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If you’re looking to grow your company in another country, pay attention to Australia. With its diverse population and growing economy, it’s no surprise that Australia placed 14th in the World Bank’s Doing Business 2020 survey for ease of doing business.
The following is a guide to expanding your business to Australia as an international company.
Table of Contents
Benefits of Doing Business in Australia
So why do business in Australia?
You’ll be able to engage with a robust economy and highly skilled workforce. Roughly 50 percent of the Australian population has completed some tertiary education, and the country has a 99 percent literacy rate. According to the International Monetary Fund (IMF), Australia’s economy is the 12th largest in the world, with a gross domestic product (GDP) of AUD 2 trillion as of 2021.
Economy
The country’s most prominent industries include:
- Mining: Australia is rich in minerals, which is why it’s the world’s leading producer of uranium, gold, and iron ore. Iron ore was the first Australian product to reach AUD 100 billion in annual export value.
- Agriculture: The Australian agriculture industry is growing, especially in livestock. Along with fishing and forestry, the agriculture sector has seen a 7 percent increase in gross value over the past 20 years, growing from AUD 62 billion in 2000 to AUD 67 billion in 2019.
- Service: The vast majority of Australian workers, about 77.7 percent, are employed in the services sector. In 2020, the industry contributed to 66.04 percent of Australia’s GDP.
Based on each sector’s growth from 1990 to 2020, key areas for potential business development include:
- Information media and telecommunications: This industry grew the fastest over the past 30 years, with a compound annual growth rate of 5.1 percent.
- Professional, scientific, and technical services: This industry grew 4.7 percent per year.
- Health and aged care: This industry experienced a growth rate of 4.4 percent per year.
Business culture and standards
In general, Australia’s workplace standards are high, emphasizing an effective work-life balance and a high standard of living.
Australia’s workweek ends at 38 hours with some exceptions, and the national minimum wage is set at AUD 20.33 per hour for those not already covered by the modern award system. A modern award is a document that explains the minimum terms and conditions of employment for each occupation, including but not limited to:
- Pay
- Work hours
- Breaks
- Overtime
- Penalties
Because there are over 100 awards in existence, most employees are covered. However, modern awards do not apply to those individuals whose workplaces have established registered agreements. Registered agreements are documents approved by the Fair Work Commission (FWC) that outline the minimum terms and conditions of employment for one or more businesses.
In addition to the holidays celebrated by each state and territory, the Australian national government recognizes seven public holidays:
- New Year’s Day
- Australia Day
- Good Friday
- Easter Monday
- Anzac Day
- Christmas Day
- Boxing Day
Australia’s academic calendar follows the calendar year, with students’ summer break occurring in December and January. As a result, business tends to be slow in January.
How to register a company in Australia
The Corporations Act establishes that a company carries out business in Australia if it meets the following basic criteria:
- Mean to advance your company in Australia
- Conduct activities with the intent to generate profit
- Make multiple deals and contracts in the country
Companies whose activities match those criteria must register with the Australian Securities and Investments Commission (ASIC). International companies can establish their company in Australia in one of two ways:
- Incorporating a local subsidiary company
- Registering a branch office
While incorporating and maintaining a subsidiary company can be complicated, this method allows for greater legal separation between entities. As a result, the parent company will only have to report finances for their activities in Australia.
A branch office is not a local legal entity. Rather, it is an extension of your parent company. Because there is no separation between your branch office and your worldwide company, you will only have to pay taxes on Australian-sourced income.
Additionally, if your company is not looking to generate profit or conduct trade in Australia, you can establish a representative office. This kind of office is more suitable for companies that are looking to promote their brand rather than conduct business. Once you decide to start doing business from your representative office, you will need to incorporate or register as a branch office.
1) Incorporating a subsidiary company
Incorporation involves acquiring partial or complete ownership of a local company. Companies that choose to incorporate must do so with ASIC. The subsidiary company can fall under one of two categories: proprietary or public. The main difference between these categories is in the number of shareholders:
- Proprietary: A proprietary company can only offer shares to company members or employees. It also must have at least one director who is an Australian resident.
- Public: A public company can have an unlimited number of shareholders. However, it must have at le[AP1] ast three directors, and at least two of them must be Australian residents.
Once you know what type of business you plan to establish, you must then draft its constitution or replaceable rules. This document outlines your company’s proposed structure and management rules.
To complete the incorporation process, you must register with ASIC and receive a nine-digit Australian Company Number (ACN) and registration certificate.
2) Establishing a branch office
If you choose to create a branch in Australia, you need to register as an international company under the Corporations Act. To do so, you’ll need to file an application with ASIC and present the parent company’s certification of incorporation. Once ASIC approves you, you’ll receive an Australian Registered Body Number (ARBN), which you will need to use as a means of identification moving forward.
You will also need to create a working office in Australia. Your legal agent must work from this office during working hours, along with other team members. You also must register your office’s street address — a postal address alone is insufficient for registration as a company.
Steps to incorporate a subsidiary or establishing a branch office:
1) Registering a company name
You’ll need to complete this step with ASIC. The title should be appropriate and unique, meaning it can’t resemble any other business name currently in use. You can use ASIC’s online-tool to make sure your name is available.
If you have a name in mind but aren’t ready to register your company, you can apply to have it reserved for up to two months. This reservation will cost AUD 52.
Although the government may approve your company’s name, you will still need to obtain a trademark for it if you want legal rights.
Once the government approves your company’s name, make sure it’s visible. Put your name clearly on display whenever you are dealing with the public and make sure you include it on all company documents moving forward.
2) Registering directors
In addition to registering the name of your company, you will need to obtain a director identification number (director ID) for every director of your company. This application is a one-time process, so you will not have to register again once the government issues your ID.
To complete your director ID application, you will need to submit the following documents to the Australian Taxation Office (ATO):
- Your tax file number (TFN)
- Residential address
- Two ATO-issued documents to confirm your identity
Note that these documents are all information the ATO already has. You can submit financial documents like bank account details, a dividend statement, or an ATO notice of assessment for the identifying documents.
If you are a resident of Australia, you can complete this application online. Those outside the country will need to use paper forms.
Challenges to registering your company in Australia
The most substantial challenges to doing business in Australia come with the initial steps of establishing your company and acclimating to the legal landscape in Australia.
This process can take several months or more, especially if you plan to have a physical location in the country.
Costs
There are several initial fees involved with registering your company in Australia, some of which are recurring:
- Reserving your company’s name: AUD$52
- Renewing your business’s name: AUD$37 annually or AUD$88 triannually
- Applying for registration as an international company: AUD$512
You may also want to consider the fees you will have to pay to maintain your business’s legal standing, including:
- Lodging returns: AUD$1,274 per year
- Verifying financial statements: AUD$1,274 per year
While ASIC sends businesses reminders of upcoming fees, it’s still possible to miss payments. Failure to lodge documents or pay on time can result in the following late fees:
- Up to one month late: AUD$83
- Over one month late: AUD$344
Other fees may also apply depending on the nature of your business, so consulting with a legal expert can help you if you’re unsure.
Taxes
If you’re going to do business in Australia, you need to know what your tax obligations will be.
Taxes in Australia operate on a Pay As You Go (PAYG) basis. This method involves withholding a certain percentage of earnings to send to the ATO, and the rate depends on the average compensation of a company’s employees.
Employers pay the following taxes according to the law in Australia:
- Superannuation: The rate employers have to pay for employee pensions is currently 10 percent of an employee’s ordinary earnings, but this number is set to increase to a maximum of 12 percent by 2025.
- Payroll: The payroll tax rate is 4.75 percent for employers who pay up to AUD $6.5 million in taxable wages and 4.95 percent for employers who pay above that.
- Fringe benefits tax (FBT): Employers must pay 47 percent of the grossed-up value of their fringe benefits.
- Workers’ compensation: All employers in Australia must pay insurance for workplace injuries. Each state and territory has a different workers’ compensation scheme, so the rate will vary based on your company’s location.
- Goods and services tax (GST): Companies must pay 10 percent on business supplies and services, including imported goods. Some types of supplies are exempt from this tax, including educational and healthcare items.
- Stamp duty: Certain property-related transactions are tax eligible, like sales, transfers, leases, and trusts. This rate varies depending on state and territory.
An incorporated company also must pay income tax of up to 30 percent of its worldwide earnings, unless a double tax treaty applies to it.
Preparing your office
If you plan to establish a physical office space, you’ll need to go through several steps to ensure it’s ready for new employees.
If you’re building a new office building or expanding on an already-existing structure, you’ll need to apply for a construction permit, which will require multiple rounds of inspections.
You must register your office property with the following bodies:
- Land and Property Information Department
- Municipal Council
- Your local water authority
- Office of State Revenue
Additionally, you will need to apply for an electrical connection, which can take up to 75 days to process.
Challenges of hiring employees in Australia
Hiring internationally poses some unique challenges to employers, which have been compounded by the aftermath of Covid-19. Knowing what legal obligations your company will have can help alleviate many of these challenges.
Employment law
Before you hire new team members in Australia, familiarize yourself with workplace regulations in Australia.
The Modern Award system is important to understand, especially when it overlaps with enterprise agreements and the national minimum wage. Most employees are covered by awards unless they are covered by an enterprise agreement or their workplace details working terms and conditions for them.
Additionally, all full- and part-time employees must receive four weeks of paid leave per year. This requirement may vary based on awards or enterprise agreements. To ensure your workplace meets legal requirements, you need to understand local, national, and industry laws.
Talent acquisition
If your company is in a niche industry that requires special skills, conventional means of talent sourcing are simply not effective.
Implementing a stronger digital recruitment strategy can help you cast a wider net. Advertise openings across multiple online platforms, like LinkedIn or Google, in addition to posting on job boards. For more specialized industries, it can also help to post on job sites dedicated to specific niches. By expanding your recruitment strategies, you improve your chances of finding applicants with the skills you need and candidates you can hire on an urgent basis.
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Talent retention
Now that companies are recovering from the pandemic, the job market is wide open for job seekers. Human resources experts report that finding the right talent is only half the battle — retaining them is the real challenge.
Focusing on the employee perspective can help you pinpoint where you might need to make changes in your company. You can make your workplace more attractive to candidates by offering flexible arrangements, like the opportunity to work from home at least part of the week. Establishing an inclusive, supportive work culture also helps make your company stand out as somewhere people will want to work.
Hire internationally with Globalization Partners
If you’re thinking of expanding your company to Australia, Globalization Partners can help. Our AI-enabled, end-to-end Global Employment Platform™ automates once time-consuming and costly processes like entity setup, contract generation, payroll, and more — all in compliance with country-specific laws and regulations. Download our eBook to learn how to avoid common hiring pitfalls, or contact us online for more information.
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THIS INFORMATION IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Globalization Partners does not provide legal or tax advice and the information is not tailored to the specific situations of your company or your workforce. Globalization Partners makes no representations or warranties concerning the accuracy, completeness or timeliness of this information. Globalization Partners shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information.
