Foreign businesses have the possibility to open a representative office in Australia. Also known as a liaison office, this is a type of business establishment that is created for non-commercial purposes only.
In other words, it can be set up by companies for various purposes, as defined by the law, but they can’t operate as a commercial company, which has as a main purpose a business activity designed for obtaining profits.
There are certain characteristics the office must have, and our consultants in company formation in Australia can help you in better understanding what the Australian liaison office requires.
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What are the main registration steps for a liaison office in Australia?
Although the representative office is not set up for commercial purposes, it still needs to comply with various steps for company incorporation in Australia, which are designed specifically for this entity.
There aren’t many steps foreign businessmen have to comply with, but it is mandatory to have a registered address in the name of the liaison office. This requirement is necessary for all types of business establishments, and it is imposed to a shelf company in Australia as well.
Another necessary incorporation requirement is to appoint 1 director (or an officer). The person appointed has to be a natural person and must also have his or her residency in Australia. Provided that the office will hire employees, they need to be registered with the Australian Taxation Office (ATO).
What are the employment obligations in Australia?
Regardless if you have decided to open a company in Australia or to operate through a liaison office, if you will need to hire employees (and this is almost always the case), you will need to complete mandatory employment registration steps.
This is due to the fact that employment in Australia is taxed and a part of the salary is processed as taxes, benefits and social security by the Australian authorities. The taxation is concluded through the company where the employer works, regardless of the nature of the establishment.
This means that it doesn’t matter if you open a representative office in Australia, a non-profit entity, a sole trader or a commercial company. As long as there is an employment contract signed, the owner of the business must conduct the formalities imposed by the tax law applicable here.
Currently, the employment taxes are charged by the ATO, where all entities must register for corporate taxation, employment taxation and for any other tax obligation. With regards to employment, we present the following:
- for a yearly income of up to $18,200, the tax is 0%;
- income above $18,201 and maximum $45,000 is taxed at a rate of 19%;
- the employment income of minimum $45,001 and maximum $120,000 is charged at a rate of 32,5%;
- income of $120,001 to $180,000 is taxed with an income tax of 37%;
- any income above $180,001 is charged with the highest personal income tax, of 45%.
Please know that the taxes presented above are charged to employees that are Australian residents. They are applicable for the financial years of 2022-2023 and 2023-2024. (in Australia, the financial year starts on 1st of July of the current year and ends on June 30th of the next financial year).
If you are interested in other taxes applicable here and the tax reporting obligations, you can rely on our specialists in company formation in Australia. Mind that the taxes presented above are charged to employees at the same rates regardless of the business establishment in which they are employed.
Therefore, if you hire Australian residents when you open a representative office in Australia, you will need to pay the tax rates presented above, in accordance with the annual income obtained by the employees.
We invite you to contact our consultants for advice on the employment regulations available for non-residents; we can help you register the liaison office and you can rely on us to set up a company in Australia as well.