certificate income collected during the sale of a lot.* Without a TFN, the strata company may be unable to properly meet its tax obligations, and banks will generally withhold tax from interest earned at the highest marginal rate, currently 47%.
An ABN is a sensible addition and provides several practical benefits. Importantly, obtaining an ABN does not in itself create any extra tax or reporting obligations. It is simply an identifier that can be obtained alongside a TFN application. As both registrations can generally be obtained together with minimal effort, having a TFN and ABN in place from the outset helps the strata company remain compliant, protect its financial interests, and avoid unnecessary administrative complications as circumstances change.
*A strata tax return is required for any year in which $1 or more of income is derived from non-owners. See our ‘A Guide to Strata Income Tax Matters’ flyer for more detail.
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