Doing Business in Australia: Establishing a Local Company isn’t the Only Solution…
We are often contacted by our Ecovis international network offices asking if we can set up a company for their local clients who are planning to do business with Australia. While we are more than happy to do this, the client may be able to do business with Australia without the need for a company.
Depending on the precise facts of each case, there are simper solutions available.
Some common situations are:
- A client has just won a supply contract with an Australian customer.
- A client has already started supplying goods to Australia.
- A client has sent staff to work on a project in Australia.
What Are the Facts?
Of course, before we can determine the best approach to the situation, we must understand the facts, including:
- scope and nature of the supplies being made;
- estimated revenue to be generated;
- are the supplies tangible or intangible?;
- will they be made from inside or outside Australia?;
- how will the supplies be delivered and what is the contractual/ownership flow via the supply chain from non-resident to local customer?;
- will the supply involve any assembly or other physical work being undertaken in Australia?
- will local agents, contractors and/or employees be involved?
Based on the answers, we begin to form a picture of how connected the supplies are with Australia, and the degree of any footprint the supplier could have in Australia.
In many cases we find that the non-resident client will have no involvement ‘on the ground’ in Australia and as such may not need to set up a company, but may simply need to be registered for the Goods and Services Tax (GST).
Registering for the GST will enable the non-resident client to be the importer of the goods (if required under their supply contract), pay GST and customs duty all at the point of importation (typically facilitated by a Customs Agent or 3PL contractor) and in some cases claim credits for any GST they have paid on local costs incurred in the process.
GST Registration in Australia: The Options
The Australian Taxation Office (ATO) offers three options for GST registration for non-resident entities, depending on the nature of the activities “connected” with Australia:
- “Simplified GST Registration” for non-residents who are eligible and want to register electronically, report and pay quickly and easily. This typically applies to non-resident businesses that sell ‘low-value’ goods online (<$1k) into Australia and are liable for GST on such supplies (since 1 July 2018). They get an ATO Registration Number (ARN) instead of an Australian Business Number (ABN) and cannot claim GST credits.
- “Claim-Only GST Registration” for non-residents with an enterprise outside Australia who are not entitled to an ABN (as they are not carrying on an enterprise in Australia), do not make supplies connected with Australia, but want to claim GST credits. This typically applies to non-resident businesses that are not making supplies into Australia but have acquired goods/services from Australia and have been charged GST that they want to recover. They get a GST Registration No. instead of an ABN.
- “Standard GST Registration” for non-residents who make supplies connected with Australia, issue tax invoices, and want to claim GST credits. This typically applies to non-resident businesses that are making regular taxable supplies of goods in connection with Australia, and as such have a liability to remit GST to the ATO, but also acquire taxable supplies (‘creditable acquisitions”) for which they want to recover GST credits. They get an ABN.
We can help determine the most appropriate option and then help apply and secure the necessary registration.
Setting up a Company in Australia: When is this Required?
Notwithstanding the above, in some cases a company may be required. For example:
- The client chooses to establish a local entity because it suits their overall business plans.
- The client is required to have a local entity under a supply contract they have won.
- The client wants to employ local staff to help fulfil its business plans.
A company can normally be set up within a day, however with non-resident shareholders and directors it is likely to take several weeks, as original certified proof of identity (POI) documents must be sent over from the home jurisdiction. Further, a local resident director (RD) must be nominated: this is a mandatory condition for an Australian company.
Local Resident Director in Australia
If the company needs to be established urgently, before a local RD has been arranged, ECOVIS Clark Jacobs can step into that role on a short or long term basis.
Perhaps the client has identified a head-office employee to relocate to Australia to run the new business, and take on the RD role, but this will not occur for several months due to logistics, visas, etc. In the interim, a nominee RD must be in place from the date the company is established.
In this context ECOVIS Clark Jacobs is happy to provide RD services on a monthly basis until such time as the designate person arrives in Australia, or an alternative is recruited.
This flexibility provides the client with key benefits:
- It can set up the company immediately.
- It is covered if a relocating employee is delayed.
- It is covered if recruitment of a local employee/director takes longer than expected.
Cutting Through the Red Tape
When we provide RD services to our clients, not only do we tick a critical box in terms of the law, we also offer the ability to establish your business in an efficient and streamlined manner, minimising your exposure to the many time-consuming pitfalls and road-blocks that often arise for the uninitiated.
However, it is not only in the initial establishment of a company that this is true, but in the subsequent ‘bedding down’ and even ongoing activities, that further issues may arise.
Indeed, once a company has been registered with the Australian Securities and Investment Commission (ASIC) and then for various tax and related requirements of the Australian Taxation Office (ATO) and the Office of State Revenue (OSR), there are typically several other needs that must be met to enable the business to actually commence operations.
Our local knowledge, experience and crucially our network, all enable us to quickly find the best fit for your specific needs.
The most common of these include:
- Establishing a banking relationship (and a bank account).
- Establishing relationships with lawyers (e.g: to assist with local contracts), immigration agents (eg: to assist with visas for key staff) and other consultants, with specific language skills if needed.
- Liaising with recruiters, HR advisers, real-estate agents, etc.
Ultimately, ECOVIS Clark Jacobs can provide a practical solution tailored to the client’s specific circumstances.