There are a number of legal considerations when you are expanding your New Zealand business to Australia. In order to spread out to Australia, New Zealand businesses will need to sort out these matters first:
- Registration and taxation
- Operating as a branch or subsidiary
- Employing foreign workers
- Dispute resolution in multiple jurisdictions
- Extending intellectual property protections to Australia
In this article, we’ll cover the above dot points and provide some general guidelines on doing business in Australia from New Zealand. Extending business operations to Australia is a worthwhile endeavour, however, it’s important to make sure it’s all done correctly to make this growth as beneficial as possible.
Why Do Foreign Companies Carry On Business In Australia?
Entering the Australian business scene is a great way to expand your business operations.
Australia gives access to a bigger market and has a stable economy, providing a promising environment for success. In fact, a number of major businesses here in Australia had their humble beginnings in New Zealand before taking on the Australian market.
How Do I Set Up A New Zealand Business In Australia?
In order to establish your business in Australia, you will need to decide on the way in which you want to conduct business in Australia. If you’re looking to simply trade into Australia without actually establishing a presence there, then you will need to look into the grants, customs and tax regulations before you proceed.
However, if your goals are to set up an Australian presence, then you will need to decide on whether it’s worth doing this as a subsidiary or a new company – there’s more on that later.
Firstly, it’s important to ensure your business is registered and compliant with all its legal obligations.
Do I Need An ABN?
Yes, an Australian Business Number (ABN) is required for all businesses that choose to operate in Australia.So, even if you’re overseas, you will need to apply for a TFN if your business is in Australia.
In order to apply for an ABN, a Tax File Number (TFN) is usually required. Otherwise, you can also apply by issuing a statement of your activities in Australia as well as providing proof of identity.
It’s important to keep note of your reference number when you apply for an ABN, as it will be required when submitting a cover sheet. The cover sheet is an additional document that needs to be lodged with the ABN application.
You can find out more about obtaining an ABN as a foreign business by reading about it here.
Do I Need To Register For Tax?
You will also need to make tax considerations. As a non-resident business of Australia, tax will only apply to income garnered from activities in Australia.
Double taxes can also apply depending on the business structure you have chosen, so it’s important to make sure your business is fulfilling their taxation requirements for both Australia and New Zealand.
You may also be eligible for Goods and Services Tax (GST) if your businesses annual turnover is expected to be more than $75,000.
Taxation is highly dependent on the specific nature of your business. It is highly advisable to get the opinion of a legal and financial professional to ensure your business is compliant with all its tax obligations.
Setting Up A Branch Vs A New Company
When setting up a physical presence in Australia, there are one of two structures to decide between:
So, what’s the main difference between the two?
A branch is another establishment of the parent company. A subsidiary, on the other hand, is a separate legal entity that is controlled by the head company. Often, the head company will own the shares of the subsidiary which permits them control over it.
A branch and a subsidiary are both subject to Australian rules and regulations. However, their registration requirements, taxation and structure differ greatly.
Setting Up A Subsidiary
To set up a subsidiary in Australia, you will need to do the following:
- Register a business name
- Apply for an ABN and TFN
- Register for all the relevant taxes (such as GST and PAYG)
- Open a local bank account
- Attain an Australian address
- Arrange at least one director that resides in Australia
How Does Liability Work With A Subsidiary Company?
In the event that a subsidiary incurs debt or runs into legal trouble, the head company (otherwise known as the holding company) will likely be liable. Therefore, it’s important to keep in mind that while the subsidiary may be in an overseas location, any potential troubles it runs into will impact the head office.
However, there are instances where the head company can reduce their liability by claiming particular defences:
- Safe harbour provisions with a plan in place to keep the company solvent
- Receiving incorrect information from the local team
- Reasonable reason to believe the company was doing well
- A directors inability to aid the company in their time of need for a good reason
- Proving that reasonable steps were taken to prevent insolvency
What If My Employees Are Foreign Workers?
Getting set up in Australia means you will likely have staff that are moving from New Zealand to Australia, or you will be hiring local Australian employees. Either way, there are a number of legal issues that need to be adhered to.
Generally, Australian employment laws will apply for those employees working in Australia. The Employment Contracts you provide to your employees must cover benefits, hours, rights and responsibilities that are in line with Australian legislation.
If they are New Zealand residents coming to Australia to work, it is important to ensure your employees arrive on the correct visa.
Additionally, if you are engaging overseas contractors, then it is important to ensure their Contractor Agreements are also in line with the legislation of all relevant jurisdictions. For example, you want to set out which governing law will apply in the case of a dispute (we’ll cover this below).
It’s essential to cover all bases and ensure your employees are being awarded all their rights under their employment agreement as not doing so can be costly to your business. A legal professional that is experienced in handling the overseas expansions of businesses can help in making sure all requirements are covered – talk to one of our legal experts today to find out more.
If There Is A Dispute, Which Country’s Laws Apply?
In any commercial relationship, your contract should set out the details around the dispute resolution process.
Ideally, when you’re doing business in another country, you want to create a contract that can be enforced in multiple jurisdictions.
Internationally enforceable contracts take into consideration the different laws of each country. Generally, it should set out the governing law and jurisdiction.
Therefore, if there is a dispute and a court judgment is made on it, the judgment must be followed regardless of the jurisdiction or else legal consequences can apply.
When expanding your business operations to Australia, it’s understandable to keep consistent with your IP protections.
In order to do this, you will need to ensure your IP is protected in Australia (and any other countries you’re thinking of expanding to). Depending on the trademark itself, there is usually either a local or international process to ensure it is protected in more than one country.
Will My Trademarks Be Valid Internationally?
In order for a trademark to be valid internationally, you’ll need to follow a separate application process. The application to register your trademark in New Zealand is valid only for New Zealand.
In order to ensure your trademark is valid in Australia, you will need to do an application using the Madrid System.
The Madrid System allows international applications for trademarks to be in one place, making it uniform for all participating countries.
Here at Sprintlaw, our lawyers can help you register a trademark in New Zealand.
Expanding your New Zealand business to Australia is an exciting opportunity, however, it’s important to make sure that at every stage you are compliant with the law. Below is a summary of the key legal considerations you need to make:
- Obtaining and ABN, TFN and applying for relevant taxes
- Setting up as a subsidiary or a branch
- Legally employing foreign workers
- Ensuring that your contracts set out the governing law and jurisdiction for disputes
- Protecting trademarks internationally through the Madrid System.
If you would like a consultation regarding expanding your New Zealand business to Australia, you can reach us at 1800 730 617 or firstname.lastname@example.org for a free, no-obligations chat.
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