Withholding when a supplier does not quote an ABN¶

When another business supplies goods or services to your business, they should quote their Australian Business Number (ABN) on the invoice. If they do not, the Australian Taxation Office (ATO) says you generally have to hold back some of the payment — at the top rate — and send it to the ATO instead of paying it to the supplier.

You report the amount you held back at a label called W4 on your Activity Statement.

Why this matters¶

The ABN system lets businesses deal with each other without holding tax back. When a supplier does not quote an ABN, that safeguard is missing — so the rule shifts the job of setting money aside onto you. If you pay the full invoice anyway, you can end up out of pocket, because the ATO still expects the withheld amount from you.

What you will learn¶

• When you must withhold because a supplier has not quoted an ABN
• That you withhold at the top rate and report it at label W4
• The common situations where you do not need to withhold

Understanding the concept¶

The rule applies when a supplier makes a taxable supply to your business — an ordinary business-to-business sale of goods or services — and does not quote an ABN on the invoice or other document.

In that case you generally withhold at the top rate, which the ATO currently sets at 47%, from the payment. You pay that withheld amount to the ATO and report it at W4. You give the supplier the rest.

There are common exceptions where you do not need to withhold:

• The total payment for the supply is $75 or less, excluding GST.
• The supply is of a private or domestic nature, or is made as a hobby or private recreational pursuit — and the supplier gives you a written statement to that effect. The ATO provides a form, the "Statement by a supplier", for this.

There is also a separate arrangement called a voluntary agreement, where a business and a contractor agree that the business will withhold tax from payments. That is a different path with its own rules — this lesson is only about the no-ABN case.

Example¶

Jordan runs a landscaping business and hires Sam, a casual labourer, for a one-day job. Sam sends an invoice for $500 but forgets to put an ABN on it, and he is clearly running this as a business rather than a hobby.

Because there is no ABN and the payment is well over $75, Jordan generally has to withhold at the top rate. He holds back 47% of the $500 — that is $235 — and pays Sam the remaining $265. Jordan sends the $235 to the ATO and reports it at W4 on his next Activity Statement. When Sam later gives Jordan a valid ABN for future invoices, Jordan can pay those in full without withholding.

Common mistakes¶

• Paying the full invoice when no ABN was quoted — you may be left owing the withheld amount to the ATO yourself.
• Thinking the $75 test is GST-inclusive — it is $75 or less, excluding GST.
• Skipping the withholding for a "hobby" supply without getting the supplier's written statement — the statement is what supports not withholding.
• Confusing this with a voluntary agreement — that is a separate arrangement with its own rules.

How this works in myaccountant¶

Key points¶

• If a supplier does not quote an ABN on a business invoice, you generally must withhold.
• You withhold at the top rate, currently 47%, and report it at label W4.
• No withholding is needed if the payment is $75 or less, excluding GST.
• No withholding is needed for genuine private, domestic or hobby supplies with a written statement from the supplier.
• Voluntary agreements are a separate arrangement with their own rules.

Learn next¶

• PAYG withholding
• Reporting the tax you withheld
• Common PAYG reporting mistakes

General information only — not tax, super or financial advice.