ABN and TFN Income Guide Australia 2025: Managing Both Income Types

Common scenario: You work a regular job (TFN income) and also do freelance work on the side using your ABN. This combination is increasingly common in Australia, but it creates unique tax obligations. This guide explains exactly how to manage both income streams correctly.

Understanding ABN vs TFN Income

Before diving into the complexities, let's clarify what each number represents and when you use them.

Tax File Number (TFN)

• Issued to all Australian residents for tax purposes
• Used for employment (employee/employer relationship)
• Tax is withheld by your employer (PAYG withholding)
• You receive a payslip and payment summary
• Entitled to employee benefits (super, leave, etc.)

Australian Business Number (ABN)

• Issued to businesses and sole traders
• Used for contracting/freelancing (business-to-business)
• No tax is withheld - you manage it yourself
• You issue invoices and keep your own records
• Responsible for your own super contributions

When Do You Need Both?

You'll need both an ABN and a TFN if you:

Work a regular job AND freelance - e.g., graphic designer employed at an agency who does weekend freelance projects
Have a side business - e.g., teacher who sells educational resources online
Do gig economy work - e.g., part-time retail worker who drives for Uber on weekends
Contract in your profession - e.g., IT worker employed at one company but contracts to others

Important: Sham Contracting

If you're working for one business regularly, following their instructions, using their equipment, and they control how and when you work - you may be an employee, not a contractor. This is called "sham contracting" and is illegal. If unsure, use the ATO's Employee/Contractor Decision Tool.

How Tax Works With Both Income Types

Your Total Income is Combined

At tax time, all your income is added together and taxed at your marginal rate. This includes:

Employment income (from your TFN job)
Business income (from your ABN activities)
Investment income (interest, dividends, rent)
Other income sources

Example: Combined Income Calculation

Sarah's Tax Situation (2024-25)

Employment income (TFN) $75,000

Freelance income (ABN) $25,000

Business expenses -$5,000

Taxable Income $95,000

Tax on $95,000: $19,093 + Medicare ($1,900) = $20,993

The Tax Shortfall Problem

Here's where many people get caught out. Your employer withholds tax based only on your employment income, assuming that's your only income source.

Warning: Unexpected Tax Bill

When you add ABN income on top of your employment income, you push your total into higher tax brackets. Since no tax was withheld from your ABN income, you'll owe the difference at tax time - often thousands of dollars.

Avoiding the Tax Shortfall

You have several options to avoid a large tax bill:

Option	How It Works	Best For
PAYG Instalments	Pay tax quarterly based on estimated annual income	Regular ABN income over $4,000/year
Withholding Variation	Ask employer to withhold extra tax from each pay	Predictable additional income
Savings Account	Set aside 30% of ABN income in a separate account	Variable/irregular ABN income
Voluntary Payment	Make voluntary payments to ATO during the year	One-off or occasional ABN income

GST: When You Need to Register

GST (Goods and Services Tax) is a 10% tax on most goods and services sold in Australia. Your GST obligations depend on your ABN turnover:

Under $75,000 Turnover

GST registration is optional (unless you're a taxi/rideshare driver).

Benefits of not registering: Less paperwork, simpler pricing, no BAS required.

$75,000+ Turnover

GST registration is mandatory within 21 days of reaching the threshold.

Requirements: Charge GST on sales, lodge BAS, claim GST credits on purchases.

Special Case: Rideshare and Food Delivery

If you drive for Uber, Ola, DiDi, DoorDash, or similar services, you must register for GST regardless of your income level. This includes:

Rideshare drivers (Uber, Ola, DiDi, etc.)
Food delivery drivers (Uber Eats, DoorDash, Menulog, etc.)
Courier services using your vehicle

BAS (Business Activity Statement) Explained

If you're registered for GST or have PAYG instalments, you'll need to lodge a BAS. This reports:

GST collected - GST you've charged on sales
GST paid - GST you've paid on business purchases
PAYG instalments - Your quarterly tax instalments

BAS Lodgement Options

Frequency	Who It's For	Due Dates
Quarterly	Most small businesses	28th of month after quarter ends
Monthly	Turnover over $20 million or by choice	21st of following month
Annually	Very small GST-registered businesses	With your tax return

Deductions: What You Can Claim

ABN Business Deductions

You can claim expenses directly related to earning your ABN income:

Common Deductions

✓ Equipment and tools
✓ Software subscriptions
✓ Home office expenses
✓ Internet and phone (business portion)
✓ Professional development
✓ Insurance (professional indemnity)
✓ Accounting fees
✓ Marketing and advertising

Vehicle Expenses (If Applicable)

✓ Fuel and oil
✓ Repairs and servicing
✓ Registration and insurance
✓ Depreciation
✓ Parking and tolls
✗ Home to work travel (not deductible)

Employment (TFN) Deductions

You can still claim work-related deductions against your employment income:

Work-related uniforms and protective clothing
Work-related travel (between work sites, client visits)
Union fees and professional memberships
Working from home expenses (separate from ABN home office)
Tools and equipment used for your job

Don't Double-Dip

If an expense relates to both your employment and your business, you must apportion it fairly. You cannot claim the full amount against both income types.

Superannuation Obligations

As an Employee (TFN Income)

Your employer must pay Super Guarantee (SG) contributions for you:

2024-25: 11.5% of your ordinary time earnings
2025-26: 12% of your ordinary time earnings

As a Sole Trader (ABN Income)

Super contributions are not compulsory for sole traders paying themselves. However, you can (and should) make voluntary contributions:

Personal deductible contributions - Reduce your taxable income
Concessional cap 2024-25: $30,000 total (including employer contributions)
Non-concessional cap: $120,000 per year

Super Strategy Example

Sarah earns $75,000 (employment) + $20,000 (ABN). Her employer pays $8,625 super.

She can contribute an additional $21,375 as a personal deductible contribution, reducing her taxable income from $95,000 to $73,625 - saving approximately $6,400 in tax.

Record Keeping Requirements

You must keep records for 5 years from the date you lodge your return. For ABN income, you need:

Income records: All invoices you've issued
Expense records: Receipts, bank statements, credit card statements
Asset records: Purchase records for equipment over $300
Motor vehicle records: Logbook (if using logbook method)
BAS and tax returns: Copies of all lodged documents

Recommended Apps for Record Keeping

• Xero / MYOB / QuickBooks - Full accounting software
• Wave - Free accounting for small businesses
• Rounded - Simple invoicing for freelancers
• ATO app - Record keeping for individuals

Common Mistakes to Avoid

1. Not Setting Aside Tax

Spending all your ABN income and having nothing for the tax bill. Set aside 25-30% of every ABN payment immediately.

2. Missing GST Registration Threshold

Not registering for GST when your turnover exceeds $75,000. Monitor your rolling 12-month income carefully.

3. Claiming Personal Expenses

Only claim expenses with a clear business purpose. Mixed-use items must be apportioned.

4. Not Paying Super to Yourself

Missing out on tax deductions and retirement savings. Consider voluntary super contributions from ABN income.

5. Poor Record Keeping

Losing receipts or not tracking income. Use cloud-based software that backs up automatically.

When to Get Professional Help

Consider using a registered tax agent or BAS agent if:

Your combined income is substantial (over $100,000)
You're registered for GST
Your business involves complex deductions (vehicle, home office)
You have investments or rental properties as well
You're unsure about contractor vs employee status

Cost of Professional Help

• Basic tax return with ABN income: $200-400
• With GST/BAS: $400-800+ per year
• Full bookkeeping service: $100-300/month
• Tax agent fees are tax-deductible!

Key Takeaways

✓ All income is combined and taxed at your marginal rate
✓ Set aside 25-30% of ABN income for tax immediately
✓ Register for GST if turnover exceeds $75,000 (or you're a rideshare driver)
✓ Keep records for 5 years - use accounting software
✓ Consider voluntary super contributions to reduce taxable income
✓ Get professional help if your situation is complex