Sham contracting and the ABN

Many workers are told by their employer to get an Australian Business Number (ABN). Such workers are said to be “independent contractors” rather than employees. This allows the employer to avoid various obligations, such as minimum wage rates, paid sick leave and annual leave.

ABNs are issued by the Australian government through the website (abr.gov.au). No payment is required to obtain an ABN from this site.

Yet many people pay private companies to get them an ABN. Googling the term “ABN” recently, I found advertisements saying things like: “ABN registration for only $95.”

Only the government can actually issue an ABN. Presumably the commercial websites take the information given to them by their clients and put it into the government’s website, then pass the ABN back to the client.

But why are people paying to get an ABN when it can be obtained for free? One reason is that people are simply unaware of how to apply.

But another reason may be that those who apply via abr.gov.au are often rejected. The website takes applicants though several questions to determine if they are allowed to have an ABN.



These “entitlement” questions are meant to find out whether or not the applicant is genuinely carrying on a business, as distinct from being an employee. People are also rejected if they say they have neither started their business nor taken steps towards setting up a business.

Some people may apply for an ABN via a commercial website in the hope that they will be helped to give the “right” answers.

The “entitlement” questionnaire is an ineffective and unfair way of combating sham contracting. There are millions of people who already have an ABN. This means that in many cases, if a new applicant for an ABN is rejected, an employer can just get someone else who does have an ABN.

Employers sometimes refuse to pay a worker until he or she manages to get an ABN. This is illegal, but many workers are unaware of their rights, or frightened they will be sacked if they complain.

If the government were serious about stamping out sham contracting, it would target the employers who insist on workers getting an ABN, rather than making life difficult for the workers themselves.

But the best way to stamp out sham contracting would be to have strong unions that are able to take industrial action against employers who pressure workers to become “independent contractors”. Laws restricting the right to strike, such as the Fair Work Act, make the unions' task much harder.