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If you’re not a resident of Australia and you’re thinking of expanding your business operations across borders, then Australia is a great place to consider.
Australia enjoys a strong economy as well as being socially and politically stable, creating a solid foundation for businesses to plant the roots of their venture.
However, setting up a business in Australia from overseas requires considering some important legal and business related obligations. Major factors that need to be accounted for include:
- The process of registering a foreign business in Australia
- Compliance with tax obligations and regulatory bodies
- Having the right legal documents in place
In this article, we’ll go through your key legal considerations to ensure a smooth process of setting up a business in Australia from overseas.
Can I Set Up A Business In Australia From Overseas?
Yes, you can expand your business to Australia as long as you meet all the legal requirements, ensure you’ve completed all the correct documentation and follow through with the process diligently.
Growing a business to the Australian market has been an attractive choice for many business owners over the years. Australia enjoys a stable economy as well as a safe social and political environment. Along with this, Australia is party to a number of free trade agreements in multiple nations and businesses like to take advantage of this.
Australia can provide new opportunities for businesses looking to expand overseas.
However, depending on your business’ goals, you’ll need to think about the best way to set up in Australia. A common method is setting up a subsidiary.
Setting Up A Subsidiary
Setting up a subsidiary in Australia means the Australian business will be its own legal entity. Due to this, a subsidiary is an attractive choice for many business owners as liability can be limited for any debts or legal issues.
Having a subsidiary in Australia requires consideration of the type of business structure you will be going with. Whether it’s a partnership, company or sole trader, this will heavily impact your decisions going forward, so it’s best to be clear on this.
However, it’s worth noting that a holding company can still be liable for its subsidiary’s debts in certain circumstances. So, make sure you are compliant with all relevant laws regardless of the promise of limited liability.
Next, you will need to have the following arrangements in place:
- An Australian address and an account with a local bank
- A registered company name
- Applying for an Australian Business Number (ABN) and an Australian Company Number (ACN)
- Hiring a local representative for the subsidiary
Getting every single one of these factors together is key in setting up a subsidiary of a foreign business, so contact us if you need any help!
How Do I Register A Business In Australia?
Registering a business in Australia can be done online through the Australian Securities and Investments Commission (ASIC). It’s a relatively simple process that allows you to select which taxes you will be eligible for in the same application.
Registering a business in Australia provides you with an ABN. However, if you are a foreign company applying to expand in Australia, the requirements will be somewhat different – keep reading to find out more.
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ARBN Or ABN
Acquiring the right kind of business number is crucial, as this is how your business will be identified through most government transactions.
An Australian Registered Body Number (ARBN) and an Australian Business Number (ABN) are both numerical identifiers of businesses. Australian originated businesses usually apply for an ABN. However, as a foreign business, you will receive an ARBN as opposed to an ABN when you have successfully registered your business.
Tax File Number (TFN)
A Tax File Number (TFN) is only required if you receive income from an Australian source that is not from royalty payments, interest or dividends.
If your business begins to earn a profit from its Australian operations, then it is likely you will need a TFN. Obtaining a TFN is a free, online application process.
Business Name
When setting up a foreign business in Australia, it’s important to be prepared for a scenario where you cannot use the exact same name for your business that you are currently using.
The name may be taken in Australia and you may have to find alternatives that are still similar. To see whether your business name is available, you can search for it on the business names registry.
Once you have found a suitable name, you can register it online.
Tax Obligations
Doing business in Australia means you will most likely need to pay some form of local taxes. For a business, tax is usually deducted only from profits accumulated by operations in Australia.
The kind of taxes and even tax breaks your business may be eligible for will depend on your individual business, so it’s best to get some professional advice – you don’t want to find yourself caught by unexpected expenses or fines.
ACL Compliance
Australian Consumer Law (ACL) is the main governing body for the relationship between businesses and their customers in Australia. Getting familiar with ACL is imperative for any foreign companies wishing to expand their business to Australia, as it will regulate their conduct around advertising and other interactions with consumers generally.
ACL covers the following matters:
- Misrepresentation and advertising
- Consumer guarantees
- Compensation
- Warranties
- Returns and refunds
Compliance with the ACL can ensure your business is meeting all its legal obligations towards customers. This will be a driving force in your success so getting familiar with ACL regulations is highly advisable – contact us if you have any questions!
Any Additional Requirements For Companies
It’s important to remember that companies and businesses have different requirements. If you are thinking of setting up a foreign company in Australia, there are alternative and even additional requirements that need to be met.
For example, a company will need to apply for an ARBN as well as an ACN. Registering a company in Australia requires filling out additional forms for ASIC.
Company structures also have their own requirements for auditing, management, reporting and organisation.
A company’s legal obligations are set out in the Corporations Act 2001 – it can be a handful, so we’ve broken it down in this article.
What Documents Do I Need?
Gathering all the right legal documentation is just as central as having a brilliant business idea. After all, you want to protect your ideas and your interactions with other parties.
In order to make sure your business is protected against certain risks and remain compliant with Australian laws, it’s important to ensure it’s up to date on all its legal requirements. We’ve summarised some of the main ones below.
Employment Agreements
If you are hiring workers in Australia to help with operating your business, becoming familiar with Australian employment standards can help avoid potential disputes in the future.
Fair Work Australia set the standards for employees including wages, leave, awards and hours. As an employer you always want a good relationship with any employees and ensuring their rights are met under employment laws is a good place to start.
In Australia, certain awards may apply to your employees. These awards will set out leave entitlements and the rate of pay they are entitled to. If any awards apply to your employees, it’s your responsibility to ensure you’re compliant with these requirements.
Privacy Policies
Chances are, like many businesses, you operate some or all of your business online. Australia has specific requirements for businesses that operate online determined by the Privacy Act 1988 and Australia’s Privacy Principles.
All businesses that collect personal information from their customers are required to have a Privacy Policy on their website. A Privacy Policy is usually used alongside a Terms and Conditions agreement as well as a Cookie Policy-.
If you’re not sure where to start, we’ve got you covered – reach out to our team today.
Founders Term Sheet
If you are operating as a company structure, then it’s likely your business has a Founders Term Sheet outlining important matters regarding dividends, directors, shares and more.
As your business expands, it may be time to update the founders term sheet to include new details. Expanding the business may have added in additional investors for capital, directors and shareholders, so it’s advisable to have this document up to date before beginning business in Australia.
Business Plan
A business plan is an essential document for most business owners, usually created at the conceptualising stages of bringing their venture to life. However, as a foreign business engaging the Australian market, it may be a good time to update or even create a new business plan that targets your business goals in Australia.
Operating a business in a new country comes with considering a new demographic, market, competition, economics and challenges. An updated business plan can help in staying ahead of this.
Supply Agreements
Supply Agreements are the contracts between your business and those that provide necessary materials for your business to function.
Whether you’re using old suppliers and having them ship internationally or new suppliers, an agreement will be required. Supply Agreements cover:
- Dispute resolution
- Payments
- Details regarding the products/Services
- Date/times
- Warranties/liabilities
It’s important to have these contracts in place as you expand your business operations to Australia.
Internationally Enforceable Contracts
When business is done over more than one jurisdiction, it’s important to make sure that all contracts can be used in different regions.
An internationally enforceable contract contains clauses (known as international arbitration clauses) that ensure the contract and any decisions that result in accordance with it can be enforced in more than one jurisdiction.
Can I Go Into Business With A Foreign Partner?
Yes, setting up a foreign business in Australia can be done with the help of a resident Australian partner. The same concepts and regulations that we’ve discussed so far in the article will still apply, except you’ll have a partner to execute them with.
Having a partner has many advantages as they are likely to understand the local market, legal regulations and economic systems well. However, it’s always best to get all business relationships in writing to mitigate any risks from the outset.
Your best bet here is to draft up a Partnership Agreement to set out the terms of your business relationship and minimise the risk of legal headaches.
Can I Hire Overseas Workers?
Hiring overseas workers is not an uncommon practice, however, it should be treated carefully as you don’t want to break the employment regulations of any country.
Australian Fair Work regulations can still apply to contractors that are overseas as well as the laws of their own country. It really depends on the individual circumstances and whether the circumstances meet a particular threshold. More specifically, it will apply if the overseas workers have a ‘sufficient connection’ to Australia.
It’s best to get professional advice on employee matters – contact us today if you have any questions.
Key Takeaways
Starting a foreign business in Australia is an exciting venture, as long as you meet all the legal requirements. There’s a lot of business legalities to handle and we’ve discussed some of them in this article. To summarise:
- Depending on whether you are a company, business or subsidiary, you will need to apply for one or more of the following – ABN, ACN, ARBN
- Forms and applications to set up a business or company in Australia can be found online through ASIC
- It is likely you will need to apply for tax, however, these will depend on your type of business
- Compliance with Australian consumer and employment regulations are essential considerations
- Sorting out legal documentation such as Founders Term Sheets, Employment Contracts, Contractor Agreements sand Supply Agreements should be completed when setting up an overseas business in Australia
There’s a lot that goes into setting up a foreign business in Australia, so consider getting some professional legal services to help out with all of it!
If you would like a consultation on setting up a foreign business in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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