Starting a new job? Thinking of freelancing? Or are you finally turning that side hustle into a full-blown business? Whatever your path, one thing’s for sure—sooner or later, you’ll come across two acronyms: TFN and ABN. And yes, they sound similar, but don’t be fooled—they serve different purposes.
Understanding the difference between TFN and ABN isn’t just tax talk—it’s the key to staying out of trouble with the ATO and keeping more of your hard-earned money. So, let’s clear the confusion. We’re breaking it down in plain English so you’ll know exactly which one you need and when.
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
To truly understand the difference between TFN and ABN, it helps to compare them across key features. While both are government-issued numbers used for tax purposes, they serve different roles depending on how you earn income in Australia.
The difference between TFN and ABN are:
| 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
- 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.
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: How to cancel ABN?
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-related 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.
