Tax File Number - Definition and Overview

A Tax File Number (TFN) is a number issued to a person by the Australian Taxation Office and used to verify client identity and establish their income levels. It is a eight or nine digits number without any embedded meaning.

It serves a purpose similar to the American Social Security number, but its use is strictly limited, by law, to make sure that it doesn't become a de facto national ID number for individuals within Australia. In most cases, a person has no obligation to quote its Tax File Number if asked for it, even by its employer; in this case, taxes are withheld anonymously from the person's salary at the highest marginal rate.

Check digit algorithm

As is the case with many identification numbers, the TFN includes a check digit for detecting erroneous numbers. The algorithm, based on simple modulo 11 arithmetic as many other check digit schemes, has been kept secret within the Australian Taxation Office since its creation in the early 1970 in an attempt to avoid people deliberately creating fake but valid-looking numbers. Since then, the algorithm has been communicated to more than 20,000 external entities in Australia, such as employers, investment bodies, software makers, etc, and each of these entities had to sign a confidentiality agreement to make sure that the algorithm was kept secure. However, the algorithm has since been easily reverse engineered and is a good example of the failure of security through obscurity.

External references

• Tax File Number essentials (http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/001), on the ATO web site
• The check digit algorithm of the TFN (http://bioinf.wehi.edu.au/folders/fred/tfn.html)
• Guidelines on the use of the TFN (http://www.privacy.gov.au/act/tfn/)