The law states that every business making a payment must check the validity of their suppliers.  They must check that:

1. Suppliers have provided an ABN and that it is a valid ABN and it belongs to them.
2. Check that the supplier is allowed to charge GST.
3. You must obtain a valid tax invoice from suppliers.

If your supplier used an invalid ABN or is not registered for GST but they have charged it, and you pay it to that supplier then the ATO position, based on the law, is that you are not allowed to claim back that GST from the ATO.

There are increasing reports of the ATO conducting reviews of businesses in the areas of supplier registration and validity of GST claims. Therefore, the business owner needs to understand that these are matters that should not be ignored and will be reviewed in an audit, with potential penalties applied by the ATO if GST is incorrectly claimed when the business owner knew it shouldn’t have been claimed.

ABN Lookup

As of February 2015, the Government have declared that the ABN Lookup Tool can now be relied upon.

The Commissioner of Taxation has advised that:
If you primarily rely on information about another entity in ABN lookup to self-assess your taxation liabilities or entitlements, and that information turns out to be incorrect:

• The Commissioner will not take compliance action to recover any tax shortfall
• You will also be protected against any false or misleading statement penalty and any interest charges.

However, you will not be protected against any liability to tax shortfall, penalties or interest charges if you and the entity on ABN Lookup are associates.

Accounting software companies are increasingly offering solutions within the software to make it easier for business owners to check the ABN status of a supplier by linking directly to the ABN Lookup website.

ICB Recommends

1. When a new supplier is being considered, or prior to any payment to a new supplier, check their GST status.
2. Once a year, check the ABN registration status of all major and/or regular suppliers you are conducting business with.
3. To be absolutely certain that you are entitled to claim back all GST charged to you by suppliers, the  comprehensive system would be to check all suppliers before any payment is made- but this is not a legal requirement.

When you use the ABN Lookup, always keep a copy of the results for your reference.