The revelation that scores of tradies have been fraudulently quoting Australian Business Numbers (ABNs) that don’t belong to them, include that of hardware giant Bunnings, has prompted calls from the small business community to overhaul the system to weed out those securing an unfair advantage.
According to The Australian, chair of the federal government’s black economy taskforce, Michael Andrew, has admitted weakness in the ABN system, and revealed that Bunnings’ ABN is now one of the most quoted ABNs across the country.
The hardware giant’s ABN accounts for 40% of all ABNs quoted in the Northern Territory, according to Andrew.
These tradespeople are reportedly adding the retailer’s ABN to invoices they issue to customers, which makes it difficult to trace where money is flowing to. There is no suggestion Bunnings has done anything wrong.
Paul Drum, head of policy at CPA Australia, has suggested a complete overhaul of the ABN system is needed, telling The Australian that information uncovered by the black economy taskforce suggest hundreds of thousands of ABNs have been issued to individuals on tourist visas.
He suggests a real-time tracking policy for the numbers to catch out those incorrectly using the system for their own gain.
Speaking to SmartCompany this morning, Drum says streamlining the ability to check ABNs is an important step, because despite their best efforts, many SMEs don’t have the time to check whether invoices given to them by suppliers match up to the business sending the bill.
“Most are time poor, they don’t want to waste time. They wouldn’t be checking valid ABNs all the time,” he says.
Drum says small businesses shouldn’t be spooked by the idea any system overhaul causing more work for them, and any changes are a “balancing act” of improving rigour while also being reasonable in terms of compliance costs.
However, the discussion around the ABN system is just one part of the many conversations the taskforce is currently having, and Drum says it’s important SMEs are aware of the broader conversations on these issues.
Business operators can also consider “actively making their own input” into the process by submitting feedback when the taskforce’s final report is handed down, he says.
The team tasked with fighting lost revenue through the so-called ‘black economy’ have so far highlighted several concerns about Australia’s tax system. So far, targets have included companies dealing with large volumes of cash; the operation of the courier and cleaning sectors; and the role of accountants and lawyers in potential tax avoidance.
Ombudsman calls for ABN review
The spotlight may have only recently reached the ABN system, but Australian Business and Family Enterprise Ombudsman Kate Carnell says the business number scheme has been a worry for some time.
“There needs to be a review done of this — the ATO is acutely aware of this and has been doing a not insignificant amount of work,” Carnell says.
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The biggest problem for SMEs is that when individuals are fraudulently using the ABN system, it hits those who are playing by the rules in two substantial ways.
“It sends the absolute wrong message about the majority of businesses who are doing the right thing,” Carnell says, highlighting that despite the headlines, the vast majority of Australian businesses are trying to fulfil their tax obligations.
“And then these businesses that aren’t [obeying the rules] have a competitive advantage — they’re not paying what they’re supposed to pay.”
These two factors make it critical that Australia moves to fight tax avoidance, while also making sure there’s no additional unreasonable hurdles for businesses to get going, Carnell says.
“I think there needs to be a bit of pressure on this, but the best thing to do would to bring together the ABN, Australian Company Number, tax file number and the possible director’s number together,” Carnell says.
This would mean data could potentially be more easily tracked about an individual’s business activities, she says, rather than the current setup where there are multiple pieces of information.
However, Carnell says policymakers should be cautious about making the system “slower or more complex” by introducing higher ID requirements to get an ABN.
“It’s not in small businesses’ interests to have a system that is easy to scam, but why would we make it slower for people?” she asks.
The need to balance improved data tracking with reduced red tape for business owners is an ongoing discussion, particularly in the case of fighting phoenix activity in Australia.
A push from many sectors to make a ‘Director Identification Number’ compulsory for Australians wanting to become directors of companies has received widespread support, but the exact model of this possible registration process is unclear.
Once a model has been decided on, however, academics at the University of Melbourne and Monash University have suggested it would take only a fraction of a working day to register, while the upside could be recouping billions of dollars each year from phoenix companies dodging their obligations to creditors and the tax office.
SmartCompany contacted Bunnings and was told the business would not be making comment on the issue of others using its ABN.