Foreigners setting up business in Australia

If a foreign company or entity would like doing business in Australia, they need to consider the options of either registering as a foreign company or as a branch or subsidiary in Australia. They need to apply for an Australian Business Number and Tax File Number. If neither applies, then they will be going down the path of not getting the relevant ABN and TFN, and be subjected to no tax file number withholding tax for all income derived in Australia.

doing business in australia

The importance of pre-approval

Tax implication

Since the announcements from the last budget, the company tax rate in Australia has been decreased by 1.5% from the prior company tax rate, and now it is at 28.5%, this would apply if the entity is deemed as a small business as measured by the revenue, asset and the number of employees.
For non-small businesses, then the tax rate would be 30%. There are measures in place to reduce the company tax rate further to 27.5% and to increase the limit of the revenue to encompass more businesses to become small businesses. This is becoming more favorable compared to the tax rate in Indonesia which is currently sitting at 25%.

Resident vs. non-resident

It is important when setting up the company in Australia to determine whether it is a resident company or a non-resident company, the decisive variables would be CM& C – Central Management and Control. ASIC and ATO would normally look at where the directors reside, and where the board meeting takes place, these variables have more weight than where the business is taking place. A landmark case that send a strong message about the notion of central management and control. The case is Hua Wang Bank Berhad v FCT [2014] FCA 1392 (Federal Court, Perram J, 19 December 2014). The case found that The Federal Court (Perram J) has held that 5 foreign companies, all of whom made substantial profits from share trading in securities listed on the Australian Stock Exchange, were each managed and controlled in Australia by a Sydney accountant, Mr. Vanda Gould, and were, therefore, residents of Australia for tax purposes and liable to Australian tax on their profits.
There are two ways of setting up the foreign entity in Australia to do the business, one is setting up as a subsidiary, and the other one is setting up as a branch.

Setting up as a subsidiary

If the entity wants to set up the operation in Australia as a subsidiary, then that would mean the foreign-owned company would take shares in the nominated company, and if it takes 100% shares, the foreign company will become the ultimate holding company.
The advantage of setting up as a subsidiary is that the annual review process will be simpler, having just to lodge the annual report to ASIC, and telling them whether there are any changes to the entity. However, if it is deemed you are foreign-owned, then you need to submit an audited financial statement to ASIC, and you can vary the reporting period up to 18 months to suit the frequency under review of your home country. However, if the entity is a small entity, then under ASIC order class 98/98, you do not need to submit the audited financial statement. The small entity is deemed as having sales of under 25 million, assets under 12.5 million, and employees under 50.

Setting up as a branch

A foreign entity could set up its office in Australia via the status of a branch. Hence the newly established branch becomes the representative of the parent company in Australia. To set it up, ASIC would want to see a certified copy of the company constitution, incorporation, and registration, and the new entity must appoint a local ASIC agent to look after the corporate affairs in Australia. Also, the memorandum must be drafted to state the powers of individual directors.
It is important to remember that as a branch, it might not be able to enjoy the limited liability commonly seen in other proprietary companies in Australia.
Also, the subsidiary company will be taxed worldwide income including Australian sourced income. However, a branch usually will be taxed on Australian-sourced income.
Hence to set up as a branch or subsidiary is a matter of fact and consideration. If you are interested in setting up a business in Australia, please come and talk to one of our specialist in EndureGo Tax, our website is, Facebook is endurego, and our email is Our mobile is 0410-829-900

Disclaimer: The information contained in this article is general and does not constitute advice, it does not factor individual needs, personal circumstances, and financial position into account. Please do not rely on the general information in this article, but rather seek independent legal, financial, and tax advice.