Despite its relatively small population of just over 23 million, Australia has proven to be an attractive market for foreign businesses. This is mainly due to its strong economy, stable political situation and adherence to the rule of law. The World Bank ranks Australia as one of the easiest countries to do business.
This article will look at key aspects to consider before setting up a foreign-owned business in Australia.
Can foreign companies operate in Australia?
Foreign companies may operate in Australia as long as they comply with local laws and regulations. For example, most businesses in Australia must be registered with the Australian Tax Office (ATO) because most businesses may be required to pay taxes.
All local and overseas businesses operating through a corporate entity registered in Australia are regulated by the Australian Securities and Investments Commission (ASIC).
Additionally, many industries and types of products in Australia are regulated by specific government bodies.
Therefore, it is vital for an overseas company to familiarise itself with these Australian requirements. Make sure you’re prepared to meet them before starting your operations here.
We have a downloadable guide to setting up a foreign business in Australia.
Is Australia a good country in which to do business?
Running a business in Australia presents some unique challenges.
Nonetheless, there is no doubt that Australia is an attractive market for foreign investment.
Australia has a sound economy, stable politics and a favourable business environment for overseas products. So there are few better places for a foreign entity looking to expand or establish a presence abroad.
Foreign companies find Australia’s federal tax rate compares favourably with other developed countries.
Australia’s skilled workforce is a major advantage for companies looking to expand their operations. With high levels of education and training, qualified staff can be found easily. There are also opportunities for companies to bring in workers from overseas where there is a local need.
Australia has an excellent infrastructure that can support the growth of a foreign company. Manufacturing facilities can be set up in areas with reliable networks like ports, airports, and railroads.
Stable politics and the rule of law
Australia’s stable political system is another reason foreign companies choose to invest here. The country’s strong and transparent legal framework protects foreign and Australian companies alike.
What are the risks of doing business in Australia?
Expanding your foreign company into Australia isn’t without its risks. It’s important to be aware of the potential pitfalls before establishing a presence in the country. Below, we discuss some general risks. As lawyers, we can help you navigate (and mitigate) any specific risks to your business if you contact us.
The Australian government is stable, and there is little danger of political instability or coups.
Australia has a strong economy. But like all countries, it’s not immune to global economic conditions. Plus, the country has a high level of debt that could affect businesses if interest rates continue to rise.
The government imposes strict regulations on Australian companies. This is especially true in areas of taxation, consumer protection and the environment. These regulations can be costly for a foreign company to comply with. However, with the right advice for overseas businesses, compliance can be made easier and costly pitfalls avoided.
Culture and social norms
The Australian culture may differ from other countries, particularly in the way business is conducted. This can be challenging for a foreign company unfamiliar with Australian customs and expectations.
Despite these risks, Australia is generally considered to be a good place to conduct business. The country certainly welcomes overseas businesses, making it relatively easy to expand a foreign business into Australia compared to many other countries.
Location, location, location
Many overseas companies choose to set up in Australia because the country sits on the doorstep of Asia. Its proximity means there are plenty of opportunities for a foreign company to tap into a growing region. With careful planning and preparation, foreign companies can benefit from Australia’s stability and lifestyle, mitigate risks and succeed in the Australian market and regionally.
What is the process of registering a foreign company in Australia?
The first step for a foreign company to establish a presence in Australia, if you wish to establish a branch office, is to register with the Australian Securities and Investments Commission (ASIC).
The company will need to provide certain information and supporting documents to ASIC. The documents required are more considerable than for a foreign company setting up an Australian subsidiary. They include directors’ and shareholders’ details, and proof that the company is a valid legal entity in its home country. It must appoint a local agent and provide an address in Australia at which it can receive documents. Once registered, the company can seek to register its business name. The company name must be the same name as it appears on your company’s certificate of incorporation.
Next, the foreign company will need to apply for an Australian Business Number (ABN), a tax file number (TFN) and register for GST. The ABN is used by the ATO for tax purposes. It will also be required when dealing with other Australian businesses.
Once the company has an ABN and is registered for GST, it can then start operating in Australia. Depending on the nature of its business, the foreign company may also need to comply with other licensing and legal requirements.
More detail is in our guide to setting up a foreign business in Australia.
Does a foreign company need an Australian director?
A foreign company can form a company in Australia to operate as a subsidiary. The Australian company must have at least one director, and at least one director must be an Australian citizen or permanent resident. The company must also have a registered office in Australia. This requirement is set out in the Corporations Act 2001 (Cth). (We have an article about resident director services in Australia.)
How much does it cost to set up a company in Australia?
The costs associated with setting up a company in Australia as a subsidiary can vary depending on a number of factors. However, there are some general costs that are typically incurred when starting a foreign company in Australia. This may include company registration fees, legal and accounting fees, and marketing and advertising expenses.
How could I establish a foreign company in Australia?
There are several ways for overseas businesses to establish a company branch in Australia. The most common way is to set up an Australian subsidiary, as discussed above. A subsidiary company is a separate legal entity from the parent company. As a separate legal entity, the subsidiary company would be given its own Australian company number (ACN). This option would allow it to operate independently from the parent company.
Another option would be to register a branch office with ASIC. This would not make the branch office its own legal entity. However, it would allow the company to carry out business under its own name in Australia. The branch office would need to appoint a local agent. The local agent must be an Australian citizen (including a corporation) or permanent resident. The local agent would be responsible for ensuring the branch office complied with all relevant laws and regulations.
The final option would be to establish a joint venture company. This could be done by setting up a new company jointly owned by both parties. The foreign company may also choose to invest in an existing Australian company.
Whichever option is chosen, it is important to seek professional advice to ensure that all legal and regulatory requirements are met and to work out which option is the best from a tax perspective for your overall business. More detail is in our guide to setting up a foreign business in Australia.
What are the ongoing obligations of a registered foreign company?
A registered foreign company operating in Australia must comply with a number of ongoing obligations and requirements. This includes registering with the appropriate government agencies and complying with local tax regulations.
For example, all foreign companies are required to register for an Australian registered body number. The number will be issued by the Australian Securities and Investments Commission (ASIC). This allows the foreign company to operate legally within Australia’s regulatory framework.
A registered foreign company must also adhere to local tax laws and regulations. This may include paying corporate income taxes based on total revenue or profits. How this applies to your business will depend on what tax treaties are in place between your home country and Australia. Failure to do so can result in fines or other penalties imposed by the government.
It is also important for registered foreign companies to comply with all industry-specific regulations. This will help them avoid any legal issues that could arise from non-compliance.
Australia: An attractive frontier for foreign companies
Foreign companies looking to expand into the Australian market will find a wealth of opportunity here. Australia is an open and welcoming country with a thriving economy that offers plenty of growth potential.
However, there are some important things to keep in mind when expanding a foreign company into Australia. The legal and regulatory environment is transparent but complex, so it’s important to seek advice early on.
Need help setting up your business in Australia?
This post gives you a general view of what it takes to set up a foreign company in Australia. However, the situation can change at any time. You should not, therefore, rely on this article as specific to your situation, current or exhaustive.
We are happy if this article has helped you but downloading or reading this doesn’t create a solicitor and client relationship between us. Instead, we would welcome the chance to talk to you to see if forming that relationship would be appropriate in your situation.
Consulting with a lawyer experienced in working with overseas businesses can help ensure you get off on the right foot when expanding into the Australian market. If you’re looking for more information about doing business in Australia, don’t hesitate to contact us today.
About Fiona Henderson
Fiona Henderson is an experienced Australian lawyer specialising in establishing business operations in Australia for overseas companies, as well as litigation and dispute resolution matters. Fiona’s advice is highly regarded by growing businesses in the USA, Germany, Austria, Switzerland, Norway, Italy and elsewhere who need an experienced lawyer and advisor to represent their interests in Australia. She regularly acts as their Australian resident director.
The Australian legal system is distinct from the legal systems many of her clients are accustomed to, which is why clients appreciate Fiona’s ability to anticipate and explain the sometimes surprising differences.