ABN vs TFN: the same $70,000, and the $8,400 of super you may be owed (2025-26)

“Get an ABN — you’ll take home more.”

It’s one of the most common things said to workers in hospitality, construction, cleaning, beauty, delivery and care work in Australia. And for about ten months of the year, it looks completely true: the money that hits your account is bigger, because nobody is taking tax out of it.

Then the return gets lodged, and the picture changes.

Here’s what actually differs between working on a TFN and working on an ABN — including the $8,400 a year that quietly goes missing on a $70,000 income, and the fact that you may be able to get some of it back.

(Figures are for FY2025-26 — the return being lodged now — unless tagged otherwise. General information only, not personal advice. “May” means may: your own facts decide.)

First, kill the myth: there is no special “ABN tax rate”

A sole trader’s business profit goes into the same individual tax return as anyone’s wages, and it’s taxed at exactly the same rates, with exactly the same $18,200 tax-free threshold.

FY2025-26 resident rates: nil to $18,200, then 16% to $45,000, 30% to $135,000, 37% to $190,000, 45% above that — plus the 2% Medicare levy. (From 1 July 2026, that 16% band dropped to 15%, and it’s legislated to fall to 14% from 1 July 2027.)

So on $70,000 of taxable income, the tax is the same either way:

16% on $26,800 = $4,288
30% on $25,000 = $7,500
Medicare levy, 2% of $70,000 = $1,400
Total: $13,188 — an effective rate of about 18.8% — leaving $56,812.

Identical on both sides of the line. What differs is when you pay it, who takes it out, and what else comes with the job.

The comparison that actually matters

On a TFN, that $13,188 never really belongs to you. Your employer withholds it from each pay under PAYG withholding, so what lands in your account is already after tax. On top of the $70,000, your employer pays 12% superannuation guarantee — $8,400 into your fund. And your $70,000 covers four weeks of paid annual leave, paid public holidays and paid sick leave.

On an ABN, the full $70,000 lands in your bank account across the year. Nothing is withheld. The $13,188 is still owed — it just arrives as one bill after you lodge. There’s no super. There’s no paid leave: the weeks you don’t work, you don’t get paid.

Same headline number. One of them comes with $8,400 of super and about six weeks of paid annual leave and public holidays — with paid sick leave on top of that; the other doesn’t.

The $8,400: super you may still be owed

This is the part worth reading twice, because it’s the one that can put money back.

Super law has a rule that doesn’t care what your contract is called. Under section 12(3) of the Superannuation Guarantee (Administration) Act, a person working under a contract that is wholly or principally for their labour is an employee for superannuation purposes — even if they hold an ABN, even if they send invoices.

Think about what “principally for your labour” describes: you turn up, you do the work yourself, you’re paid for your time, and you don’t supply the substantial plant or equipment or subcontract it out to someone else. That’s a very large share of labour-only ABN arrangements in hospitality, cleaning, construction, care and beauty.

If that’s your situation, your engager may have owed super all along — 12% of your earnings, $8,400 a year on $70,000, plus what it would have earned by now. The ATO’s ruling TR 2023/4 and guideline PCG 2023/2 set out how it’s assessed, and the ATO takes unpaid-super enquiries from workers.

One more thing changed on 1 July 2026: Payday Super is now law. Employers must have super received by the fund within seven business days of paying wages, instead of quarterly, with penalties for shortfalls. Employees can now watch super land with every pay. On an ABN, nobody does that for you — though as a sole trader you can make personal deductible contributions yourself, within the concessional cap ($32,500 for FY2026-27), if you follow the notice-of-intent process.

You don’t actually get to choose

Here’s the uncomfortable bit: whether you’re an employee or a contractor is not a decision you or your boss make. It’s a conclusion drawn from the real relationship.

For tax and super, the ATO applies TR 2023/4 and PCG 2023/2, looking at the totality of the relationship as set out in your contract — following the High Court’s 2022 decisions in Personnel Contracting and Jamsek.
For workplace law, since 26 August 2024 the Fair Work Act applies a whole-of-relationship test: the real substance, practical reality and true nature of the working arrangement — including how it actually runs day to day, not just what the paperwork says.

Holding an ABN proves nothing. Anyone can get one in minutes. It does not turn an employment relationship into a contracting one, and signing a contractor agreement doesn’t either.

Where a business misrepresents employment as contracting, that’s sham contracting, and it’s unlawful. The employer’s defence was tightened from a “recklessness” test to a “reasonableness” test, so it’s harder to lean on. Civil penalties run to $469,500 for a company, and up to $4.695M for serious contraventions. In one Federal Court case, a small business was penalised $197,000 for telling three workers with disability to get ABNs and sign contractor agreements while doing the same work under the same control as before.

If you’re the worker in this picture, you’re not the one at fault — and you don’t need to accuse anyone of anything to get it checked. The ATO offers an employee/contractor decision tool, and Fair Work and the ATO both take enquiries.

Nobody withholds your tax — so how much should you set aside?

On a TFN, PAYG withholding does the saving for you. On an ABN, that’s your job, and it’s the single biggest reason ABN workers get a shock in October.

Two numbers to hold onto:

Your average rate at $70,000 with no deductions is about 18.8%.
Your marginal rate matters more: every extra dollar above $45,000 costs 32% (30% plus the 2% Medicare levy). And if you have a study loan above the HELP threshold, add 15c — that’s 47c in the dollar on the next dollar you earn.

A practical rule of thumb is to move 25–30% of every invoice into a separate account the day it’s paid. It’s a rule of thumb, not advice — but it covers the tax, and it means the bill is boring instead of frightening.

The year-two shock: PAYG instalments

Year one on an ABN is the one people budget for. Year two is the one that catches them.

Here’s the sequence. In your first year, nothing is withheld, and you pay the whole year’s tax as a lump sum after you lodge. Fine — painful, but expected. Then the ATO looks at that return and decides you should be pre-paying the next year’s tax as you go, the way an employee does through withholding. You get entered into the PAYG instalments system.

For an individual, entry is automatic once all three of these are true on your latest return:

instalment income of $4,000 or more, and
tax payable of $1,000 or more, and
notional tax of $500 or more.

The crunch is the overlap. In that second year you can be paying last year’s bill and this year’s instalments in the same few months. Nothing has gone wrong and you haven’t been penalised — you’re simply catching up to the pay-as-you-go rhythm an employee was always on. But if you budgeted for one bill and two arrive, it feels like a penalty.

Two things make it manageable. First, instalments are credited against your final tax bill — this is prepayment, not extra tax. Second, if your income has genuinely dropped, you can vary an instalment down; the general safe harbour is to land within 85% of your actual liability, or the shortfall can attract interest. Note also that instalment income excludes GST and capital gains.

If you keep the 25–30% aside from day one, the year-two overlap is already funded and the whole thing turns into an administrative event rather than a financial one.

Your study loan doesn’t stop just because nobody withheld it

On a TFN with a HECS-HELP or other study loan, your employer withholds extra from every pay once you’re over the threshold, and it’s applied to the loan when you lodge. It’s invisible and automatic.

On an ABN, nobody withholds it. The loan repayment is still calculated on your income when you lodge — it just arrives bundled into the same bill as your income tax, and it’s the single most common reason an ABN worker’s first tax bill is far bigger than they modelled.

Under the repayment system that started 1 July 2025, repayments are marginal: you repay a percentage of the income above the threshold, not a percentage of everything. The threshold is $67,000 for FY2025-26, rising to $69,528 for FY2026-27. The first band charges 15c in each dollar above the threshold, with a 17c band above that.

Two consequences worth planning around:

The marginal design means crossing the threshold no longer knocks a cliff-sized chunk out of your income — the old system’s harsh step at the boundary is gone.
But it stacks on your marginal rate. Above $45,000 with a study loan, the next dollar can cost 32c of tax plus 15c of loan = 47c. That’s the number to set aside against, not the 18.8% average.

If you have a study loan and you’re on an ABN, treat the top of the 25–30% range as your floor, not your target.

The upside: what you can claim on an ABN

It isn’t all one way. Running a business genuinely opens up deductions an employee can’t touch.

As a sole trader, expenses incurred in earning your business income are deductible from the first dollar: tools, materials, equipment, business insurance, software and subscriptions, the business portion of your vehicle (with a logbook), the business share of a home-based business, accounting fees. The $20,000 instant asset write-off is law for FY2025-26 — an asset costing under $20,000, first used or installed ready for use by 30 June 2026, for a business with turnover under $10M, written off in full, per asset. (Making it permanent from 1 July 2026 was announced in the 2026-27 Budget but the enabling bill was not yet law at the time of writing — treat it as proposed.)

An employee is narrower: work-related expenses only, no ordinary home-to-work travel, home-office hours via the 70c per hour fixed rate. From FY2026-27 employees get a $1,000 instant work-related deduction — the higher of $1,000 with no receipts or their actual expenses — but note that’s on the return lodged from July 2027, not the one you’re lodging now, and it doesn’t replace a sole trader’s ordinary business deductions.

One caution that applies to both sides: a deduction is not a refund. A $20,000 write-off is a $20,000 deduction; at a 32% marginal rate it saves you about $6,400 in tax — not $20,000 in your pocket. Keep records for five years either way.

GST: the $75,000 line — and the rideshare exception

GST is a separate registration from your ABN, and it has its own trigger.

The general rule: you must register for GST once your annual turnover reaches $75,000 (that’s gross turnover, not profit) — or if you expect to reach it. Once registered, you add 10% GST to what you charge, you can claim back the GST on your business purchases, and you lodge a BAS (usually quarterly).

The exception that catches people: if you drive taxi, limousine or ride-sourcing — Uber, DiDi and the like — you must register for GST from the very first dollar, regardless of turnover. There is no $75,000 grace period for that work. Food delivery is not ride-sourcing, so a delivery-only rider falls back to the ordinary $75,000 threshold.

Two practical notes. Registering means the GST portion of what you collect was never yours — set it aside like the income tax, or the BAS becomes a nasty surprise on top of the annual bill. And if you’re under $75,000 you can register voluntarily, which occasionally makes sense if you buy a lot of GST-inclusive equipment, but it also commits you to lodging BAS.

The real question: is the rate actually higher?

If you’re being offered ABN work, the only honest comparison is what you’d need to charge to end up in the same place.

Start from a $70,000 employee salary:

Super adds 12% → × 1.12
Paid leave matters more than people expect: an employee is paid for 52 weeks but works about 45.8 of them, once four weeks of annual leave and around eleven public holidays come out → × 1.135
Together: about $89,000 of invoicing just to match — roughly 27% more.
Value the ten days of paid sick leave too, and it’s closer to $93,000 — about 33% more.

And that’s before your own public liability or income protection insurance, unpaid admin and BAS time, and the fact that you generally have no workers compensation cover, no notice period, no redundancy pay and no unfair dismissal protection.

So the working rule is simple: on an ABN you need roughly 25–30% more, on the same hours, just to stand still. If the ABN rate on offer is the same as the wage — or only a little above it — it isn’t a better deal. It’s a pay cut wearing a bigger number.

Both at once: a TFN day job and an ABN side hustle

This is now the most common shape of all — a salaried job plus driving, delivering, freelancing or selling on the side. The single biggest misunderstanding about it is worth stating bluntly.

There is no second tax-free threshold. You are one taxpayer, lodging one return, with one $18,200. That threshold is already used up by your day job. So every dollar of side income lands on top of your salary and is taxed at your marginal rate — 32% above $45,000, and 47c with a study loan in the mix. There is no “you don’t have to declare it under $X” rule for a side hustle; the $18,200 applies to your total taxable income, not per job.

That produces the classic outcome: someone earns $12,000 on the side, assumes it’s under the threshold and therefore free, and discovers they owed roughly a third of it. Nothing went wrong — the money was simply never theirs to keep.

A few things that follow:

Don’t tick “claim the tax-free threshold” twice. You claim it with your main employer only. Claiming it on a second TFN job systematically under-withholds and produces a bill.
Your side-hustle deductions come off the side-hustle income, and losses may be quarantined by the non-commercial loss rules rather than reducing your salary — a genuine business with a real profit motive is treated differently from a hobby that runs at a loss.
The set-aside percentage is higher for a side hustle than for a full-time ABN, because you’re stacking on top of an already-taxed salary rather than starting at zero. Marginal, not average, is the number that matters.

Forget hiding it: the ATO already has your gig income

If any part of the plan is that the side income won’t be noticed, that plan expired.

Under the Sharing Economy Reporting Regime (SERR), the platforms report you directly. Ride-sourcing and short-stay accommodation platforms have reported since 1 July 2023; food delivery, asset hire and task-and-services platforms joined from 1 July 2024. Reporting is twice a year, and it includes your identity details and your gross income through the platform.

The practical effect is that your gig earnings pre-fill your tax return. The ATO isn’t investigating you — it already holds the number and is comparing it to what you declare. A mismatch generates an automatic “we noticed income from…” letter, which is a far worse way to meet this than simply reporting it.

The same logic runs through crypto (exchanges report identity and transactions), bank interest, share dividends and private health cover. Data matching is the default now, not an audit technique.

The genuinely useful move if you’re behind: a voluntary disclosure or an amendment made before the ATO contacts you can substantially reduce shortfall penalties — often by a large margin. Coming forward first is worth real money. Waiting for the letter forfeits it.

No ABN on the invoice = 47% withheld

A short but expensive one.

If you supply goods or services to a business and don’t quote an ABN on your invoice, the payer is required to withhold 47% of the payment and send it to the ATO. Not as a penalty — as a default. You’d get it back when you lodge, but you’ve handed nearly half your cash flow to the ATO for up to a year in the meantime.

Two things people get wrong here:

It’s about the invoice, not the entity. Having an ABN doesn’t help if the number isn’t quoted on the document you send. Put your ABN on every invoice.
Quoting an ABN doesn’t prove you’re a contractor. This is a withholding rule, not a classification rule. A worker who is really an employee is still an employee — quoting an ABN just means the payer doesn’t apply the 47% default. It doesn’t validate the arrangement, and it doesn’t remove the engager’s super or PAYG obligations.

There are limited exceptions (such as supplies under $75 excluding GST, or where the supply is private or domestic in nature), but for ordinary business-to-business work, assume the rule applies.

Students and working holiday makers

Visa status changes the tax maths more than anything else on this page, and this is the area where general information is least reliable — your own facts genuinely decide the answer.

Working holiday makers (subclass 417 and 462) are taxed under a separate scale. For FY2025-26 it’s 15% on the first $45,000 — with no tax-free threshold at all — then the ordinary rates above that ($45,001–$135,000 at 30%, $135,001–$190,000 at 37%, above $190,000 at 45%). The 15% applies from the first dollar, so the $18,200 that anchors every other example in this article simply doesn’t exist for a WHM. For the employer to apply that 15% rate, they must be registered with the ATO as an employer of working holiday makers; if they aren’t registered, they’re required to withhold at foreign resident rates instead.

The critical point for this article: giving your employer an ABN does not change any of that. The ATO is explicit that if the arrangement means the working holiday maker is really an employee, the employer must tax them using the working holiday maker tax table even if the worker provides an ABN. “Just get an ABN” is not a way out of employee status for a backpacker, and it never was.

Also worth knowing: condition 8547 on 417/462 visas limits work with any one employer to six months without written permission from Home Affairs — and for a genuine sole trader, each client is generally treated separately. That’s a Home Affairs condition, not a tax rule, but it drives a lot of the ABN pressure in backpacker work.

International students are usually in a different position again. If you’re enrolled in a course lasting six months or more, you may well be an Australian resident for tax purposes — which means you do get the $18,200 threshold and the ordinary resident rates. A course shorter than six months, with the intention to leave afterwards, points towards non-resident treatment: no tax-free threshold, and all Australian income taxed at foreign resident rates. If you become a resident part-way through a year, the threshold is pro-rated rather than lost, with a floor of at least $13,464.

Residency for tax is not the same thing as your visa, and it’s not a choice. If you’re a student or on a working holiday and doing ABN work, get the residency question settled before you model any of the numbers above.

The paperwork each side actually owes

Most of the friction in these arrangements comes from nobody being clear on who owes which document. Here’s the split.

On a TFN, the employer does the administration:

You complete a TFN declaration when you start, which sets your withholding and whether you’re claiming the tax-free threshold.
You get a payslip for every pay — generally required within one working day of payday — showing gross, tax withheld and super.
Your pay and tax are reported to the ATO through Single Touch Payroll, and at year end you get an income statement (not a paper group certificate) that pre-fills your return. Wait until it’s marked tax ready before you lodge.
Super appears in your fund — and since 1 July 2026 under Payday Super it should arrive within seven business days of each pay, so you can actually check it.

On an ABN, all of it is yours:

Issue a tax invoice for every job, with your ABN on it (see the 47% rule above), and add GST only if you’re registered.
Keep every record for five years from lodgement: invoices issued, receipts for expenses, a logbook if you’re claiming vehicle use, and bank records separating business from private.
Lodge a BAS if you’re registered for GST, and pay PAYG instalments once you’re in the system.
Track your own super — nobody contributes for you, and personal deductible contributions need the notice-of-intent process to be deductible.
Your income is not pre-filled from a payslip. It comes from your own records — and, for gig work, from the platform data the ATO already holds.

The asymmetry is the whole story in one table: on a TFN the administration is done for you and the protections come attached; on an ABN you get more control and every obligation that goes with it.

What to do this week

Check where you actually stand. Use the ATO’s employee/contractor decision tool, honestly, based on how the work really runs.
If your work is essentially your own labour, ask about super. You may be owed 12% — and the ATO takes unpaid-super enquiries.
If you’re genuinely contracting, open a second bank account today and move 25–30% of every invoice into it.
Keep your records — invoices, receipts, logbook, five years.
Get the classification checked before you sign anything, not after the bill arrives.

None of this makes ABN work a bad choice. Real contracting, priced properly, can be an excellent one. The mistake is taking employee pay for contractor risk — and only finding out in October.

General information only, current at July 2026 and based on FY2025-26 rules unless tagged otherwise. It doesn’t take your circumstances into account. Confirm your own position with the ATO or a registered tax agent.