Entering the Australia Market

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Entering the Australian Market 

The combination of a strong economy, low unemployment, well-educated workforce, and high salaries make Australia attractive to foreign investors, although planned changes to Foreign Direct Investment laws unveiled in January 2021 introduce some issues for international companies.

Also, companies establishing a presence in Australia face challenges complying with employment, tax, and company registration laws as they can vary between states and territories. Plus, hiring staff from abroad poses more complications – and risks.

There are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into Australia.

Work alongside our Professional Employer Organization (PEO) recruitment specialists, then utilize our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of Australia and how to navigate challenging legislative issues revolving around federal and state laws and regulations.

Here we have set out some basic summaries of what you need to make the transition into the Australian market, whichever sector you operate in.

Starting a Business in Australia

Australia lies outside the world’s top 10 economies – ranked 12th with a GDP of 2 trillion Australia dollars (€1.28 trillion euros, 1.44 trillion US dollars) – but is a major player among the ‘Pacific Rim’ and Asia-Pacific (APAC) nations. Australia ranks fourth among Pacific Rim economies while the economic heavyweights of China, US, Japan, South Korea, Thailand, and India also figure among their major trading partners.

The World Bank ranked Australia 14th out of 190 countries in their latest ‘Ease of Doing Business’ report and fourth among member nations of the Organization for Economic Cooperation and Development (OECD).

Australian authorities employ a structured framework for establishing a legal entity in the country, complying with the Corporations Act (2001). Foreign companies establishing a subsidiary typically choose a proprietary Private Company (Pty) with liability limited by share capital. After selecting a unique name, the company must file an ‘Application for registering an Australian company’ with the Australian Securities and Investments Commission (ASIC). Other steps include:

  • Register office and principal place of business addresses. The registered office must be in Australia and cannot be a postbox
  • Register a local representative to receive legal and official documents
  • Obtain Australian Business Number (ABN) and Tax File Number (TFN)
  • Liaise with Business Registration Services (BRS) to obtain an Australian Company Number (ACN) and incorporation certificate
  • Register for Pay As You Go (PAYG) for withholding employees’ income tax, and for Goods and Services Tax (GST) if turnover is expected to exceed AU$75,000 (€48,042, US$58,200)
  • Register with the relevant State Insurance Regulatory Authority (SIRA) to insure employees against illness or injury at work

Expanding Business into Australia

Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?

International companies expanding into Australia quickly realize they need to base decisions on extensive research before drawing up a business plan for their new territory. A detailed blueprint will have to answer many critical questions.

Will staff be migrated across the world or recruited in-country? Who will handle payroll? How will your company deal with regulations surrounding taxation, entitlements and benefits, severance, and termination?

In Australia, these questions are complicated by the sheer size of the country. Australia spans 2,500 miles from east to west and almost as far from north to south. Where will you locate offices, find distributors or manufacturers? The list grows, in addition to dealing with federal, state, and territorial regulations applying to employment and taxes.

There is a simple alternative. By partnering a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Australia.

Australia Business Facts

  • Capital city – Canberra
  • Population – 26 million
  • States and Territories – Australian Capital Territory, Queensland, New South Wales, Northern Territory, Western Australia, Tasmania, Victoria, South Australia plus various external territories
  • Official language – English
  • Economy and world ranking – 12th largest economy, GDP AU$2 trillion; €1.29 trillion, US$ 1.44 trillion
  • Leading sectors in economy – Energy and resources; finance; clean agriculture; education; tourism; health services and consumer goods
  • Main exports – Metal ores and scrap metal; coal, coke, and briquettes; natural gas; education travel services; foodstuffs and live animals
  • Main Imports – Travel and educational services; refined and crude petroleum; machinery and transport equipment including vehicles; industrial and electrical machinery; telecommunication and sound equipment; chemicals
  • Main trading partners – China, US, Japan, S. Korea, UK, India, Germany
  • Government – Parliamentary, constitutional, and federal monarchy, representative democracy
  • Currency – Australian Dollar AU$

Advantages and Challenges of the Australian Market

Advantages of expanding into the Australian Market:

  • Economy: Recession-free since 1991, Australia paints a positive picture for international expansion
  • Consumers: Disposable income per household is higher than the average for members of the Organization for Economic Cooperation and Development (OECD), fueling a services sector that accounts for well over 60% of the GDP
  • Global reach: Proximity to Asian markets such as Japan and South Korea, and closer alignment with their time zones, make Australia an appealing steppingstone for further international expansion
  • Logistics: Despite its size, Australian markets are easier to access due to the vast majority of the population being concentrated in major cities such as Sydney, Canberra, Perth, Melbourne, Adelaide, and Brisbane
  • Employment Market: Access to a well-educated and multi-cultural workforce, with close to 30% having been born overseas and two million conversant in an Asian language
  • Business Focus: Emphasis on research and innovation

Challenges of expanding into the Australian market:

  • International contact: Time zones affect conference calls. An early 8am meeting call from Sydney works out at 4pm in New York (the previous day) and nine o’clock the previous evening in London
  • Red Tape: Tax filing, superannuation payments and exporting and importing, despite many Free Trade agreements, require dense bureaucratic processes stretching over days
  • Business Environment: Adjusting to a work culture that confusingly combines a laid-back attitude with focused business practices
  • Staff Transfer: If migrating workers into Australia, plan well ahead for obtaining visas and work permits
  • Infrastructure: Applying for construction permits involves 11 layers of documentation

Limited Company / Subsidiary or Branch in Australia

Foreign businesses planning expansion into Australia must initially decide on the type of company structure that best suits their plans. The typical choices are between a subsidiary, operating as a proprietary private company (Pty) or a branch, regulated by the Australian Corporations Act and the Australian Securities and Investments Commission.

Subsidiaries can have a totally different name from the parent company, pursue different business activities and form their own contracts. Branches, by comparison, are an extension of the parent company and are not a separate legal entity.

There are key differences between subsidiaries and branches, to be considered.

Main characteristics of a subsidiary:

  • Subsidiaries are separate legal entities independent of the parent company and must file an ‘Application for registering an Australian company’ with the Australian Securities and Investments Commission (ASIC)
  • Must obtain Australian Business Number (ABN) and Tax File Number (TFN)
  • Liaise with Business Registration Services (BRS) to obtain an Australian Company Number (ACN) and incorporation certificate
  • Subsidiaries can operate under a different name to the parent company and pursue different business opportunities
  • Directors and shareholders of the parent company generally have no responsibility for debts or liabilities of the subsidiary beyond their initial share capital
  • The subsidiary must have at least one Australian director
  • Subsidiaries are considered an Australian company for tax purposes, are taxed on their worldwide income, and will pay taxes between 27.5% and 30% depending on turnover
  • Subsidiaries pay Goods and Sales Tax (GST)

Main characteristics of a branch:

  • Branches are considered an extension of the foreign parent company, which remains responsible for its debts and liabilities
  • Although not a separate legal entity, branches must comply with all Australian laws
  • Branches pay taxes on Australian income to the Australian Tax Office (ATO), plus Goods and Sales Tax (GST)
  • Branches need an Australian Registered Body Number (ARBN)

Legal Structures for Australia Market Entry

Companies planning to expand into Australia with a subsidiary must comply with the Australian Corporations Act (2001) and the Australian Securities and Investment Commission (ASICS). This applies to all entities set up in the country. The main types are:

  • Proprietary Company Limited by Shares (Pty): The usual choice of international companies setting up subsidiaries. It is a structure where the liability of its members and shareholders is limited to the nominal value of their shares
  • Unlimited Proprietary Company: The liability of its members is not limited
  • Public Company Limited by Shares (Ltd)
  • Unlimited Public Company with Share Capital
  • No Liability Company (NL, Mining and Resources)

The legal structure for a private limited liability company:

The legal structure for a subsidiary allows it to operate independently from the parent company, under its own name and able to follow its own commercial and business activities. The subsidiary can have up to 50 shareholders who generally have no liability beyond their share contributions. The shareholders elect directors, company secretaries and managers who can then handle day-to-day operations.

The legal structure for a branch:

A branch is not a separate legal entity from the owning foreign parent company and carries on the same business under the same name as the parent company as its permanent representative in Australia. A designated branch manager oversees the business activity and supervises financial reporting.

Opening a Business Bank Account in Australia

After registering a company and receiving an Australian Company Number (ACN), businesses must open a corporate bank account, as well as obtaining an Australian Business Number (ABN) from the Australian Tax Office (ATO). The company must be registered before applying for an account.

All Australian companies need a business bank account for their corporate activities, such as buying goods and services, paying bills, taxes, and salaries etc. Also, it is important that the tax authorities can differentiate between personal and business activities.

Signatories’ identities must be verified to combat money laundering. The manager responsible for opening the account should provide either a passport, Australian driving license, birth certificate, health card or utility bill, with power of attorney to open the account. 

All ID documents must be in English and notarized. Banks in Australia award points when it comes to identifying its customers. Passports and photo ID, for instance, receive more points than other documentation but a passport and driving license will accumulate enough points to begin the process.

Different institutions may require different or additional documentation to those listed below:

  • Company name and registration certificate or certificate of incorporation
  • Name of directors and major shareholders’ IDs (relative points awarded) or appoint a representative / responsible manager with power of attorney to verify IDs
  • Proof of registered address and place of business; a PO box number is insufficient
  • Valid ABN or ACN – and Tax file Number (TFN)
  • Proof of a good business record

The process can be started online with some banks ahead of moving to Australia but with limited services. The process takes between three and five days.

Company Formation in Australia

Foreign companies setting up in Australia must follow strict registration procedures before they can set up payroll operations for their new employees.

After selecting a unique name for the enterprise, the incoming company must decide between operating as an independent limited liability subsidiary or as a branch

A proprietary limited liability subsidiary is the typical choice, with registration involving the following procedures:

  • Register with the Australian Securities and Investment Commission (ASIC)
  • Register with the Australian Tax Office (ATO)
  • Obtain a Tax File Number (TFN)
  • Register for Pay As You Go (PAYG) taxation and Goods and Services Tax (GST)
  • Register for an Australian Company Name (ACN) and obtain an 11-digit Australian Business Number (ABN) to interact with the ATO
  • Registering for Pay As You Go (PAYG) and Fringe Benefits Tax (FBT) to remit withheld payments to the ATO in order to operate payroll

Finding an Office in Australia

A growth economy, skilled workforce and access to funding are three leading attractions for businesses. Australia is ideally located to take advantage of emerging Asian markets. It is also one of the best for start-ups, ideally poised to support businesses with its infrastructure, resources and financial strategy.

Selecting the best location is vital. Making the right choice can make the difference between success and failure. Points to consider when establishing an office:

  • Is it part of a business cluster / hub?
  • Is it within the budget … but still has room for expansion?
  • Is it necessary to be near to manufacturers or distributors?
  • Demographics of potential employees, ease of travel and good transport links
  • Is it attractive and functional to keep the work force happy?
  • Are surrounding areas desirable, clean, and good for mental health to attract the best workers and provide services and accommodation?
  • What local support or government grants or tax breaks are available in the area?

Australia is a huge country with six states and two territories. The top cities for business:

Hobart (Tasmania): is one of the cheapest cities to live, but also has one of the best-performing and qualified workforces with 70% employed in professional, sales or in clerical and community occupations. It also enjoys special and formal trading relationships with China, Japan, and Italy.

Sydney (New South Wales): provides the best job opportunities, has low unemployment and a high average salary at AU$66,532 (€42,728, US$47,843) and is considered the economic and financial capital. Industries include property, business and retail services, manufacturing, and health, responsible for 25% of GDP in Australia.

Adelaide (South Australia): is attractive for retail start-ups with its large population, thousands of visitors each day and huge numbers of students who enjoy the ultimate shopping experience. Labor and land costs are low with well-planned infrastructure and transport corridors.

Brisbane (Queensland): an important port, which has the largest economy and very affordable for business, especially for office and living accommodation. Many IT and financial organizations are located here.

Melbourne (Victoria): is well placed for interaction with the Asian market. It has easy set up processes for businesses, low costs, and a strong economic and governmental environment. On course to be Australia’s largest city by 2030.

Perth (Western Australia): is renowned for mining and has seen booming business in recent years. Companies such as BHP Billiton, world’s leading resource company, have thrived in this fast-growing city (fourth largest in Australia), which is famed for its beaches, good weather and great lifestyle. The cost of living is lower than any other major Australian city.

Canberra (Australia Capital Territory): is the capital with a strong economy boasting top talent. Businesses here are near to government, with excellent transport and infrastructure. This city has ‘livability’ and sustainability with 100% renewable energy.

Darwin (Northern Territory): has boundless possibilities and the territory’s government is proactive with projects to entice involvement in its agri-business, space industry, land and property and hospitality industry. There are investment opportunities, grants, introductions to contracts and industry networks as well as advice and client support.

Finding an Australian Manufacturer

Most businesses trying to turn ideas and prototypes into tangible products find it essential to partner with a manufacturing facility, especially when planning to produce in bulk. Exploring the options, researching, and networking in the industry are vital to success and will save time and money. Australia is a very large country and local support is essential. Some of the questions to ask:

  • Do they hold relevant quality certificates?
  • Can they deliver direct to customers?
  • Can they keep up with demand? Or do they outsource?
  • Are they financially sound?
  • What is their minimum order quantity?
  • Discuss possible penalties for poor quality or late deliveries
  • Payment options

Also, to be considered:

  • Market research to avoid manufacturing a product in a saturated market
  • Licensing to a company that can handle manufacturing, marketing, and distribution
  • What distribution networks are available?
  • Can the manufacturer build and test a prototype?
  • Protecting intellectual property rights

Australia’s Trade and Investment Commission’s website enables browsing through industries and companies by name or keyword. They also have an industries’ directory with contact details. https://www.austrade.gov.au/suppliersearch.aspx

Research and check their reputation in the industry and explore links to Australian manufacturers. Reach out to local business groups and check out business directories such as:

Finding an Australian Distributor

A successful move into Australia will be jeopardized without a top-line distributor to move products around the country, or further afield into Pacific Rim nations. Australia is huge and local support will be vital. Finding the perfect match among distributors is critical to accomplishing objectives. Make sure they are in tune with your industry’s distribution channels and the regions they supply. Treat distributors as long-term partners and work with them to formulate goals and business plans.

Check out any trade missions in your home country going to Australia, which may be well placed to target relevant companies, organize events and be ‘au fait’ with conferences and trade fairs and arrange one-to-one meetings. Social media such as LinkedIn is a booming source of information. Business to Business networking, directories and local magazines are all good sources for contacts to become familiar with the locale.

Other important sites to check out include:

At Bradford Jacobs, we mean business!

Bradford Jacobs opens the door for companies planning to explore exciting new markets such as Australia, ideally located for further expansion into the Pacific Rim and Asia. 

Our Professional Employer Organization (PEO) specialist teams have in-depth global knowledge of how to recruit in new territories. Our Employer of Record (EOR) services will guarantee your company complies with laws relating to employment, registration, taxation, and payroll in Australia.

Bradford Jacobs provide ongoing consultation on human resources based on our understanding of individual cultures and customs of every country being targeted for global expansion. 

Work with Bradford Jacobs to expand into Australia and put the brightest and most talented staff in place. Contact us today!