A foreign company can start the process of company formation in Australia by selecting one of the options available under the Australian law.
Foreign investors have the possibility of incorporating a local company, or they can also opt to operate through a subsidiary or a branch office in Australia, depending on their investment plans, capital, business model and other important factors.
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Requirements for opening a branch in Australia
For those who want to open a branch in Australia in 2023, we have prepared an article where investors can discover the main advantages of this structure, but also the responsibilities, the tax requirements and accounting procedures that can apply to it.
For more details on the incorporation of a local branch, as well as for legal representation on the registration process, please address to our team of specialists in company incorporation in Australia.
If you will open a company in Australia that will operate as a branch office, it is necessary that the place which is the company’s registered office to be open in all business days (Monday to Friday), as per the rules of the Australian registration institutions.
The Australian branch office should be open for the following minimum program:
• 10 AM to 12 PM;
• 2 PM to 4 PM.
Besides this, when you will set up a company in Australia, it will also be mandatory to display the company’s name outside the office. This requirement is necessary regardless if the company has only 1 place of business or more.
Additional elements have to be mentioned as well, depending on the characteristics of the branch office (such as the original place of incorporation).
If you are interested in another way of starting a business in this country, outside of the branch office, you must know that both local and foreign investors have the possibility of buying a shelf company in Australia.
This represents a legal entity that has already been incorporated, and which in general is registered as a limited liability company, but other legal entities are also available. If you are interested in starting a business in another country, such as Bahrain, we can put you in touch with our local partners.
How to apply for a company name in Australia?
One of the main requirements imposed to those that want to open a company in Australia, regardless of its type, is to select a suitable company name. The company name must meet a set of basic requirements, imposed by the law, the main characteristics being:
- to be unique at a national level;
- to reflect the company type under which the business is registered;
- to reflect the company’s business activity/purpose;
- to not infringe any copyright laws applicable in Australia on trademarks.
What are the basic characteristics of an Australian branch?
The Australian branch is a structure that has to be controlled by the parent company abroad, in accordance with the applicable law.
This is why this structure is highly recommended to companies that want to implement the same business model in all countries it has branches or other representative units, as the branch is not legally entitled to carry its own business model or take its own management decisions. Alternatively, investors can choose to open an LLC in Australia.
Certain rights are applicable to an Australian branch of course, but they are limited. Below, you can find out the basic characteristics of the branch office and find out if the structure is suitable to your business needs.
If you are not sure on whether you should operate through a branch office or a subsidiary, our team of specialists can help you make a decision in the process of setting up a company in Australia under one of the two structures:
- when starting the process of company formation in Australia, the incorporation documents of the parent company abroad are required;
- the branch office is considered a non-Australian resident, but which is issued with an Australian Registered Body Number;
- for the liabilities of the branch, the parent company is fully responsible;
- the rules of company formation require foreign investors to appoint an Australian agent, who will be responsible for the branch office;
- the branch office must also have a registered office, a compulsory requirement for all companies operating here;
- with regards to taxes, the branch is liable to the payment of the local corporate taxes, but which will be calculated solely for the income obtained from activities developed in Australia.
Please mind that the branch office will also be liable for the payment of the GST (the Australian VAT). The tax compliance law imposes branch offices to submit specific financial documents, including the ones of the parent company abroad.
If you want to set up a company in Australia as a branch office, our team of consultants can offer more details on other tax aspects you should be aware of. We can also help you if you want to open a branch or other type of company in Seychelles or other country through our local partners.
What are the rules concerning the appointment of an Australian agent?
As mentioned above, one of the requirements for company formation in Australia for a branch office is to appoint an Australian agent. First of all, it must be noted that the Australian agent has to be an Australian resident.
The Australian resident can be:
- an individual who has obtained his or her residency in Australia;
- a company that has its tax residency in this country.
The purpose of the agent is to represent the company in the relation with various institutions but it must be noted that the person/company appointed for this function bears certain responsibilities and liabilities.
For instance, the agent must complete all the obligations imposed for the branch office, while bearing the liability for various legal/financial situations of the company (such as breaches of contracts or regulations, and/or penalties charged to the branch).
In order to appoint a local agent, the foreign company must sign specific documents that will reflect this action. There are several ways to complete this legal obligation, as presented below:
- the company can sign a memorandum an appointment (the procedure is done by completing the Form 418);
- the agent can be appointed through a power of attorney;
- the foreign company retains the right to replace the agent, and this can be done through the Form 404 – Notification of change of agent.
What are the reporting obligations of an Australian branch office?
All companies in Australia have certain reporting obligations. Therefore, if you set up a company in Australia by completing the standard incorporation process, you will need to verify the reporting obligations imposed for you company type.
Accounting formalities must also be completed when buying a shelf company in Australia, which must comply with the obligations set up for its company type. These obligations are also extended to branch offices and subsidiaries.
For a branch office, the law states that there is the obligation to submit on a yearly basis the company’s annual return. The procedure is completed with the Australian Securities &Investments Commission (ASIC).
With regards to this, foreign businessmen should be aware of the following:
- for companies that must hold the annual general meeting (AGM), the submission of the annual returns must be done within 1 month since the AGM took place;
- the time limit between the submission of 2 yearly financial reports can’t be longer than 15 months;
- companies that fall under the rules of the ASIC Corporations (Foreign-Controlled Company Reports) Instrument 2017/204 are not obligated to submit financial reports;
- the company must prepare 4 types of financial documents – the balance sheet, the profit and loss statement, the cash flow statement, any other document that can be required based on the law of the country where the foreign company has its tax residency.
The tax residency of the company matters when submitting financial documents for the Australian law as well.
For instance, foreign companies that have their tax residency in New Zealand and operate in Australia through permanent offices (such as the branch office) do not have to submit certain financial documents that other foreign companies may be required to submit.
What is the data on foreign companies in Australia?
Given that the branch office is a type of structure that is generally selected for incorporation by foreign companies, we will present below few important details regarding the presence of foreign companies in this country, as presented by the Australian Bureau of Statistics:
- at the level of June 2022, the Australian economy had 2,569,900 active businesses (foreign and local);
- the value of foreign investments in Australia accounted for $4,5 trillion (data measured at the end of 2022);
- those who want to open a company in Australia should know that a large proportion of the foreign companies hired less than 20 employees;
- amongst the top 2,000 companies operating here, 37% of them were represented by foreign owned businesses, which accounted for $S 1,1 trillion worth of assets;
- in 2021, the top foreign investors in Australia were the United States of America (accounting for $S 929,4 billion) and the United Kingdom (S$ 737,4 billion).
What documents are necessary for branch registration in Australia in 2023?
The list of the documents necessary for the registration of a branch office in Australia is extensive and this is why we recommend you address to our specialists, in order to have information on all the documents you should prepare.
In order to open a company in Australia as a branch, you will need to present the Certificate of Incorporation of the parent company, as well as its statutory documents.
The information on the directors of the company is also required, as well as other details on the foreign company. Please mind that in practice, it happens very often for the Australian authorities to reject a large share of the branch applications due to incomplete files. In order to avoid this, please contact our team for legal advice.
Please know that if you want to open a branch in Australia in 2023, you will be asked to pay the required taxes and fees. All companies are required to pay the corporate tax which is charged at a rate of 30%.
However, certain companies can pay a lower corporate income tax in 2023, if they qualify as small and medium-sized companies. For them, the tax is reduced at a rate of 25%.
A novelty of the taxation system in Australia is that the GST, charged for the sale of most goods and services, has been increased since 1 January 2023.
If in the previous years the GST was established at 7%, in 2023, is charged at a higher rate, of 8%. We can also help you with branch registration in another region, such as Dubai, through our local partners.