Generally, if you are in business you:

• pay tax on your income, and
• can claim a deduction for business expenses.

If your activities are a hobby you:

• don’t pay tax on money you earn, and
• can’t claim a deduction for expenses.

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Sole traders, partnerships, companies and trusts have different legal obligations and are taxed differently.

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According to the Australian Tax Office "The Australian Business Number (ABN) is a single identifier for all business dealings with the tax office and for dealings with other government departments and agencies." 

It is not compulsory to have an ABN, but your business will need an ABN to:

• register for goods and services tax (GST) and other business tax registrations
• deal with other businesses, and
• avoid having amounts withheld from payments.

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Goods and services tax (GST) is a broad-based consumption tax charged at the rate of 10% on the sale of most goods and services and other things in Australia.

GST is charged at each step in the supply chain, with registered businesses including GST in the price of goods and services they sell.

For GST, a sale or supply includes a sale of goods, lease of premises, hire of equipment, giving advice, export of goods, and supply of other things. A purchase includes an acquisition of goods or services such as trading stock, a lease, consumables and other things.

• your business expects annual sales of $50,000 or more, or
• you are a taxi operator or hire car operator.

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 You need an ABN and GST registration in order to claim GST credits for any GST you have paid for goods and/or services you have used in your business. If you are supplying goods or services, you will need to be able to quote an ABN so that others businesses do not withhold tax at the top marginal rate when they pay you.