Benefits of Setting up Business in Australia
Steady economic and political climate.You are highly unlikely to hear about unrests, political scandals, or outrageous bureaucracy from Australia. The country has developed a healthy political culture, transparent and effective laws and business regulations, independent judiciary system, and advanced anti-corruption mechanisms that guarantee silence for your money and promise a perfect business experience. The country is praised for its 2-decade-long persistent economic growth. It is one of the world’s most sound and low-risk investment fields.
Professional and diverse manpower. The local manpower is well-educated and multilingual (except English, most of the Australians speak either Asian or European language) which eases fulfilling your business ideas. Over 40% of local manpower have tertiary degrees, diplomas, and various qualifications. It is a top educational destination in the Asia-Pacific. Australia has become home to lots of immigrants (1/4 of the Australians were born abroad), and multiculturalism is a part of its mentality. This, in turn, gives your business a bunch of clues all across the globe. It is an opportunity for your team to think wider and easily reach remote markets through such multicultural staff. If you think about expanding your business in the future – and who doesn’t? – the Australian workforce with its cross-cultural mindset would be very handy.
Open-market trade ambitions. Australia is an active trader and adherent of open-market trade regulations. It has signed piles of bilateral/multilateral agreements for a free trade with many countries in the world, and today, your business can simply enjoy the trade freedom and expand internationally in a short period of time.
Big opportunities for small businesses. 96% of local businesses are small, and, therefore, trying to fight your way to the market, you won’t be squeezed by huge monopolist companies. Australia offers honest conditions for a good start. Less pressure means more freedom and faster growth. Authorities are always on the side of small businesses protecting them and providing all sorts of informational and administrative support to new companies.
A variety of legal entities. Australia supports a big variety of business structures. A proprietary “limited” company, public company, sole trading, trust, partnership and joint venture are the most popular of them. Depending on what you are looking for – flexibility and safety or saving on taxes – in Australia, you can select the business entity that would meet your business goals in the most efficient way. All incorporated legal entities are managed by the ASIC (Australia Security and Investment Commission) according to the Corporations Act issued in 2001. If you want to spread your overseas business to Australia and don’t want to register your firm as an Australian company, you can undergo incorporation as a foreign company. You need to get registered with the ASIC and then appoint a local agent and register an office down under. However, such form of business doesn’t free you from taxation and compliance with laws.
Quick & easy business setup. Australia practises one of the world’s easiest and fastest incorporation procedures. Once the paperwork is done and the package of your documents is ready, it may take you a couple of days to get your new firm registered with the Australian Business Registrar. Moreover, foreigners don’t necessary have to form a big paid-up capital while for incorporating a firm: a couple of Australian dollars is enough for a start.
Limited liability. You can protect your personal assets from possible risks associated with your business (such as debts, legal issues, and so on) by incorporating a company with a limited liability. Your company will be responsible before creditors and the law within the limits of its share capital, and you risk nothing but shares (or rarely some extra money if you issued “unpaid” shares). Your company’s legal entity is fully detached from its founder(s) and members.
Please, bear in mind that such limited liability works only if the business owner doesn’t give any personal guarantees in case of debts (this way their personal assets become vulnerable) and they run their company honestly and diligently showing no negligence in incurring debts. Otherwise, limited liability won’t protect the company’s owners/members from claims of creditors. In Australia, a person is allowed to get registered as a company (its only shareholder and director are the same person) and benefit from acting in the company’s name which is separate from their own name.
Wide capital/investment opportunities. If you register your new business as a company with a limited liability, it becomes more appealing to investors. Buying shares in your company, they aren’t liable for any further expenses and their investment is protected by the firm’s limited liability. Even if the company goes through harsh times, investors risk nothing but the investment (shares). In this context, such entity as, for example, a partnership isn’t a good idea if you plan to attract investors because an investor who is a “silent partner” becomes fully liable for the partnership’s debts or other difficulties.
With all these benefits, you should understand that after incorporating your firm in Australia, you become subject to certain tax and filing obligations as well as to compliance with the laws and business regulations. Running a company is about risks, liabilities, taxes, and costs. The financial responsibility is probably the first implication you face. If you choose to incorporate your firm in Australia, you should bear in mind below-mentioned important points. To avoid frustrations and misunderstanding in the process of incorporation and mistakes in a post-incorporation period, we recommend enlisting a professional incorporation backup which usually contains tax strategizing.
Post-incorporation Implications in Australia
1. Cost of setup and further spending
Registering a company in Australia isn’t free of charge. You will be charged for such things as the registration of a business name (the price will depend on the duration of the registration – 1 year or 3 years) and the company registration (which will cost you from 600 AUD to about 1500 AUD depending on the provider of incorporation services). Registering a company is more costly than just registering a business name, but once incorporated as a company (Pty Ltd), your business will have an image of a serious undertaking, and it will pay you back each time you deal with bankers, suppliers, and clients.
After the registration of your business name expires, you have to renew it for 1 year or 3 years paying 34 AUD or 79 AUD respectively. Obtaining the Business Number isn’t obligatory unless you are the payer of the Goods and Services Tax; for other businesses it isn’t mandatory, but remember that, if you don’t have the number, companies you deal with will have to pay the withholding tax.
Add to this costs expenses associated with managing your financial accounts (good accountants can be expensive, but you still can choose whether to hire the accountant full-time or enlist them only for the periods of mandatory filing).
Australia cannot be called a tax haven, but it still has its benefits in comparison with other top-tier countries. For example, small businesses can claim for a list of tax reductions if their annual turnovers don’t exceed 2 million AUD.
Income taxation depends on the source of income, taxpayer’s residence and amount of the earned profit. The company’s income (including dividends and capital gains) is taxed at the fixed rate of 30% without any tax-free threshold. In some cases, companies can claim for tax deductions.
An income of individuals (dividends and capital gains are also taxed) is also subject to the income tax which rate depends on a residence status of an individual and an amount of annual income. For residents, taxation starts from the income higher than 18.2k AUD at the rate of 19%. The rate increases gradually as the income rises. The maximum rate of 45% (plus additional 54.547k AUD of a fixed tax) is applied to incomes higher than 180k AUD.
For non-residents, taxation starts from 0 AUD at the rate of 32.5% and the maximum rate is 45% (plus additional 63k AUD of a fixed tax) for incomes higher than 180k AUD. It is reasonable to seek for ways of obtaining the permanent residence in Australia as it gives a tangible reduction of taxes and dividend credits. Unlike companies, individuals can get up to a half of their capital gains tax-free.
At the same time, a principle of residence allows a non-resident to be more flexible in paying taxes as, in Australia, they get taxed only for incomes earned inside the country while residents get taxed for all incomes regardless of their source. Australia has signed a big number of double taxing agreements which help individuals and companies that earn profits abroad to avoid double taxation in both countries. Once the tax for the income is paid overseas, it is possible to get a tax credit for it in Australia.
Other taxes businesses should mind are: the Medicare levy (up to 2%), Goods and Services Tax (10%), Superannuation tax (over 9%), customs duties, excise duties, withholding taxes (for example, the pay-as-you-go tax you need to withhold and then pass to the Tax Office if you pay salaries to your company’s employees and directors), and so on. Taxation is conducted on 2 levels: in addition to the above-mentioned federal taxes, lots of local taxes (set up by territory governments) can apply (for example, the Stamp Duty and taxes on land and motor vehicles).
Your firm must get registered for paying the Goods and Services Tax if your annual turnover is more than 75k AUD (150k AUD for not-for-profit organisations) or if you run a taxi or car rent business.
3. Records and filing
Companies incorporated in Australia must keep their records for 5 years. There are lots of available electronic tools for this purpose. In Australia, the financial year ends on the 30th of June. Smaller companies can file their tax statements every 3 months or once a year while large companies must handle filing their taxes every month. If you miss the deadline, penalties will apply. You must submit your company’s tax return using a form that specifies your taxable income and the tax paid itself. Even if your business earns nothing during the financial year, you still need to submit the tax return form. The due date for big companies (those with yearly income higher than 10 million AUD) is January 15: you submit the tax return for the fiscal year that ended in the preceding calendar year.
4. Legal field
If you incorporate a business in AU, you automatically enter the local legal field and must comply with the laws related to your industry, employment, paying taxes, and so on. Industry regulations change from time to time as they are under the influence of political interests. You should also study the employment standards and all aspects of taxing in order to make a well-informed decision about incorporating in AU.
Procedure of Company Registration
Once the business entity for your new Australian company is decided and you have already sorted the taxes and other costs out, you or your authorised incorporation agent can move on to preparing for your company’s registration. At first, you will have to get your Australian Company Number at the ASIC, and then you need to undergo registration with the ATO (Australian Tax Office) and the ABR (Australian Business Registrar). Unlike companies, trusts and partnerships, sole traders don’t have to obtain a separate TFN (Tax File Number) for running business in Australia.
Setting up a business down under is a great opportunity for you to fulfill your prominent business ideas and contribute competitive values to the local economy. With wise strategising and tax planning, you can easily achieve the pinnacle of your goals. The provided information contains careful considerations concerning doing business down under; however, it doesn’t substitute a professional advice. Don’t hesitate to entrust a seasoned incorporation agent with your business idea in order to have a smooth and faultless setup in Australia.