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Business in Australia

Australia offers a dynamic and prosperous environment for businesses, boasting a robust economy, strategic location, and favorable regulatory framework. With its stable political climate, advanced infrastructure, and skilled workforce, Australia attracts entrepreneurs and investors from around the globe seeking opportunities for growth and expansion. From small startups to multinational corporations, businesses in Australia benefit from a wealth of resources, innovative spirit, and a commitment to excellence.

Foreign Investment in Australia

The Australian Government welcomes and supports foreign investment in line with the nation’s interests.

Foreign investment in Australia is subject to scrutiny by the Foreign Investment Review Board (FIRB), which assesses proposals against national interest criteria. FIRB recommendations, based on the Foreign Investment Policy and the Foreign Acquisitions and Takeovers Act 1975, are submitted to the Treasurer for the final decision. The process is comprehensive, and sector-specific legislation applies to airports, airlines, ships, and the financial sector. The FIRB guides foreign investors to ensure compliance with the government’s policy, and it may block proposals deemed contrary to national interest.

Structure of Business Entities

In Australia, individuals can choose from various business structures such as sole trader, partnership, trust, joint venture, or corporation. Foreign companies operating in Australia can establish a wholly or partly owned subsidiary by registering with the Australian Securities and Investments Commission (ASIC) and receiving a unique Australian Company Number (ACN). Public companies, eligible for listing on the Australian Securities Exchange (ASX), have the opportunity to engage in public fundraising.

Australian Securities Exchange (ASX)

The Australian Securities Exchange (ASX) is the country’s primary stock exchange, overseen by ASX Limited, a publicly listed company. Globally, it ranks 8th in market capitalisation and holds the 2nd position in the Asia-Pacific region, with a market cap of $8.12 billion as of January 2024. ASX plays a pivotal role in facilitating a fair and well-informed market for financial securities, operating under listing rules covering various market activities. These rules aim to protect the interests of listed entities and uphold investor confidence by disclosing material information.

Corporate Tax

Australia’s corporate tax system is relevant for foreign entities conducting business there. Various tax incentives, deductions, and concessions are available to businesses, such as the Research and Development (R&D) Tax Incentive and capital allowances for eligible assets. It is important to note that tax laws and rates are subject to change, and businesses should stay informed about the latest updates from the Australian Taxation Office (ATO) or seek advice from tax professionals for the most current information and compliance requirements.

Income Tax

For purposes of income tax, a company is considered a resident of Australia if it (a) is incorporated in Australia, or (b) carries on business in Australia and either (i) its central management and control are in Australia or (ii) voting power is controlled by shareholders who are residents of Australia. The proposed modifications to the corporate residency test aim to designate a foreign company as an Australian tax resident if it maintains a substantial economic connection to Australia, with its principal place of business and central management. Foreign corporations with permanent bases in Australia are also subject to the corporate tax rates.

Capital Gains Tax (CGT)

Australia imposes Capital Gains Tax (CGT) on profits from the sale of assets for foreign investors. It includes gains from real estate, shares, and other investments. The tax rate and regulations may vary depending on factors such as residency status and the type of asset. Foreign investors should be aware of CGT implications, seek advice on potential exemptions, and ensure compliance with Australian tax laws to navigate the complexities of investing in the country.

Goods & Service Tax (GST)

Foreign companies operating in Australia are subject to the Goods and Services Tax (GST), a value-added tax on goods and services consumed within the country. GST is levied at a rate of 10%, and businesses with an annual turnover above a certain threshold must register for GST. Foreign companies conducting taxable supplies in Australia must comply with GST regulations, including filing periodic returns and remitting the tax collected to the Australian Taxation Office (ATO). Understanding and adhering to GST obligations is crucial for foreign companies to ensure compliance with Australian tax laws.

Payment Times Reporting 

The Payment Times Reporting Scheme mandates large companies in Australia, with over $100 million in total income, to disclose their payment practices towards small suppliers biannually. The Scheme publicises this information to encourage businesses to improve their payment processes, as delays can significantly impact small enterprises. The Payment Times Report (PTR) collects data on payment terms, the percentage of timely payments to small businesses, small business purchases, and supply chain finance options. Companies failing to comply may face penalties, including fines of 0.6% of annual income. Approval from a board member is required before submitting the PTR.

PEPPOL e-invoicing

The Australian government announced its commitment to Peppol – the standard of electronic invoicing (eInvoicing). Peppol is used in various countries, including Canada, the US, Singapore, and many parts of Europe, and enables the universal digital exchange of invoices between suppliers’ and purchasers’ accounting systems. This move intends to replace traditional paper and PDF invoicing, reduce manual invoice and payment processing tasks, and unlock productivity savings economy-wide. Adopting Peppol is part of the Australian government’s Payment Times Reporting initiative. EInvoicing is an essential enabler to faster payments.

Intellectual Property

Intellectual Property (IP) protection is an important factor in doing business in Australia, as in many other countries. Intellectual property refers to mental creations such as inventions, literary and creative works, symbols, names, and commercial images. Intellectual property protection is essential to stop people from exploiting or profiting from one’s inventions and ideas without consent. It is an investment in protecting one’s ideas and receiving the rewards of labour and intelligence.

Australian Consumer Law

The Australian Consumer Law (ACL) protects consumers from unfair trading practices, covering misleading conduct and unconscionable behaviour, ensuring consumer guarantees, prohibiting unfair contract terms, enforcing product safety regulations, and addressing various deceptive practices. Breaching the ACL can result in severe penalties, with corporations fined up to AUD 10 million and individuals fined up to AUD 500,000.
The time restriction for bringing legal action under the Australian Consumer Law (ACL) varies depending on the nature of the pursued claim.