Foreign companies have several options with regards to the legal entity they can operate under if they want to expand their business activities in Australia. One of the main options is to set up a subsidiary, which means that the foreign business will have to follow all the steps for company incorporation in Australia.
The subsidiary has to be registered under one of the legal entities that are prescribed by the Australian commercial legislation and in most of the cases, investors will have to decide between the public limited company and the private limited company; the decision should be based on the size of the company and the investment plans of the foreign businessmen.
However, if you are not sure what the best option is for your Australian subsidiary, you can address to our team of consultants, who can help you set up a company in Australia and select the most suitable company type. Our team can also provide information on the tax benefits and obligations you will have when opening an Australian subsidiary.
|Best used for
Investors can open a subsidiary in Australia for the purpose of expanding their business operations overseas.
The subsidiary is ideal for obtaining tax benefits applicable to local businesses (as it is incorporated as an Australian legal entity) and limiting the liability of the parent company and the business risks associated to expanding on a foreign market.
Registration obligations for taxation
The subsidiary is required to:
– obtain an Australian Company Number (ACN);
– an Australian Business Number (ABN);
– a TFN (Tax File Number);
– register for GST (the Australian equivalent of the VAT).
It must complete its tax registration procedures with the Australian Taxation Office (ATO) and submit tax reports in accordance with the current tax formalities.
Minimum share capital
You can open a subsidiary in Australia with a share capital of minimum AUD $1 (there aren’t any capital requirements for incorporation, as long as there is a small share capital invested).
Penalties are applied as a Failure to Londge (FTL) for tax returns, GST, PAYG (Pay As You Go) returns, etc.
They are charged based on the size of the company (small, medium sized and large).
The management of the company can be foreign, but it it necessary to appoint a director who has Australian residency.
|Legal representative requirements
In order to open a subsidiary in Australia, it is necessary to appoint 1 resident director.
|Local bank account setup procedure
The investors will need to provide personal details, the registration details and documents of the parent company, the registration documents of the subsidiary in Australia, such as:
– the company name;
– the tax registration details;
– the registered address in Australia;
– details of the company’s directors.
|Independence from the parent company
A subsidiary is an independent structure from the parent company, although the parent company holds the majority of shares.
|Liability of the parent company
|Limited to the amount invested.
|Corporate tax rate
The standard corporate tax is of 30%, but a rate of 25% is available since 2021-2022 to companies that are base rate entities (small and medium sized companies with a lower taxable income).
|Annual accounts filing requirements
– the PAYG – payroll reporting;
– the BAS (business activity statement) on a monthly, quarterly or annual basis;
– the GST report;
– the IAS (instalment activity statement) – similar with the BAS, but applied to companies that are not GST payers;
– the income tax report.
|Possibility of hiring local staff (YES/NO)
|Travel requirements for incorporating branch/subsidiary (YES/NO)
|Number of double tax treaties signed by Australia (approx.)
Table of Contents
What are the steps in opening a subsidiary in Australia in 2024?
If you have decided to opt for an Australian subsidiary, you will have to start the process for company formation in Australia; the registration of the company will begin at the Australian Securities and Investments Commission (ASIC). Below, our team of specialists in company incorporation in Australia have prepared a short description of the basic steps that you should follow in this case:
- register a suitable trading name for your Australian subsidiary;
- obtain an Australian Business Number and a Tax File Number, both necessary for trading activities in this country;
- register for taxation purposes – for the Goods and Services Tax, as well as for the Pay As You Go tax;
- the foreign company must also make sure to appoint a local representative that will be in charge for the Australian subsidiary;
- find a suitable office space where the company can have its official business address;
- open a corporate bank account for the Australian subsidiary and deposit the required capital (which will vary depending on the selected company type).
Why register a subsidiary in Australia in 2024?
The reasons for opening a company in Australia as a subsidiary can be influenced by numerous factors, regarding liability of the parent company, the preferred management structure, business plans and others. One advantage of the subsidiary is that it represents a separate legal entity, with its own legal personality, different than the one of the foreign company, and this means that the parent company will have limited liability for the subsidiary’s financial issues, as opposed to the branch office, where the parent company is fully responsible.
Then, the taxation of the subsidiary can be of interest. The branch office is liable solely to taxation for the income obtained from activities in Australia, while the subsidiary is liable for its global income, but it can also benefit from various tax incentives and measures stipulated by the legislation in Australia, as it is an Australian based entity.
Below, you can see a short video on how to open an Australian subsidiary:
What are the main foreign investors of Australia?
Regardless if foreign companies opt for subsidiaries or for branch offices, Australia is the home of numerous foreign companies. Australia provides an attractive business market and has a solid economy, ranking as the 14th most important economy in the Doing Business Report and this is why foreign businessmen prefer to set up a company in Australia; below, you can find some data on this subject:
- at the end of 2020, the total value of the foreign direct investments in Australia accounted for $4 trillion;
- the main foreign investors are the United States of America and the United Kingdom, which invested $929,4 billion in 2020 and $737,6 billion, respectively (according to the Department of Foreign Affairs and Trade);
- the number of greenfield investments in Australia increased gradually in the last years – 412 in 2017 and 438 in 2018;
- the main economic sector that is of interest for foreign investors is the mining and quarrying sector, accounting for 35,3% in 2019, from all the investments;
- in Australia, the index measuring the shareholders’ power is of 8.0, above the OECD average, of 7.0.
Our team of consultants in company incorporation in Australia can offer more details on how to invest in this country; if you want to set up an Australian subsidiary, you can rely on our team for advice on the types of taxes that you need to pay. Our team can also provide accounting services for your company and can help you understand the tax compliance system applicable here. For more details, do not hesitate to contact our consultants, who can help you set up a company in Australia.
Foreign businessmen who want to open a company in Australia registered as a subsidiary or registered under another structure must know that they are required to pay specific processing fees.
The registration of a company can cost minimum $474. The fees charged by the institutions are regulated under the Corporations (Fees) Act 2001 and they can be updated on a regular basis in accordance with the Consumer Price Index. According to the information presented by ASIC, the registration fees charged by the institutions can increase up to $576 (fees may be adjusted after 1 July 2024), depending on the selected company type.
For instance, the registration of a subsidiary company that has a share capital will require the payment of a fee of $576, while if the company is registered without a share capital, the fee is $474. The fee of $576 applies in many circumstances, including when registering a foreign company in Australia.
The registration fees have been last updated in July 2023, so those who want to set up a company in Australia should verify the current costs available at ASIC.
The fees presented above are maintained in 2024 as well, as the authorities have not yet brought any new modifications (however, they can appear in July 2024, when the authorities can adjust their fees as per the applicable rules).
When you will register the company, one of the main registration steps will be to select a suitable business name, in accordance with the Australian law. According to ASIC, those who registered the subsidiary in 2023 were be required to pay a fee of $39 per 1 year or $92 per 3 years. Currently, for 2024, the reservation of a company name, under the latest fee modifications, costs $59.
The institution does not only charge fees for the registration of a new legal entity, but also for the issuance of licenses or for company takeovers and other types of fees that can be processed by this authority. It must be observed that companies have to submit financial reports at the end of the financial year, and for this procedures, fees are applied in certain cases.
Please mind that as a foreign investor you also have the possibility to acquire an Australian shelf company, which is useful when a person does not want to spend too much time with the incorporation formalities.
A shelf company is a legal entity that has already been incorporated following the standard rules and which is also registered with the Australian institutions.