Contents
Expanding your business into Australia is an exciting step – whether you’re a multinational corporation or an ambitious local business looking to grow. Setting up a company subsidiary in Australia is one of the most popular ways for established companies to launch a presence in this lucrative market, offering the benefits of local credibility, operational flexibility, and legal protection. However, laying the right foundations takes more than just registering a business name; understanding the legal essentials is crucial for long-term success.
You might wonder: what exactly is a company subsidiary, how is it different from a parent company or a sister company, and what are the legal steps you need to follow? If these questions sound familiar, you’re in the right place. In this guide, we’ll walk you through what a subsidiary is, why businesses use this structure, and the step-by-step process for establishing a subsidiary company in Australia – complete with the legal documentation and compliance tips you need to get it right.
We know that setting up a business overseas or expanding your group structure can feel overwhelming. That’s why we’re here to break down the essentials, so you can focus on building your vision with confidence.
What Is a Subsidiary Company?
Before diving into the legal requirements, let’s get clear on some key terms.
What Does Subsidiary Mean?
A subsidiary company is a business entity that is controlled by another company, known as the parent company. Control, in legal terms, typically means the parent company owns more than 50% of the subsidiary’s shares, allowing it to make key decisions.
In Australia, subsidiaries are usually registered as proprietary limited companies (Pty Ltd), which are separate legal entities. This means the subsidiary can make contracts, own assets, and be sued in its own name – offering a layer of liability protection for the parent company.
How Is a Subsidiary Different to a Sister Company or Sub Company?
- Sister Company: Two companies owned by the same parent are often called sister companies. They’re peers in the group, but neither controls the other.
- Sub Company: This is just another way of referring to a subsidiary – a company lower down in the group structure, controlled by a parent.
For clarity, here’s a snapshot comparison:
- Parent Company: Controls one or more subsidiaries.
- Subsidiary Company: Controlled by the parent.
- Sister Companies: Separate subsidiaries of the same parent.
Subsidiary Company Examples
Many well-known brands operate as subsidiaries of larger groups. For example, in Australia, mineral companies often set up multiple subsidiaries for each mine or project, while global tech firms establish local subsidiaries to operate under Australian law. These structures allow each entity to focus on its purpose and manage risks independently.
Why Set Up a Company Subsidiary in Australia?
Choosing to establish a subsidiary in Australia isn’t just about ticking a regulatory box – there are real strategic benefits:
- Local Presence: Australian customers and partners often prefer dealing with a local entity.
- Legal Protection: The subsidiary’s liabilities generally don’t flow back to the parent company.
- Operational Flexibility: The subsidiary can enter contracts, employ staff, and trade in Australia.
- Tax and Regulatory Compliance: Subsidiaries are treated as Australian companies for tax purposes, potentially taking advantage of local rates and incentives.
Of course, the main trade-off is greater administrative and compliance overhead – you’ll need to meet Australian company law standards and reporting requirements. But, for many growth-focused businesses, the benefits far outweigh the challenges.
Planning Your Subsidiary: What Should You Consider?
Before getting started, it’s important to take a step back and plan. Setting up a business structure is more than just filling out forms – it’s about making strategic choices that set your business up for success.
- Business Objectives: Why are you setting up the subsidiary – sales, distribution, R&D, services?
- Ownership Structure: Will the parent own the subsidiary directly, or via another entity (like a holding company)?
- Group Structure: Will your new company be a single entity or part of a broader group of subsidiaries?
- Funding: How will you capitalise your subsidiary – intra-group loans, equity, or a mix?
- Risk Management: What risks are involved, and does the group structure provide appropriate asset protection?
- Reporting & Tax: Will the subsidiary be consolidated for group accounting/tax, or operate independently?
Working through these questions up front (ideally with both your legal and accounting advisers) can save you time, money, and hassle down the road.
Step-By-Step Guide: How To Establish a Company Subsidiary in Australia
Ready to take the next steps? Here’s a practical guide to setting up your subsidiary the right way.
1. Choose the Right Business Structure
In almost all cases, an Australian subsidiary is established as a proprietary limited company (Pty Ltd). This company is then wholly or majority owned by the parent company.
Key features of a Pty Ltd company in Australia include:
- Limited liability for shareholders (protecting the parent company’s other assets)
- Separate legal personality from the parent
- Subject to Australian company law (the Corporations Act 2001)
To learn more about business structures, see our guide on structure options for your business.
2. Appoint Local Directors and Officeholders
By law, every Australian company needs at least one director who resides in Australia. While your parent company can appoint its own representatives as additional directors, you must have at least one local director listed with the Australian Securities and Investments Commission (ASIC).
You’ll also need a registered office address in Australia (not just a PO Box), and a public officer who is responsible for tax matters.
For more information, see our guide to the roles and responsibilities of Australian company directors.
3. Register Your Subsidiary With ASIC
The company registration process is managed by ASIC – the authority that oversees companies in Australia. Key steps include:
- Choose a unique company name (making sure it’s available)
- Complete the company registration application (including shareholder and director details)
- Pay the required registration fee
Once approved, your company will receive an Australian Company Number (ACN), and you’ll be officially recorded as a registered company.
Check out our step-by-step company registration guide for additional insight.
4. Obtain an Australian Business Number (ABN) and Other Registrations
Your subsidiary will need an Australian Business Number (ABN) to operate, invoice clients, and pay tax in Australia. Most companies also register for:
- Goods & Services Tax (GST): Compulsory if your turnover exceeds $75,000 AUD annually.
- Tax File Number (TFN): Needed to pay company tax.
- PAYG Withholding: Required if you’ll pay employees.
Read more in our guide to getting an ABN and GST registration process.
5. Set Up Company Governance and Shareholding
You’ll need to issue shares in your new subsidiary, and the parent company will be recorded as the shareholder. Set up a company constitution (optional, but recommended for clarity), and ensure the parent’s representatives understand their authorisations and obligations.
If the subsidiary will have multiple shareholders (for example, as a joint venture), consider a Shareholders Agreement to outline decision-making, share transfers, and exit processes.
6. Establish Compliance Systems
With your subsidiary registered, it’s crucial to implement compliance and risk management processes early – including company secretarial requirements, tax compliance, employment contracts, and protecting IP. We’ll cover these areas in detail below.
What Legal Requirements and Laws Should You Know?
Australian law sets a clear framework for subsidiaries – understanding your obligations will help your business run smoothly and avoid costly mistakes.
Company Law (Corporations Act 2001)
Your subsidiary must comply with Australian company law, covering duties of directors, annual reporting, and maintaining company records. Ensure at least one director is locally resident and that your registered office is up to date with ASIC.
For a full overview, see our corporate law guide for businesses.
Taxation
The subsidiary will be taxed as an Australian resident company on its worldwide income. Engage a local accountant early to make sure you meet your tax, accounting, and payroll reporting obligations.
Employment Law
If your subsidiary employs staff in Australia, you’ll need to comply with the Fair Work Act, pay at least minimum wages, provide statutory leave, and meet workplace health and safety obligations. Written employment contracts and robust workplace policies are a must.
To get started, check out our employment contract guide.
Australian Consumer Law (ACL)
If your subsidiary supplies goods or services to consumers, you must comply with the ACL. This covers issues like fair trading, advertising, warranties, refunds, and misleading conduct.
Learn more about consumer law basics in our ACL guide for businesses.
Intellectual Property Protection
Protecting your brand, logos, and any unique creations is vital. Register trade marks for your key assets and ensure any IP developed by the subsidiary is clearly owned by the right entity in your group.
Our IP guide for Australian businesses is a great starting point.
Privacy and Data Protection
If your subsidiary collects any personal information (including customer details through your website), you’ll need to comply with the Australian Privacy Act and have a compliant Privacy Policy.
Other Industry-Specific Laws
Depending on your sector – such as finance, health, food, or transport – you may need additional licences, permits, or comply with specific regulations. It’s important to research and seek advice on any requirements unique to your industry.
What Legal Documents Will Your Subsidiary Need?
Having the right contracts and documents in place helps protect your interests and keeps your subsidiary compliant from day one. Here are the essentials:
- Company Constitution: Sets out the rules for operating your subsidiary (optional, but recommended for flexibility and certainty).
- Shareholders Agreement: Especially important if your subsidiary has more than one owner or operates as a joint venture.
- Employment Agreements: For all staff employed by your Australian subsidiary.
- Workplace Policies: Such as Health & Safety, Anti-Discrimination, and Employee Conduct that reflect Australian law and culture.
- Customer Contracts or Terms and Conditions: Outlines the rights and responsibilities for your customers, and helps your business comply with Australian Consumer Law.
- Privacy Policy: Required if you collect or handle customer data, online or offline.
- Supplier and Contractor Agreements: Protects your relationships with external vendors and service providers.
- Intellectual Property Assignment or Licence Agreements: Ensures your IP is properly owned by the right company in your group and not lost if staff or contractors change.
- Board Minutes and Resolutions: Documenting major decisions as required by law.
Depending on your structure and operations, additional agreements – like intercompany loan agreements, distribution agreements, or confidentiality agreements – may also be needed. The best approach is to consult a legal expert familiar with group structures who can tailor your documents to your specific needs.
Optional: What About Branches or Joint Ventures?
While most foreign businesses establish a subsidiary company in Australia, alternatives do exist. For example, you may:
- Register a branch office – but this means the parent is directly responsible for liabilities in Australia, and compliance can be more complex.
- Enter a joint venture with a local partner – each party’s rights and responsibilities must be set out clearly in a joint venture or shareholders agreement.
Each option has unique pros and cons, and the right choice depends on your goals, risk appetite, and industry.
Key Takeaways
- A company subsidiary is a separate legal entity controlled by a parent company, commonly used to expand into new markets while managing risk.
- Setting up a subsidiary in Australia involves choosing the right business structure, appointing local directors, and registering with ASIC and the ATO.
- Complying with company, tax, employment, consumer, and privacy laws is essential for smooth operations and business credibility.
- Equipping your subsidiary with robust legal documents – constitution, shareholder agreements, employment contracts, policies – safeguards your business from common pitfalls.
- Getting tailored legal support when establishing your subsidiary can prevent costly mistakes and ensure you’re set up for long-term success.
If you would like a consultation on starting a company subsidiary in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
Meet Our Lawyers for Business Set Up
Get in touch now!
We'll get back to you within 1 business day.
Book in a free consultation with us to discuss your legal needs.