Australia has long been a country which encourages trade and foreign investment.
Recently the International Monetary Fund said Australia’s economy was forecast to continue to grow whilst being less enthusiastic about other major economies in the world.
Whilst we have a relatively small population, we have a strong consumer market, a talented and skilled workforce, strong governance and judicial structures and we are the world’s twelfth largest economy.
We have a vibrant start up and entrepreneurial mindset across a range of industry sectors matched with a strong economy in the fields of agriculture, construction, education, finance, health, manufacturing, mining, research, and retail.
Business structures in Australia
There are a range of business structures that are used in Australia, but a foreign company can choose to establish a business in Australia either as:
- a branch of a foreign company, or
- a wholly owned subsidiary of a foreign company.
Whilst there is no real benefit of one over the other it is vital that you consider which way you wish to proceed as it does have implications for costs, funding, growth and reporting.
You will need to get expert accounting, financial and legal advice to ascertain which is the best structure for your needs and long term plans.
A foreign branch
A foreign branch is not a separate legal entity, but it must comply with Australian laws.
It is not a simple process to set up a foreign branch in Australia as it requires considerable documentation to be provided to our corporate regulator the Australian Securities Investment Commission (ASIC) and significantly more than if you were setting up a subsidiary.
You will be required by ASIC to lodge annually a balance sheet, profit and loss and any other documentation that you would be required to prepare in your country of residence.
ASIC does not require an audit to be conducted but has the power to request one if it is not satisfied with the level and nature of the reports lodged with it.
In Australia, the Australian Taxation Office (ATO) is responsible for taxation and revenue collection at a federal level and if the foreign branch is considered a ‘permanent establishment’ as defined in Income Tax Assessment Act 1936 it would not be a resident of Australia for tax purposes by virtue of being a permanent establishment and would be assessed on tax in Australia on income derived directly or indirectly from an Australian source.
A Branch would be taxed on “net profit” will only be entitled to deduct expenses which relate to its assessable income, being income from Australian sources.
A subsidiary company
This will be a separate legal entity in Australia.
You will be required to register with ASIC and ATO.
Once set up there are compliance issues and reporting requirements so you must seek sound legal and accounting advice to ensure compliance.
The cost of setting up a company in Australia is relatively inexpensive and can be done for under $1,000.00 (AUD).
The current company rate in Australia is between 25% to 30%.
The company can either be a private or public company.
Private companies must:
- Have at least one shareholder
- Have at least one director
- Have a maximum of 50 non-employee shareholders
- Have at least one director ordinarily residing within Australia
- Have a registered office
Public companies must:
- Have at least one member
- Have at least three directors
- Have at least three directors ordinarily residing within Australia
- Have at least one company secretary
- Have at least one company secretary ordinarily living within Australia
- Must appoint an auditor
- Keep its registered office open to the public during specific hours
How can FC Lawyers help?
At FC Lawyers we have over 30 years’ experience assisting foreign companies and business enter and set up in the Australian market across a broad range of industries and professions.
Our worldwide network of professional affiliates can assist with any questions you may have in your home jurisdiction.
Contact our business and corporate team to discuss your needs.
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