There are some payments from suppliers that you don't have to withhold tax from, regardless of whether an ABN is provided or not. However you must have sufficient records to show the reason for not withholding.
If you are unsure if any of the following conditions apply, ask the supplier to give you a written statement that the supply of goods or services is excluded. The supplier may use the Statement by a supplier form, or create a statement containing the same information. You must keep their statement for five years.
If you have reason to believe the statement is false or misleading you must withhold the top tax rate from the total payment.
Total payment is $75 or less
When the payment for the full supply is $75 or less, exclusive of GST, you do not have to get an invoice with an ABN, a tax invoice or withhold tax. However, you should have evidence to support claims for input tax credits relating to these supplies.
You cannot avoid having to withhold by breaking down a larger supply into $75 amounts, but a series of small supplies of under $75 would not require withholding where no ABN was quoted.
Example 1
Ana has her shop sign painted. The painter invoices her for $150 and does not have an ABN. Ana cannot turn this into two $75 transactions and avoid withholding.
Ana has flowers delivered for the counter once a week and she is invoiced $40 each time. As these are separate transactions, Ana would not need to withhold if the florist does not quote an ABN.
End of exampleSupply isn't a business transaction
A supply is not considered a business transaction (and therefore you do not need to withhold tax) if:
- the supplier is an individual (not in business as a partnership, company or trust)
- for the supplier, it is a private or domestic supply, for example, when another business person sells your business a second-hand computer that has only been used at home for private purposes and is not part of their trading stock or business equipment
- the supply is made as part of a private recreational pursuit or hobby, for example, when you buy a picture to hang in your public business office from an artist who paints as a hobby.
The supplier should provide you with a written statement. A statement by a supplier form is available from our website or suppliers can create their own as long as it includes the same information.
The statement can be on the invoice. If it is separate, you must be able to link it to your transaction records so that you can show why you did not withhold.
If your business is a partnership, company or trust, and the supply is made through your business, this exception will not apply. You will have to withhold if the supplier doesn't quote their ABN.
Entire payment is exempt income for the supplier
You do not have to withhold from payments to suppliers whose income is exempt from tax, whether they provide an ABN or not. Common types of bodies exempt from income tax include:
- religious institutions
- schools, pre-schools, colleges, universities and other public educational institutions
- community service organisations, such as sports clubs, community centres, youth groups, community arts or theatres and other associations that have community service purposes
- public hospitals and non-profit private hospitals
- charities, whose income is exempt.
The supplier should provide you with a statement by a supplier form available from our website or suppliers can create their own as long as it contains the same information, including:
- a statement that its income is exempt from tax under subdivision 50A of the Income Tax Assessment Act 1997.
The statement can be on the invoice. If separate, keep the statement with your transaction records so you can show why you did not withhold.
The supplier does not need to provide proof of the income tax exempt status of the payment. You can accept the statement unless you have reasonable grounds to believe it is false, in which case you must withhold if no ABN is quoted.
The supplier is not carrying on an enterprise
If your supplier claims that they are not carrying on an enterprise and do not need or is not entitled to an ABN, you don't have to withhold tax.
The definition of enterprise is very broad and most activities would be enterprises if they are not:
- private or domestic
- private recreational pursuits
- hobbies
However, some activities may not be considered to be an enterprise and the operator would not be entitled to an ABN. Such activities are usually quite small and may be operated from home.
Example 2 – Owner provides services for a body corporate
No enterprise carried on
Daphne is a pensioner who, each month, tends the front garden of the unit complex in which she owns a unit. For this work, the body corporate gives Daphne a $100 discount off her levies. Daphne doesn't have an ABN. She would be considered to be making the supplies of her services in the course of a hobby or private recreational pursuit. The body corporate would, therefore, not be required to withhold from the discount given to Daphne.
Enterprise carried on
Patrick carries on a gardening business. He is asked by the body corporate to perform garden maintenance services for the body corporate, of which he is a member. Patrick invoices the body corporate for $250 but does not quote his ABN. The body corporate must withhold the top rate of tax from the payment to Patrick.
End of exampleOther conditions
- the supplier is an individual under 18 years of age and your payments to that person are $350 or less each week
- the goods or services are supplied through an agent who has quoted their ABN on an invoice or some other document relating to the supply
- the goods or services supplied are wholly input taxed under GST
See also:
You don't have to withhold tax from some payments from suppliers regardless of whether an ABN is provided or not.