The difference between TFN and ABN is that a TFN (Tax File Number) is a unique identifier issued to individuals by the Australian Taxation Office to manage personal tax obligations, lodge tax returns, and track superannuation contributions. An ABN (Australian Business Number), on the other hand, is a unique 11-digit number issued to businesses and organisations to identify themselves in commercial activities, register for Goods and Services Tax (GST), issue invoices, and interact with the ATO for business-related taxation purposes.
To put it briefly, an ABN is necessary for handling business taxes and conducting lawful business operations, whilst a TFN is mostly for personal tax matters. Individuals and business owners can stay compliant and steer clear of needless tax problems by being aware of the differences.
Is ABN and TFN the Same?
No, an ABN and a TFN are not the same. A TFN (Tax File Number) is like your personal tax ID and is used to manage your income tax and superannuation. An ABN (Australian Business Number) is for businesses. It lets a business operate legally, register for GST, and deal with the ATO and other companies. Simply put, your TFN is for you personally while an ABN is for your business.
What Is A TFN (Tax File Number)?
A Tax File Number (TFN) is a nine-digit number assigned by the Australian Taxation Office (ATO) to identify individuals and companies in the tax system.
What is TFN Needed for?
- Used for lodging your income tax return
- Helps your employer estimate how much tax to withhold from your salary.
- Required to access superannuation and government services like Centrelink
Who Needs TFN?
- All employees in Australia
- Freelancers/contractors (alongside ABN if running a business)
- Students earning an income.
- People claiming government benefits or opening a bank account
What Is An ABN (Australian Business Number)?
An Australian Business Number (ABN) is an 11-digit number issued by the Australian Business Register (ABR) and is essential for businesses and self-employed individuals.
What is ABN Needed for?
- Identifies your business to the government and clients
- Required to register for GST (if your turnover exceeds $75,000)
- Allows you to issue invoices and claim GST credits
- Used when applying for business-related licenses and permits
Who Needs An ABN?
Having an ABN allows you to demonstrate that you are operating as a legitimate business in Australia.
- Sole traders
- Partnerships
- Companies
- Trusts
- Freelancers or contractors invoicing clients for work
Difference Between TFN And ABN
Curious about TFN and ABN? Let’s break down their differences and see how each works in Australia.
| Feature | TFN (Tax File Number) | ABN (Australian Business Number) |
|---|---|---|
| Number Format | 9 digits | 11 digits |
| Issued By | Australian Taxation Office (ATO) | Australian Business Register (ABR) |
| Used For | Reporting personal income tax, managing superannuation | Running a business, registering for GST, and issuing invoices |
| Needed By | Employees, students, and individuals earning a salary | Sole traders, businesses, freelancers, and independent contractors |
| Tax Rate Implications | Without a TFN, you’re taxed at the highest marginal rate | Without an ABN, clients may withhold 47% from payments |
| Cost | Free | Free via ABR (some third-party services may charge a fee) |
| Registration Time | Usually takes 15–28 days | Can be issued instantly online through the ABR website |
Learn the Difference between ABN and ACN
Why Does This Comparison Matter to You?
Let’s break it down further with examples:
- If you’re starting a new job or earning wages through employment, you need a TFN. Without it, your employer might deduct the highest rate of tax from your pay—ouch!
- If you’re freelancing or starting a business, you’ll need an ABN. Without one, your clients might legally withhold 47% of your income, assuming you’re not a registered business. Plus, you can’t legally invoice or register for GST without it.
This side-by-side comparison shows that while both numbers relate to taxes, they apply to different types of income. Knowing which one suits your situation helps you avoid overpaying tax and ensures you’re complying with the ATO’s rules.
Recommended Read: Can I Cancel ABN Online?
Do You Need a TFN to Apply for an ABN?
Yes, in most cases, you will need a Tax File Number (TFN) when applying for an Australian Business Number (ABN). Your TFN helps the Australian Taxation Office (ATO) verify your identity and link your business activities to your personal or organisational tax obligations.
While an ABN enables your company to function legally, register for GST, and issue invoices, your TFN ensures that all income and tax reporting is properly associated with you or your business entity. Without a TFN, the ABN application process may take longer and include additional verification processes.
In short, having your TFN available makes applying for an ABN easier and ensures that your business begins on the appropriate tax footing.
Recommended Read: Find the lost ABN
Do You Need a Separate TFN for Your Business?
You do not always require a distinct TFN for your business. If you operate your firm as a sole proprietor, you can use your personal Tax File Number (TFN) to pay both personal and business taxes. All of your business income will be reported on your personal tax return.
If your business is organised as a corporation, partnership, or trust, it is treated as a different legal entity and requires its own TFN. This ensures that your business income is accurately taxed and remains separate from your personal income.
Lastly, your firm’s structure will determine whether you need a unique TFN or not. By using the right TFN, you may avoid any problems with the ATO and make sure that your tax reporting goes easily.
Real-Life Scenarios: Which One Do You Need?
Employee At A Café
You just got hired at a local café. You’re on the payroll, so you only need a TFN. Your employer handles tax and super.
Freelance Graphic Designer
You work with multiple clients and invoice them. You’ll need both a TFN (for lodging your personal tax return) and an ABN (to invoice legally).
New Business Owner
You’re starting an online clothing brand. You’ll need an ABN to register your business and maybe a TFN if you’re paying yourself wages or hiring staff.
Understanding the difference between a TFN and an ABN helps ensure you set yourself up correctly from the start.
Recommended Read: Can ATO Track ABN Income?
Can You Have Both A TFN And An ABN?
Yes, and in many cases, it’s necessary. There might be some difference between TFN and ABN, but:
If you’re juggling a part-time job and also running a side hustle or freelancing, you’ll need both a TFN (Tax File Number) and an ABN (Australian Business Number). Here’s why:
- Your TFN is tied to your personal income, such as wages you earn from your part-time job. It allows your employer to deduct the correct amount of tax from your earnings and contribute to your superannuation.
- On the other hand, your ABN is linked to your business activities. If you provide services or products as a freelancer, sole trader, or small business owner, you must have an ABN to operate legally. It allows you to invoice clients, charge GST (if applicable), and report business income separately from personal income.
Why Do You Need Both ABN and TFN?
Each number serves a different purpose, and having both ensures that your personal and corporate incomes are separate. There is difference between TFN and ABN but sometime you need both. For example, assume you work part-time and run a freelance design firm. In that case, your TFN will be used for your job income (taxes will be deducted from your wages), while your ABN will be used for your freelance business (you’ll need it to issue invoices and manage your business services).
How Does ABN and TFN Work In Practice?
When you’re filing your tax return, you’ll report both types of income separately. The income from your job will be taxed as personal income, while the income from your freelance or business activities will be reported as business income. This separation allows you to apply for tax deductions related to your business activities, like office supplies, work-related travel, or business expenses.
Why Are TFN and ABN Important?
Keeping your income streams separate makes it easier to stay compliant with the ATO and helps avoid overpaying taxes. It also ensures that you’re correctly managing your taxes for both your personal and business finances, keeping you on the right side of the law.
Conclusion
By now, you should grasp the difference between TFN and ABN and how it affects your tax obligations and commercial activities in Australia.
Whether you’re starting a side hustle, jumping into freelancing, or simply entering the workforce, knowing which identifier you need—and how to apply for it—makes the process smoother and helps you stay on the right side of the ATO.
Need personalised guidance on your tax or business setup?
Contact ISM Accountants—we’re here to make taxes simple and your financial future secure. Explore more of our tax services in Australia.
FAQs
Yes, but your income will be taxed at the highest rate, and it can create issues during tax time.
If you’re invoicing clients or earning income outside of employment, yes.
TFN take up to 28 days; ABN are usually instant if applied correctly.
Yes, you should cancel it through the ABR to avoid future compliance issues.
Only if your business earns over $75,000 annually, or if you want to register voluntarily.
