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Doing business & investment in Australia 

The Australian Government welcomes foreign direct investment and recognizes it has helped build Australia's economy and contributes to economic growth, innovation, and prosperity in the following sectors.

 

  • Agribusiness and food

  • Infrastructure

  • Resources and Energy

  • Defence, advanced manufacturing, and space

  • Circular economy

  • Digital technologies

  • Health & biotechnology 

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FIRB - Regulation of foreign investment and doing business in Australia 

The Foreign Investment Review Board ( FIRB) is a non-statutory body established advising the Treasurer and the Government on Australia's Foreign Investment Policy (the Policy) and its administration. The FIRB examines and evaluates the proposals by foreign persons to invest in Australia and makes recommendations to the Treasurer on those subject to the Foreign Acquisitions and Takeovers Act 1975 and Australia's foreign investment policy.

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The laws govern foreign investment for doing business in Australia


Foreign Investor obligations

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Working visa for coming to Australia 

The Australian Government provides a number of visa options for coming to Australia for business purposes and the businesses to sponsor and employ skilled workers in particular occupations required in Australia.
Business sponsorship, nomination and subclass 457 visas can be lodged simultaneously. Once approved, business sponsorship is usually 5 years valid.

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Type of business entity for business in Australia

 

Branch office

This does not require the incorporation of a local subsidiary. The establishment of a branch office is instead treated as an extension of the foreign company. The Australian branch of the foreign company is not a separate legal entity, and therefore the foreign company would be liable for all debts and obligations of the Australian branch.

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Australian subsidiary

Incorporating a local subsidiary company is a proper structure as proprietary companies and can be converted to public companies at a later date if the need arises.  An Australian proprietary company is required to have at least one director who resides ordinally in Australia and must have a registered office.  one advantage of being a proprietary company is that efficient and effective way of dealing with third parties in Australia for doing business and a lower level of reporting and corporate governance when compared to a public company.

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Foreign company

FC is one of the companies recognised by ASIC that has to be registered with ARBN for doing business in Australia. 

a company with ARBN has to comply with a separate obligation listed in ASIC 

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The steps required in establishing a company in Australia include:

  • reserving a company name;

  • deciding on how the company is to be governed

  • registration with ASIC; and

  • applying for an Australian Business Number (ABN).

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Other business structures can be utilized for doing business in Australia. 

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  • Public company — a public company is able to apply for listing on the ASX, and can issue its shares for sale to the public. Public companies, however, must have at least three directors, two of whom must be ordinarily resident in Australia, and face additional reporting and corporate governance obligations.

  • Joint venture — a foreign investor may wish to enter into a joint venture arrangement with one or more other parties. Such arrangements may be either unincorporated or incorporated. There is no legislation directly regulating joint ventures of either type. instead, the rights and duties of the participants are usually set out in detailed joint venture documents.

  • Partnership — a partnership is an association of persons who carry on businesses in common with a view to profit. Generally, they must contain between 2 and 20 partners (though there are some exceptions to this), and are formed by agreement between the partners. In general, the liability of partners for the debts of the partnership is unlimited, so that each partner is joint and severally liable and may be sued personally.

  • Trading trusts — a trading trust is a trust arrangement under which a trustee (usually a limited liability company) conducts a business or holds an investment on behalf of certain beneficiaries. Once the trust is created (through a trust deed), the trustee acquires the business or investment and holds it on trust for the beneficiaries in accordance with the terms of the deed.

 

Financing a company 

An Australian company can finance and borrow by way of subscription for share capital and/or by loans or loan capital by a parent company and/or third-party lenders. the third party lenders can by the banks in Australia for expanding investment or business in Australia.
 

Opening a bank account

Opening up a bank account in Australia, the banks requires the following essential documentation.

  • Certification of Registration provided by ASIC; and

  • The current company extract evidencing directorship 

  • 100 points of identification for account signatories (100 points of ID will generally be constituted by a combination of passport, driver’s licence, Medicare card, other bank cards) 

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Employment laws

The fundamentals of employment law in Australia is from The National Employment Standards (NES)

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The National Employment Standards (NES)

The NES cover all employees within the Federal system, and set 10 minimum conditions, acting as a "minimum safety net" for all employees. They included minimum entitlements for paid leave, maximum hours of work, notice of termination and redundancy pay.

 

Modern awards

Modern awards are industry or occupation-based minimum employment standards, which apply in addition to the NES. They create one set of minimum conditions for employers and employees across Australia who work in the same industries and occupations. Most employers will employ at least one employee who is "award covered" and multiple awards may be binding upon an employer depending upon the composition of its workforce. The terms of an applicable award may be varied or excluded by the use of enterprise agreements, guarantees of annual earnings, individual flexibility agreements or annualised salaries.

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Enterprise agreements

An enterprise agreement sets out the employment conditions between a group of employees and an employer or two or more related employers. Enterprise agreements are bargained for at the workplace level, and to be approved and come into operation, must result in in-scope employees being "better off overall" than if the terms and conditions of their employment were governed by the applicable underlying modern award. While an enterprise agreement is operative, an otherwise applicable modern award will not apply and in-scope employees will not be entitled to take protected industrial (strike) action.

 

Individual contracts of employment

Each employment relationship will also be governed by individual contract, which will commonly include terms specific to the individual employee. Executives and other key employees will usually be employed pursuant to comprehensive individual contracts containing provisions designed to protect the employer's business interests.

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Contracting with business parties in Australia.  

Australian contract law is based and on UK law.  the parties have the freedom to contract as they see fit and the terms are freely determined by the parties for their own situation as long as it is operated within legal boundaries.

 

The main consideration when making a contract is that the terms of the contract must be certain and clear to understand for both parties.  ambiguous terms and conditions later can be a problem and its interpretation often to be decided at the court with costs and expenses incurred.   Also, the parties must demonstrate their intention to create legal relations, and enter into a binding agreement.

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Australian courts generally do not invalidate vague or ambiguous terms and rather with respect to such terms. the courts decide its proper construction.  A contract may be unenforceable it if is made by a person who lacks authority, incapable adult, and or minor.  The Corporations Act in Australia contains a number of assumptions that third parties are entitled to make when dealing with companies, including in respect of the appointment of directors, and the entering of contracts both directly and where an agent is used.

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Taxation

Taxes in Australia are imposed by all three levels of government.

The federal government is the largest taxing authority, collecting various taxes including income tax, goods and services tax (GST) (this is a value-added tax), fringe benefits tax, customs duty on certain imports and excise duty on certain goods.

In addition, state and territory governments levy taxes such as stamp duties, land tax and payroll tax, while local governments tax in the form of rates and levies.

 

Income tax

Generally, a resident of Australia is assessable to tax on income and capital gains derived by it from all sources, whether within or outside of Australia.

A non-resident is assessable to tax only in income derived by it from Australian sources and on capital gains made (or deemed to be made) on assets that are classed as "taxable Australian property".

Income tax is administered by the Australian Taxation Office (ATO) and residents are taxed at a marginal rate, depending upon their total income.

 

Company tax

An Australian resident company is liable to pay Australian tax on income and capital gains derived from all sources, either within or outside Australia. Tax is generally imposed on the company's net income. The current rate of company tax is 30%.

A non-resident company is liable to pay Australian tax on income derived from Australian sources (other than income subject to withholding tax) and capital gains made on taxable Australian property. The rate is also 30% on the net amount.

 

Tax treaties

Foreign tax treaties which Australia has entered into with certain countries prevent double taxation. Companies that are residents of the UK for the purposes of the 2003 Australia-UK taxation convention and are operating in Australia, may not be required to pay Australian tax on activities undertaken in Australia. These are activities that would usually be taxed under Australian law.

 

Taxation of dividends

Dividends paid out of income that has been subject to taxation at the company level are known as "franked" dividends under the Australia imputation system. Broadly, the extent to which a company can "frank" a dividend depends upon the balance of its "franking account" at the relevant time.

The franking account represents an accumulation of the amount of profits subjected to the full corporate tax rate of 30%, either directly through tax paid or indirectly through franked dividends received from other companies. For example, given the current 30% company tax rate, for each $100 of taxable profit $30 of tax must be paid and an amount of $70 can be paid as a fully-franked dividend.

The imputation system allows Australian resident shareholders to receive franked dividends partially tax free or effectively tax free where the taxpayer's marginal rate is less than or equal to 30%. If the taxpayer's marginal tax rate exceeds 30%, any franked dividends received will be subject to additional tax in their hands.

 

Capital gains tax

Capital gains realised on assets acquired after 19 September 1985 are subject to income tax unless specifically exempted. An "asset" for capital gains tax purposes is defined as any form of property, and included intangible, as well as tangible property. A net capital gain (capital gain less capital loss) is included in a taxpayer's assessable income. A net capital gain is taxed at the individual's marginal tax rate. Capital gains tax is not payable on certain assets including a family car and residential home.

 

Stamp duty

Stamp duty is a tax levied on transactions by state and territory governments, including loan arrangements, transfers of some marketable securities, conveyances of property and certain dealings in real estate. The duty applies to transactions evidenced by instruments, as well as those effected without a document being brought into existence. Different rates apply to different types of transactions across the different jurisdictions.

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GST

A GST was introduced with effect on 1 July 2000. It is a broad-based consumption tax on supplies of goods, services, real property, intangibles and other rights in the course of an enterprise. The rate of GST is 10%, and this is a flat rate on all taxable supplies.

There are a limited number of exemptions to GST. Importantly, one such exemption includes the acquisition of a business as a going concern (eg the purchase of a business).

 

Deductions

A company or individual can deduct from its assessable income any expenses that are incurred in gaining or producing assessable income, or expenses that are necessarily incurred in carrying on a business for the purpose of gaining or producing income provided that the expenses are not capital nor of a private nature. This is outlined in s 8-1(1)(a)-(b) and s 8-1(2)(a)-(d) of the Income Tax Assessment Act 1997 (Cth). Common deductions for businesses include employee salaries (Federal Commissioner of Taxation v Snowden & Willson Pty Ltd (1958) 99 CLR 431; BC5800600) and interest paid for interest free loans by a company to its subsidiaries (Federal Commissioner of Taxation v Total Holdings (Australia) Pty Ltd (1979) 24 ALR 401).

A unique feather of Australia's taxation system is the concept of negative gearing. This enables individuals who borrow and make a loss on an investment to write off the net interest loss of the borrowing against other assessable income, thereby reducing their overall assessable income. In other jurisdictions the interest loss on borrowings is quarantined to investment income whereas in Australia, this loss can be deducted from all assessable income and is not quarantined.

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Useful websites

  • Australian Securities and Investment Commission

  • Australian Competition and Consumer Commission

  • Fair Work Commission

  • Australian Taxation Office

  • Foreign Investment Review Board

  • Austrade

  • Australian Prudential Regulation Authority

  • Australian Parliament

  • IP Australia

  • Australian Securities Exchange

  • Department of Home Affairs

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