Unlocking the Mystery: Understanding the Differences Between ABN and TFN

Introduction:

Are you an international student planning on working in Australia? Knowing the difference between ABN and TFN is essential. In this article, we’ll discuss the differences between these two types of identification, and explain their respective purposes.

TFN:

A TFN, or Tax File Number, is a unique nine-digit identification number issued to employees and taxpayers in Australia. Anyone who plans on working in Australia will need to have a TFN. This number is used to track employee income and tax liability. TFNs are issued only once in a lifetime and are linked to an individual's tax records.

ABN:

An ABN, or Australian Business Number, is an 11-digit identification number issued to businesses in Australia. Every business operating in Australia must have an ABN. A sole trader may also operate using an ABN. An ABN is used to identify a business for tax purposes, and any transactions conducted by the business are linked to its ABN.

Differences between ABN and TFN:

1. Employment Status

When working through a TFN, an employee would have to sign a contract that identifies them as an employee of the business. If you're operating under an ABN, you're considered a self-employed business owner.

2. Pay

Through a TFN, an employer pays their employees a salary or wage that is deposited directly into the employee’s bank account. An ABN holder does not receive a salary, but instead invoices the business they work for and gets paid according to the agreement.

3. Taxes

TFN holders have taxes deducted from their paychecks before the money is deposited into their bank account. At the end of the financial year, a payment summary is distributed in MyGov that shows the amount of money earned and taxes deducted. ABN holders are responsible for managing their taxes and will not have any taxes deducted from their invoices.

4. Superannuation

TFN holders receive superannuation payments from their employer as a percentage of their salary, while ABN holders do not receive any form of superannuation from the businesses they work with.

5. Insurance

Those working under a TFN would be covered by work cover and personal indemnity insurance paid for by their employer. ABN holders are responsible for purchasing their own insurance to protect themselves and their business.

6. Leave

Leave entitlements such as annual and sick leave are provided to part-time or full-time TFN employees, while ABN holders are not entitled to any workforce-related leave because they work for themselves.

Working with both ABN and TFN:

International students working in Australia are often concerned about working on both ABN and TFN arrangements. It is possible to work on both simultaneously, so long as the hours worked are within the student visa guideline. For example, a student may work as an employee for a restaurant on a TFN, and as an Uber Eats driver as a contractor on ABN.

Sham contracting:

Employers sometimes try to ask employees to work under an ABN when they should be working under a TFN. It is important for employees to know the difference and for employers to offer the right type of contract to protect workers' rights. By visiting the Fair Work Australia website, individuals may find more information on this topic.

Conclusion:

Being an international student in a foreign country can be challenging. However, comprehending the differences between ABN and TFN and knowing how to use both effectively can make the student experience much more rewarding. Please visit the links and seek advice if you are unsure of which one applies to you and what your rights may be.