Australia crowns to be the largest country in Oceania and also boasts of being the world’s sixth largest country with an area of approximately 7.7 million square kilometres. The country comprises six states and two territories namely, the Australian Capital Territory (which includes Canberra, the political capital of Australia), New South Wales, Northern Territory, South Australia, Queensland, Victoria, Tasmania, and Western Australia. Australia shares close neighbourhood with Indonesia, Papua New Guinea and East Timor.
The country is known to have one of the strongest, open, flexible and most competitive economies in the world. In fact, it is one of the largest economies in the Asia Pacific region following China, Japan and Korea. Along with the strong economic growth, Australia also enjoys low inflation, which makes it all the more attractive for investors for doing business in the country.
Australia ranks 18th in the World Bank’s, Ease of Doing Business Report 2019. This is a testament to the country’s forward-thinking approach to business, protection of intellectual property rights, sound business regulatory environment and openness to global commerce.
This article covers everything you need to know about doing business in Australia, right from understanding the country’s tax and legal compliances to knowing about the types of business entities that can be formed.
Doing Business in Australia
Australia ranks on 12th position in the world economy and enjoys the 6th highest per capita GDP. Major sectors that contribute to economic growth include mining-related exports, banking, manufacturing, telecommunications, tourism and agriculture.
MNCs consider Australia as the best place for setting up their regional headquarters as the country offers them an opportunity to easily target the dynamic Asia Pacific region. It is also a leading financial centre in the Asia Pacific region.
The corporate tax rate in Australia is 30% which is very competitive as compared to other major economies. Moreover, it offers cost advantages to businesses in terms of office space, industrial land, utilities, transport infrastructure, etc.
In addition, the Government in Australia welcomes and encourages foreign investment. Also, the legal framework and government policies are very liberal and transparent.
Types of Business Entities for Incorporation in Australia
You can incorporate the following types of business entities in Australia:
- Private Proprietary Company (Limited Liability Company)
- Limited Liability Partnership
- Australian Trading Trust
- Public Limited Company
- Representative Office
Depending on the type of entity that you choose to incorporate, the timeframe for incorporation, rules and regulations vary. Every type has its own advantages and disadvantages. Therefore, one must analyse all the conditions before incorporating a business entity in Australia.
Benefits of Registering a Company in Australia
Some of the advantages of registering a company in Australia include:
- Quick business registration within a weeks’ time owing to simple and direct rules
- Multiple trade agreements with other nations
- World-class infrastructure
- Educated and skilled labour force
- Incentives offered by The Australian Trade Commissions (Austrade) helps international companies source goods and services in the country. It also aids in identifying potential investment projects and strategic business partners.
- Safe environment to conduct business and trade
- Advanced nation
- Suitable location in the Asia Pacific region for conducting research and development
Tax Registration and Filing in Australia
Australian domestic corporations have to pay corporate income tax on worldwide income, including income earned by their foreign branches. Some of the important things to consider in relation to taxation in Australia are:
|Corporate Income Tax Rate||30%|
|Capital Gains Tax Rate||30%|
|Interest paid by Australian Branch of Foreign Bank to Parent||5%|
|Construction and Related Activities||5%|
|Goods and Services Tax||10%|
|Fiscal Year in Australia||1 July to 30 June|
|Companies with year-end of 30 June||To file returns by the following 15 January|
Australia’s Double Taxation Treaties
Australia has double taxation treaties with many countries throughout the world including Singapore, India, Canada, France, Germany, Indonesia, Malaysia, South Africa and the United Kingdom among others.
Legal and Compliance Requirements in Australia
All incorporated entities in Australia are required to comply with the below mentioned laws:
- In order to form a limited liability company, the minimum requirement is 1 shareholder and 1 director. Non-resident investors have to appoint 1 director living in Australia.
- For trust to function as an alternative to a trading company, they have to get registered with the Australia Companies Registrar and tax authority.
- If all the trustees of a trust company are living outside the country, they have to appoint an Australian resident as a trustee or as a public officer.
- Limited liability partnerships must comprise of general partners whose liabilities extend up to their personal assets along with a limited partner whose liability only extends to their contribution. In addition, a minimum of 1 general partner must be an Australian resident.
- Public limited companies must have a minimum of 3 directors out of which 2 must be Australian residents.
- All branches in Australia are required to appoint a local agent who can accept services and notices on behalf of the foreign company. In addition, a branch is also required to have a registered address in Australia.
- Representative offices are restricted from engaging in activities that amount to carrying business.
Company Secretarial Compliance in Australia
Before starting a business in Australia, you need to comply with the below mentioned laws:
- All companies in Australia are required to keep minutes book that records the following:
- Resolutions passed by the members or directors without a meeting.
- Proceedings and resolutions of the members and directors of the company in meetings.
- In case the company is a proprietary company having only 1 director then the making of declarations of the director.
- The minutes of the company should be kept at the registered office or the principal place of business or any other place in this jurisdiction approved by ASIC.
- The chairman of the meeting should sign the minutes.
- Written consent must be taken from the director or secretary of the company for the appointment of such position as well as shareholders.
- All registered business entities in Australia should receive an Australian Company Number.
All companies in Australia have to follow International Financial Reporting Standards (IFRS) for accounting. The responsibility of developing, issuing and maintaining accounting standards for entities in the public as well as the private sector is on the Australian Accounting Standards Board.
As per the Australian law, large proprietary companies have to prepare annual financial reports and a directors’ report, get their annual financial statements audited and send these reports to the shareholders. The companies are also required to file the annual financial reports with ASIC unless a specific exemption applies to them. Even representative offices and branches are required to get their financials audited.