If you’re a Japanese business hoping to expand to Australia, or you’re wanting to work with an Australian company from overseas, it’s important that you get some background information about Australia’s commercial environment.
Many foreign businesses choose to expand in Australia as it has a promising environment. Overall, Japan and Australia enjoy a positive relationship. So, it’s likely that your business can perform well in Australia, as long as you follow key steps to get started.
The following are some key considerations you should make before you start a Japanese business in Australia:
- Registering a foreign business in Australia
- Which laws govern Australian businesses
- What visas are required (for example, for foreign workers)
- How do employment laws work
- What taxes apply to businesses
- Dispute resolution in an overseas business context
- Internationally enforceable contracts
In this article, we’ll cover the general commercial environment in Australia and what Japanese businesses need to consider before they hit the ground running.
Why Foreign Businesses Expand To Australia
Australia’s stable economy and rules-based society make it an attractive destination for foreign businesses wanting to expand their operations overseas. Japan is Australia’s third biggest two-way trading partner, meaning the two nations enjoy a mutually prosperous economic relationship.
As a result, Japanese businesses and investors often look to Australia when thinking of going global.
What Does Australia’s Business Environment Look Like?
As Australia and Japan enjoy a thriving diplomatic and commercial relationship, it makes sense for Japanese businesses to consider taking advantage of the economic opportunities in Australia. According to the Australian Trade and Investment Commission, Australia is ranked 15th out of 190 other economies for facilitating greater ease of doing business.
In addition to this, Australia has a longstanding relationship with Japan. Commercially, Australia and Japan have cemented their strong ties through free trade agreements such as the Japan-Australia Economic Partnership Agreement (JAEPA). The two nations also enjoy a free trade arrangement.
In light of these trade agreements, it’s worth considering the recent vision for a more economically connected and thriving Indo-Pacific market. The “Free and Open Indo-Pacific” (FOIP) vision aims to bring this to life, by boosting economic activities within the region for its prosperity. Australia and Japan both support these strategies which will further aid Australia-Japan business relations.
Australia also shares a ‘Quad’ partnership with Japan, India and the United States to give effect to FOIP.
Essentially, Australia and Japan’s foreign policy interests align closely, making it a highly attractive option to see business relations between the two nations.
Where Did It All Start?
In fact, Australia and Japan’s relationship dates back to the period after World War II. The two nations began a booming trade relationship, where the 1950’s saw it strengthened through a formal trade agreement. Over the years, Japan and Australia have continued to enjoy a positive trade relationship,
Since then, a number of Japanese companies have established a dominating presence in the Australian market. Fujitsu, Honda, Canon, Toshiba, Panasonic and Yamaha are just a few examples of Japanese companies that have become household names in Australia.
So, if you are thinking of bringing your Japanese business to Australia, it could give you pleasing results – but, of course, it’s crucial that you take the right legal steps.
How To Set Up A Japanese Business
Setting up a foregin business in Australia means getting familiar with local business laws, regulations and processes. This way, you can ensure your business is compliant and you can avoid any disputes or unwanted fees.
So, what’s first?
Register Your Business In Australia
For starters, you will need to register a business name in Australia. In order to do this, you will have to find a name that is available. You can search the online name registry to find out which names can be used.
Next, you will need to acquire an Australian Business Number (ABN). This is because you will be carrying on business in Australia.
Since you will also be receiving income in Australia, you’ll need to apply for a Tax File Number (TFN). This number is a unique identifier for the business for tax purposes. If your employees are working in Australia, they will need their own TFNs, too.
It’s worth noting that the application for an ABN can still be completed without a TFN by providing additional documentation.
ABN Or ARBN?
A foreign company can have both an ABN and an ARBN.
In Australia, a company must register with the Australian Securities and Investments Commission (ASIC) and attain an Australian Company Number (ACN). However, the rules are a little different for foreign companies wishing to do business in Australia (we’ll talk a little more about ASIC below).
Foreign companies registering with ASIC are eligible to get an Australian Registered Business Number (ARBN) instead of an ACN. If you have a company and you’re thinking of expanding it to Australia, the details for an ARBN can be found online.
The process will require lodging a Form 401 and providing other necessary documentation – if you’re not too sure about the process, have a quick chat with our lawyers!
ASIC is one of the main regulatory bodies for businesses in Australia. Attaining your business numbers signifies the beginning of your relationship with this regulatory body.
Much of your annual reporting, processing of fees and company updates will be done through ASIC. This is particularly important if you have company directors and shareholders as ASIC enforces many of their duties (these can be found in the Corporations Act 2001, which is the main piece of legislation governing companies in Australia).
Therefore, it’s advisable to always keep up to date with your ASIC obligations as fines can apply for failing to meet them.
Setting Up A Local Subsidiary
Some Japanese businesses may choose to simply work with Australian companies, whilst keeping their headquarters or business activities in Japan.
However, if you want to set up and run your business in Australia, you can Set Up A Local Subsidiary.
A subsidiary is a legal entity on its own, as opposed to a branch of the head company. Many companies set up a subsidiary and retain control of it by owning all the shares.
Once you have a name registered and applied for the relevant business numbers, you still have a few more steps to complete to meet the requirements for a subsidiary. These are as follows:
- Registering for all the relevant taxes
- Opening up a local bank account
- Getting an Australian address
- Arranging at least one director that usually resides in Australia
If you want to expand to Australia but do not have an address in Australia, you can satisfy this requirement by engaging a resident director service provider. This allows you to pay someone who lives in Australia to be a director for your company, for the purpose of having an Australian address.
If your business chooses to do this, it’s worth understanding the obligations of a director of a company. This is because you’re appointing a director in Australia to manage the affairs of your company, but it’s important to be clear on their very strict responsibilities and duties under the Corporations Act 2001.
Any breach of these duties can have serious consequences – we’ve written about this in more detail in this article.
A good way to monitor their conduct and ensure it is enforceable is through a Director’s Service Agreement – chat to our team if you’d like an Agreement today.
JAEPA came into force on 15 January, 2015. The agreement provides support for both nations in trade practices, such as preferential treatment for Australia.
Therefore, if your commercial activities require engagement with Australian businesses from Japan, the provisions of the agreement can be useful.
If you’re a Japanese business hoping to do business with an Australian business or expand in Australia, our lawyers can give you advice specific to your situation – chat with us today!
Getting An Office Space
If you would like to establish a physical presence in Australia, then you can look into getting a space to operate from. This can also be the official address for the company, an office or a store.
This is particularly relevant if you are thinking of setting up a subsidiary in Australia, as doing so requires an Australian address (if you need a resident director service, we can refer you to a provider).
Either way, you will require a Commercial Lease. Another option is to have a co-working space, where you share a working space with other businesses.
Do I Need A Visa?
In most cases, you will require a special visa to come and do business in Australia.
However, Australia offers an ETA to Japanese citizens, allowing them to come to Australia for 90 days for business purposes. An ETA Visa lasts up to 90 consecutive days, therefore, if you wish to stay in Australia for any longer, you will need to look into other visa options.
The ETA visa is a great way to come to Australia for up to three months and see the business environment first hand, meet with potential clients, suppliers or inspect commercial properties yourself.
If you wish to stay for longer, you may need to apply for a Business Owner Visa (subclass 890).
It’s advisable to see a legal professional that specialises in business visas to learn about your options and start the application process.
Foreign Investment Review Board
The Foreign Investment Review Board (FIRB) oversees proposals from foreign investors. Japan falls under one of the few nations who have a higher threshold, further opening the gateway of opportunity.
If you are looking to extend your investment portfolio to the Australian market, then it is worth considering as Japan is Australia’s second largest source of foreign direct investment. The positive trade relationship between the two nations continues to promote economic opportunity.
Understanding Business Laws In Australia
Business laws in Australia are regulated largely by the Corporations Act 2001. If you have a company, then the Act sets out a lot of rules you need to comply with, such as how your meetings should be held and how voting can work.
It also sets out standards for the documents you need to draft, such as your Company Constitution and Shareholders Agreement. We’ve written more about what the Corporations Act involves, otherwise, it’s best to speak to a lawyer who can explain how it applies specifically to your company and how you can ensure you’re compliant.
Consumer Protection Laws
Australia also has strict consumer protection laws. As you will likely provide a good or service, it’s crucial to ensure your business standards are meeting the regulations set out by the Australian Competition and Consumer Commission (ACCC).
The ACCC is the regulating body for Australian consumer laws set out in the Competition and Consumer Act (2010). Familiarising yourself with matters regarding conduct, product or service quality and representation is vital so your business doesn’t find itself under investigation.
For example, the Australian Consumer Law requires businesses to remain transparent with consumers about what their products or services do. If they misrepresent or deceive consumers about their products, they can face legal action under these consumer laws.
So, if your business plans to operate in Australia, you’ll need to ensure that your marketing practices are compliant with these advertising laws to avoid any disputes.
Hiring workers in Australia will mean adhering to local employment laws, employee entitlements and work standards as well as practices. In addition to this, there may be a difference in workplace culture which will require consideration.
For example, you’ll need to understand your obligations under Work Health and Safety regulations. These laws basically require employers to maintain a safe workplace for their employees, so as to minimise any risk of injuries (this extends to mental health, especially if your employees are working from home!).
You also owe your employees certain obligations under the Fair Work Act 2009. For example, you need to ensure your employees are being paid fairly, and that their work arrangements meet the National Employment Standards.
In Australia, each industry and job type may have certain awards. Each award may have different leave entitlements, pay entitlements and other benefits for employees. If you’re hiring workers in Australia, it’s important to check which award they would fall under so you can meet your obligations to them under that specific award.
Work hours may need to be designed to fit the closing hours of grocery stores, banks and other essential institutions. In some countries, these places close earlier. Therefore, it makes sense for most workers to finish work by a certain time allowing them the opportunity to run any errands.
On the other hand, if you want to keep employing people in Japan, then you will require employment agreements for overseas contractors. The terms in these contracts will be a little different since you’re dealing with overseas employment standards, payment and dispute resolution processes.
Our legal professionals can help draft contracts that are compliant with the relevant laws of the country you’re in.
Taxes will need to be paid on income accumulated from business in Australia. You will be able to register for the relevant taxes when completing the registration for your business.
GST is a national tax of 10% on goods and services sold in Australia. You’ll need to apply for GST if your business receives, or is expected to receive, a turnover of more than $75,000.
PAYG, on the other hand, is income tax on tax-resident employees. However, employers need to withhold and pay this to the ATO directly, so it’s important that you follow this process correctly to avoid any penalties.
It’s advised that you speak to a financial professional to understand which taxes you may need to pay (for example, Fringe Benefits Tax or Payroll Tax), and to apply for the correct ones.
If A Dispute Arises, Which Country’s Laws Apply?
In order to resolve disputes that are valid in multiple jurisdictions, it’s crucial to invest in internationally enforceable contracts.
When expanding a business to another country, the matter of jurisdiction becomes somewhat of a tricky question. If a dispute cannot be resolved through initial steps (such as mediation), then legal action is a likely next step.
Enforcing cross-border contracts can be complex, and very expensive. This is especially the case if you have a judgment in one country and you need to enforce it in another country.
Generally, businesses operating internationally should secure their contracts by having international arbitration clauses. This way, you give enforcement and dispute resolution more certainty. If you need help drafting an international arbitration clause, our lawyers are happy to help.
However, if you do not have an international arbitration clause in your contract, you’ll need to determine 2 things when finalising your terms:
- Governing law
This is something that you and the other party need to negotiate in the early stages. It always helps to have an expert lawyer guide you through the process – our team is ready to help you.
There are a lot of key legal considerations to make when thinking of expanding your Japanese business to Australia, however, the strong relationship between Japan and Australia is a great incentive to proceed.
To summarise what we’ve discussed in this article:
- The Australian market and Japan-Australia relations can be a positive edge for Japanese business
- Registering your business and understanding the relevant regulations, taxes and forms is essential
- You can use the 90-day visa or apply for a longer stay visa
- Consider contracts such as Commercial Lease Agreements, Employment Contracts and internationally enforceable contracts
- Chat to an Australian lawyer to become familiar with Australian business and consumer laws
If you would like a consultation on expanding your Japanese business to Australia, or if you want to know more about Japanese-Australian relationships, you can reach us at 1800 730 617 or email@example.com for a free, no-obligations chat.
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