In our previous insights ‘Establishing a corporate presence in Australia (Part 1)’ we addressed some FAQs about structures of proprietary companies and the duties of their directors. In this insights we discuss foreign investment requirements, the corporate tax system in Australia and employment agreements.
Australian companies are able to trade in jurisdictions throughout the region, subject to compliance with certain regulatory requirements in those jurisdictions.
Australia has a foreign investment review process operated by the Foreign Investment Review Board (“FIRB”). Generally, FIRB approval will be required for certain investments in Australia by foreign governments or related entities, investments in particular industries, sensitive or national security type areas, and in some real estate transactions.
As a result of the Coronavirus pandemic the previous monetary thresholds below which FIRB approval was not required have now been reduced to $0. Presently, we recommend that any foreign party looking to make investments in Australian companies, interests in land, or other assets should seek advice regarding the potential requirement for FIRB notification.
Overseas owners should be aware that the Australian taxation regime includes thin capitalisation provisions and transfer pricing provisions similar to many other jurisdictions.
The Australian tax system also has a “dividend imputation” system that is designed to minimise shareholder tax liability on dividends when the dividend paying company has paid income tax on its taxable revenue. Dividend imputation credits are not generally available to foreign shareholders.
The standard company tax rate in Australia is 30% of corporate taxable profit. However, a “small company” is subject to a tax rate of 27.5% and that rate is presently due to reduce to 25% over the next 2 years.
New Australian trading companies have obligations to register with the ATO to obtain a tax file number (“TFN”), an Australian business number (“ABN”) and, in most cases, goods and services tax (“GST”) registration.
The ATO has some “know your client” and anti-money laundering type information requirements when a company applying for those registrations has non-Australian directors or shareholders.
Australian companies that are foreign owned will normally be required to prepare and file annual audited accounts with ASIC. We assist clients with a process whereby foreign owned Australian companies may be able to obtain ASIC exemptions from the need to prepare and file audited financial reports.
We recommend that Australian companies enter into written employment or contractor agreements with their personnel. The distinction between employment and contractor relationships is important. Australian employees get the benefit of a compulsory employer-paid superannuation contribution regime currently at the rate of 9.5% of annual remuneration. A number of Australian companies also establish employee share schemes and other equity participation arrangements.
Please contact us if you wish to discuss the requirements of establishing operations in Australia. Our team can provide you with advice in relation to the most appropriate structure for your business.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.