Setting Up a Company in Australia

Why Australia Company Formation?

 

According to IMD's World Competitiveness Yearbook, which assesses the overall strength of a countries' economy, Australia is consistently ranked as one of the most resilient economy in the world. With its increasing integration with emerging Asian economies, Australia offers excellent investment opportunities for firms seeking to extend their operations into the Asia-Pacific region.

 

Boasting a GDP per capita (US$46,278) that is higher than that of Germany (US$40,870), UK (US$35,334), France ($42,747), Australia is a country of consistent economic performance and stability. The developed financial infrastructure and stable bank regulatory system in Australia offer huge incentives for the influx of foreign direct investments in recent years.

 

Company set-up process in Australia

 

In order to set up a company in Australia, investors must first decide on the type of company that they wish to form and operate. Public companies must have at least 3 appointed directors, 2 of whom must be residents in Australia, and one company secretary living in Australia. On the other hand, proprietary (Pty Ltd) companies require only one director and one member, with the director needing to be resident in Australia.

 

After deciding on the type of company that is to be established, investors should check with the Australian Securities and Investments Commission (ASIC) that their desired company name is available, and to reserve the name. The company name can be reserved for two months.

 

Under the Australian Corporations Act, all companies must be registered with ASIC. Subsequent to this process, companies must also register for an Australian Business Number (ABN). The ABN is used in business transactions with other companies, and is typically listed on commercial invoices. In addition, companies would need an ABN in order to register for Goods and Services Tax (GST). A business needs to register for GST if the company meets the GST turnover threshold of $75,000 or more.

 

Other Tax considerations

 

Tax File Number (TFN): A TFN is a number issued by the Tax Office to companies, and is a unique reference number that is used to quote to the Tax Office when applying for an ABN or when lodging income tax returns. Although it is not mandatory for companies to have their own TFN, it is recommended when setting up a company in Australia to obtain a TFN as it makes the monitoring and administration of tax-related activities easier.

 

Pay-Roll Tax: the Pay-roll tax is a State tax levied on the wages paid out by employers. The rates and exemption threshold vary between different States, and companies should seek taxation advice from their local tax professional/authority.

 

Pay-As-You-Go (PAYG) withholding: PAYG withholding is a legal requirement on companies to withhold amounts from payments made to employees (e.g. directors, contractors). Companies must also withhold amounts from payments made to other businesses if they do not quote their ABN on invoices. Withheld amounts must be reported and paid to the Tax Office.

 

Conclusion

 

Regulations on the setting up of a company in Australia can vary extensively, depending on the State in which the business is formed. Professional services firms can be of immense benefit to entrepreneurs looking to invest in Australia via company incorporation. Such firms can use experience gained from a variety of company formation engagements to simplify the company setup process, hence saving time while ensuring all regulatory requirements are met.

 

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