For businesses looking to expand into new markets, Australia is a great place to invest. Known for its political stability, robust economy, and vibrant multicultural society, Australia offers a highly skilled workforce and supportive government policies to enable foreign investment.
Victoria, Australia’s second most populous state has experienced steady growth over the last ten years and is forecast to grow by 2.6%, exceeding other Australian states and territories. Melbourne, the state’s capital, is now the most populated city in Australia. As part of its growth story, the Victorian Government has an ongoing commitment to encouraging inbound investment. Jack Delmo, Chief Executive Officer, McLean Delmo Bentleys discusses why Australia, and particularly Victoria is a great place to do business and what businesses need to consider when establishing operations.
Government Support for Inbound Investment
The Australian Government actively encourages foreign investment through various initiatives. Austrade, the government’s trade and investment arm, provides comprehensive support to international investors, including market insights, networking opportunities, and assistance in navigating regulatory frameworks. Additionally, state-level bodies such as Invest Victoria offer tailored support for businesses setting up operations in the region.
“Australia offers an unparalleled combination of business stability, talent availability, and market access,” comments Jack Delmo, “With the government’s investor-friendly policies and Victoria’s innovation-driven economy, businesses have an excellent platform for growth.”
Setting Up a Business in Australia: Key Considerations
While Australia offers a wealth of opportunities, establishing a business requires careful planning and compliance with local regulations. Following are the critical steps and considerations for businesses looking to expand into the Australian market.
Choose the Right Business Structure
Selecting the appropriate legal structure for your Australian operations is crucial, as it will impact taxation, regulatory obligations, and overall flexibility. A foreign company setting up in Australia for the first time may do so in one of three ways:
• Representative office – where there is no direct business operations in Australia, but the foreign company wishes to provide some support to its Australian customers.
• Branch – where a company intends operating a business in Australia, but the foreign company does not wish to establish a separate legal structure to operate through.
• Subsidiary – where a company intends operating a business in Australia, and a foreign company does wish to establish a separate legal entity to operate through.
Consulting a professional advisor can help determine the most suitable structure based on your business goals and work through the many considerations including Australian taxation issues, repatriation of profits to the country of origin, Corporations Act and financial reporting obligations, long and short-term business strategy, management independence, etc.
Company Secretarial Matters
Compliance with corporate governance requirements is essential. Businesses must appoint a local resident director and ensure ongoing compliance with Australian Securities and Investment Commission (ASIC) regulations, including the timely filing of annual returns and financial statements.
“Effective company secretarial services are key to maintaining good standing with regulators,” advises Jack Delmo, “Non-compliance can lead to penalties, additional administrative burdens and reputational risks.”
Taxation Compliance and Considerations for Non-Residents
Australia has a well-developed tax system, and understanding its nuances is critical for foreign investors. Key tax considerations include:
• Corporate Tax Rate: The standard corporate tax rate is 30%, but a lower rate of 25% applies to businesses with an aggregated turnover below AUD 50 million.
• Goods and Services Tax (GST): A 10% GST applies to most goods and services. GST may need to be charged on invoices, but can also be claimed on various expenses paid.
• Withholding Tax: Withholding tax can apply to dividend, interest and royalty payments to foreign entities. Rates can differ depending on various factors, including the existence of a Double Tax Agreement (DTA) with certain foreign country. We note that the United Arab Emirates doesn’t not have a DTA with Australia.
• Transfer Pricing: Transactions between related parties must comply with Australia’s transfer pricing rules, ensuring that they are conducted at arm’s length.
• Employment Taxes: Consideration needs to be given to legalities if you are employing directly in Australia. These include employment laws, employment withholding requirements, Workcover insurances and superannuation.
• Thin Capitalisation Rules: These rules are designed to ensure investment in Australia is adequately capitalised. This can apply to limit deductions in specific scenarios, however a de-minimis threshold of $2m applies to the debt deduction.
• General Anti-Avoidance Rules: Can be applied to deny tax benefits where certain conditions are met. These rules are primarily focused on arrangements that have entered into with a dominant purpose to obtain a tax benefit.
Managing an international structure and mitigating the incidence of tax leakage can be a complex and highly customised exercise which involves consideration of strategic, commercial and tax variables and having regard to several limitations imposed by integrity features of the Australian tax law. Professional advice on tax structuring and compliance can help businesses optimise their tax position and avoid pitfalls.
Accounting Services
Accurate and transparent financial reporting is crucial for maintaining investor confidence and meeting regulatory requirements. Engaging local accounting professionals ensures compliance with Australian Accounting Standards and International Financial Reporting Standards (IFRS).
“Leveraging local expertise in accounting and financial reporting helps businesses stay compliant while focusing on their core operations,” commented Jack Delmo.
With its vibrant economy, strategic location, and supportive business environment, Australia offers immense opportunities for businesses looking to expand into new markets. By understanding the key steps involved in setting up operations and leveraging professional services, companies can unlock the full potential of this market.
“Investing in Australia is a strategic move for businesses aiming to expand their global footprint,” says Jack Delmo. “With the right guidance and resources, businesses can thrive and contribute to Australia’s economic landscape.”
Whether you are a seasoned multinational or a burgeoning enterprise, Australia welcomes you with a wealth of opportunities.
McLean Delmo Bentleys
McLean Delmo Bentleys is a member of Bentleys a network of advisory and accounting firms, with 700 talented staff delivering solutions from 18 locations across Australia and New Zealand. As a full-service advisory firm, McLean Delmo Bentleys has been providing professional services for 50 years across audit and assurance, business advisory, tax advisory, wealth management, superannuation and finance and lending. Internationally, we are a member of Kreston Global.