Australia offers a well-developed legal, financial and regulatory environment for international investors. But establishing an Australian business involves more than registering a company. Foreign investors should consider the legal structure, taxation, corporate governance, foreign investment rules, funding arrangements and ongoing reporting obligations from the outset.

The appropriate structure will depend on what the investor intends to do in Australia, who will own the business, how it will be funded, whether profits will be retained or repatriated, and whether the Australian operation will form part of a wider international group.

1. Choose the right structure

Common options include establishing an Australian proprietary company, operating through an Australian branch of a foreign company, using a trust or partnership in appropriate circumstances, or acquiring an existing Australian business. Each structure has different tax, legal, reporting and commercial consequences.

For many foreign-owned operating businesses, an Australian subsidiary can provide a clear separation between the Australian operation and the overseas parent. However, the most appropriate structure should be considered before capital and contracts are committed.

2. Australian company requirements

An Australian proprietary company must have at least one director who ordinarily resides in Australia. Directors must obtain a director identification number before appointment. The company also needs an Australian registered office and must maintain appropriate corporate records, including its register of members.

The identity and role of a resident director should be considered carefully. A directorship carries substantive legal responsibilities and should not be treated merely as an administrative appointment.

3. Tax registrations

The business may require a Tax File Number and Australian Business Number, and depending on its activities and turnover may need registrations for GST, PAYG withholding and other taxes. Employers also need to consider payroll, superannuation and state or territory obligations.

Cross-border businesses should consider Australian income tax from the beginning, including whether activities create an Australian taxable presence, how transactions with overseas related parties are priced and documented, and how funding is provided to the Australian entity.

4. Foreign investment approval and registration

Australia has a foreign investment framework under which some proposed investments must be notified to the Treasurer before they proceed. The rules vary according to the investor, the nature and value of the investment, the type of Australian business or asset involved, and whether national security considerations arise.

For example, notification rules can apply to substantial interests in Australian entities or businesses, direct interests in agribusinesses, media businesses and national security businesses. Foreign government investors are subject to additional requirements. Where foreign investment approval is required and an interest is subsequently acquired, registration obligations may also arise.

5. Funding the Australian operation

An Australian business can be funded through equity, debt or a combination of both. The choice should be considered together with Australian tax rules, transfer pricing, interest deductibility, withholding tax and the investor’s home-country tax position. Documentation should reflect the commercial substance of the arrangement.

6. Ongoing compliance

Establishing the entity is only the beginning. An Australian company may have annual ASIC obligations, income tax returns, Business Activity Statements, payroll and superannuation obligations, financial reporting requirements and, for larger international groups, additional international tax reporting.

Foreign investors should also consider whether visas or immigration permissions are required for individuals who intend to work in or run the Australian business.

A coordinated approach

The most effective time to consider these issues is before the investment structure is finalised. Tax, legal, commercial and foreign investment requirements often overlap. Changing the structure after the business has commenced can be more expensive and may create unintended tax consequences.

How Amerital can help

Amerital Advisory & Partners can assist foreign investors with Australian entity establishment, tax registrations, structuring considerations, accounting and tax compliance, cross-border tax matters and coordination with legal and other professional advisers.

Key references: ASIC – registering a company and company officeholder requirements; business.gov.au – starting a business in Australia as a foreigner and tax registrations; Australian Government Foreign Investment – business investment guidance; Australian Taxation Office – foreign investment registration requirements.

Important Disclaimer
The information in these articles is general in nature and is not intended to constitute taxation, legal, financial or investment advice. Australian taxation and foreign investment rules are complex and may change. The application of the law depends on the facts and circumstances of each taxpayer or investor. Professional advice should be obtained before acting on the information contained in these articles.