Establish a business in Australia

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If you are preparing to establish a business in Australia, you will certainly need to consider various important issues such as business structure, business registration, tax compliance and implications, corporate governance, potential access to Government grants, business premises, workforce for your business operations and market research for your products or services. Certain industries may also have its own licencing and ongoing registration requirements. You will need expert partners who can make your establishment process easier and smoother. This passage mainly covers business structure and tax compliance issues.

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Business structure

 

You may decide to operate your business as a sole trader, partnership, trust or company. A sole trader is the simplest business structure and it is inexpensive to set up but you are personally responsible for all aspects of your business including any debts. A partnership allows two or more people to operate a business together but all partners are also personally liable for all debts and obligations of the business. A trust is a structure allowing the trustee to hold assets on behalf of its beneficiaries. A company is a separate legal entity and has its director(s) and shareholder(s). Companies in Australia must be registered with the Australian Securities and Investments Commission (ASIC). The company's owners can limit their personal liability and are generally not liable for company debts.  

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If you are a foreigner, you will generally need to select among establishing a company, registering a foreign company and acquiring an existing company in Australia. An Australian company needs to have at least one local resident director and its local registered office to receive notices. Foreign companies must also be registered with ASIC and need to have at least one local agent who is authorised to accept, on behalf of the foreign company, service of process and notices. ASIC is responsible for the ongoing registration obligations of foreign companies. You may also acquire an existing Australian company which has its trading records. 

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Ongoing compliance

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You will need to understand the ongoing compliance requirements in Australia in relation to the tax and corporate laws. The Australian tax system is a mix of direct and indirect taxes levied by both the Commonwealth and State governments. The Government generally taxes Australian residents on income from worldwide sources and non-residents (or overseas investors) on certain Australian sourced income. 

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The most common Federal Government taxes include income taxes for individuals and companies, goods and services tax (or value added tax), superannuation taxes, customs and excise duties. Capital gains tax (CGT) is imposed on gains realised from the sale of assets such as real properties. Fringe benefits tax (FBT) is imposed on the value of non-cash benefits provided to employees by employers. Employers also need to report their payroll and superannuation information to the taxation office through a specific digital system which is called Single Touch Payroll. 

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States and territories in Australia also impose tax on various state-based activities. These taxes and duties are not necessarily consistent throughout Australia. They have their own state laws. Stamp duty is imposed on certain transactions such as transfers of real properties. It is imposed on the buyer. Payroll tax is imposed on employers whose annual wages paid to their employees exceed a threshold. In Victoria, the current threshold is $700,000 per year. Individuals and other entities who own land in Australia over a cap limit are required to pay land tax annually. 

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In general, a business needs to report its goods and services tax monthly or quarterly, and submit its income tax return annually. If your business recruits employees, you will also need to report your payroll and superannuation information via your Single Touch Payroll system and may also need to report fringe benefits annually if applicable. 

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While the Australian Taxation Office (ATO) is responsible for administrating the Australian tax laws, ASIC is a regulatory body (or department) for companies. It deals with the registration of companies and monitor the compliance of companies with the Corporations Act. 

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If you have any inquiries or questions in relation to establishing a business in Australia, please contact us on info@advantagehouse.com.au.