Foreign entities establishing a business in Australia will need to undertake a thorough consideration of the implications for the various issues that may arise before establishing their presence. Decisions made without first exploring the opportunities, traps and pitfalls may be difficult to recover from.
The following is a list of issues that should be considered however there may be other considerations that are particular to the circumstances of an entity wishing to start business in Australia.
- A business must register if it has a place of business located in Australia and may need to register in other circumstances.
- Advice should be sought on the structure that is most appropriate for your business. The options include registering as a foreign company, establishing an Australian company, Joint Venture, Partnership or Trust.
- A Foreign company or Australian based company is likely to require a statutory audit and to have their accounts lodged with ASIC.
- An Australian based company will require at least one director who is ordinarily a resident in Australia.
- A Foreign company must appoint at least one Local Agent.
- A Foreign company or Australian based company must have a registered office in Australia.
Tax in Australia is imposed at both the Federal and State level. The main taxes imposed at Federal level include:
- Income tax (including tax on capital gains).
- Goods and services tax (GST) being a 10% tax on the value of most goods and services.
- Fringe benefits tax payable by the employer on employee benefits.
- Employers are required to withhold tax deductions from salaries or wages paid to employees.
- Employers are required to provide a prescribed minimum level of superannuation support for employees. The minimum level is currently 9.5% of remuneration (capped at $49,470 per quarter).
The main taxes and charges imposed at State level include:
- Stamp duty on various transactions including transfers of land.
- Payroll tax payable by employers on wages paid.
- Employers are required to pay workers’ compensation insurance for their employees, as cover for workplace injuries.
- Land tax payable on certain land holdings.
In dealing with income tax there are a number of complex areas that may require special attention and advice including:
- Thin capitalisation rules that may limit the interest deductions a foreign controlled entity can claim.
- Transfer pricing rules that control arrangements by which profits are shifted out of Australia.
- Debt/equity rules that determine whether a particular arrangement is debt or equity and therefore affect deductibility of interest on loans.
- Taxation of financial arrangements (TOFA) – rules that contain a number of different methods for bringing to account gains and losses in relation to “financial arrangements” where entity turnover exceeds certain thresholds.
- Repatriation of profit rules.
- Withholding taxes on interest, unfranked dividends and royalties paid to non-residents.
- Research and development taxation concessions.
- Double tax agreement between Australia and relevant overseas jurisdictions.
Business seeking to start business in Australia should seek the advice of an Australian MSI Global Alliance accountant and lawyer.