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Corporate Compliance Requirements in Australia

Unsure about your accounting, taxation and fiscal obligations in Australia? Keep reading, stay informed and ensure you remain in good standing with local authorities.

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Corporate Compliance Requirements in Australia

  1. 1. How to Form a Company in New Zealand? Corporate Compliance Requirements for Legal Entities in Australia
  2. 2. Australia’s Compliance Requirements Regardless of its commercial activity, all Legal Entities located in Australia must comply with a series of obligations managed by various Government Entities. These obligations fall within the following categories: • Tax obligations • Corporate compliance/ Company directors • Licenses • Business fair trading and compliance • Intellectual Property • Environmental compliance • Employment law
  3. 3. Before starting: Business Registrations One of the first tasks to take care of when incorporating a business in Australia is compliantly registering the business with the relevant authorities. The first registration task is obtaining a business name through the Australia Securities and Investment Commission’s (ASIC) online business name registration portal. This business name must be renewed every 1-3 years. Every operational business must get an: Australian Business Number (ABN) and a Tax File Number (TFN). If the company is seeking to trade in goods and services, it must be registered for Goods and Services Tax (GST). All of these tax registrations are available to obtain online through the same Australian Business Register website. Following this, the company is formally recognized. Depending on the activities of the company, there may be certain other licenses and permits required before operations can be underway.
  4. 4. 1. Tax obligations Residents and Non-Resident companies An entity that is a resident of Australia is generally assessable on ordinary and statutory income derived from all sources whether in or out of Australia. In contrast, a non-resident entity is generally assessable only on ordinary and statutory income from Australian sources. (Australian Taxation Office) Differences Resident businesses are taxed on their worldwide income, that’s everything from the money they make in Australia, through to money made when trading or exporting overseas. Non-resident companies, on the other hand, are taxed on the income they make in Australia.
  5. 5. 1. Tax obligations Types of taxes • Corporate Tax: For businesses with an annual turnover of less than AU$50 million, corporate tax is 27.5%, and returns must be filed annually before February 28th, or January 15th if your organization turns over more than AU$10 million per year. Relying on an experienced accountant is key. • Goods and Services Tax (GST) in the country is measured at 10%, and companies with a GST turnover must register with their local authority. Returns should be submitted quarterly, but businesses turning over more than AU$20 million should file their returns every month. • Capital Gains Tax currently stands at 30% for residents, reduced to 27.5% for non- residents. • Payroll Tax: All businesses are responsible for paying contributions to the Social Security and Unemployment Insurance Fund, which stands at 9.5% of their employees’ salaries. A 46% tax is also levied on fringe benefits (for example, a company car, private healthcare) given to employees, making it expensive to offer extras. On top of that, employers are expected to withhold payroll tax, a figure that is decided by local authorities. On average, the tax rate is 5.5%.
  6. 6. 2. Corporate compliance/ Company Directors Businesses registered in Australia must have at least one director of Australian origin under Australian law, although resident directors may be employed on a third-party basis to overcome this if you’re an overseas investor. On top of this, businesses must report necessary information about their shareholders, executives, directors and their financial position in their Annual Return. All shareholders and directors must be listed on the Australian Business Register (ABR) in a bid to increase commercial transparency in the country. Due to transparency efforts, there’s nowhere to hide when you do business in Australia, and you must take this into consideration before incorporating. If you’re operating in a sensitive industry and require confidentiality, seek legal advice on the ramifications of these legal compliances on your operations.
  7. 7. 3. Licenses When doing business in Australia as a foreign investor, you must follow Australia’s Foreign Investment Policy and FATA at all times. It’s your responsibility to read through, understand and follow these policies. Therefore, it makes sense to hire a lawyer or solicitor to guide you through the process of incorporating and doing business in Australia to ensure compliance. On top of that, it’s important to remember that licenses and registrations can vary greatly from industry to industry and from state to state, so speak to local governments before incorporating an Australian business. It may be that you need to file for a permit or license in Melbourne, but in Adelaide, you can operate without permits. Such cases may encourage you to consider your location when incorporating, helping you save money and overcome legal barriers that can add complexity to your business and increase your level of risk.
  8. 8. 4. Business fair trading and compliance Being located deep in the South Pacific, Australia is a long way from the major consumer markets of North America, Europe, and Asia. This makes Australia largely reliant on its trading industry. Thanks to their 6 current Free Trade Agreements (FTAs) and 2 awaiting ratification, Australia will continue its strong trading prowess. Nevertheless, businesses operating in Australia seeking to take advantage of its trading expertise must be aware of the corporate compliance regulations helping to ensure businesses and their customers practice fair trade. Fair trading laws consist of a mixture of federal and state laws so it is important to be aware of the differences, especially when trading across multiple states. The fair-trading laws broadly cover the obligations surrounding market practices, industry codes, product safety, product labeling, price monitoring, and trading regulation. The specificities of the federal laws are all comprehensively outlined in The Competition and Consumer Act 2010. While the federal laws demonstrate a firm grounding of the system, it is definitely worth reviewing the state laws as well. To be fully compliant, both sets of these laws are important to adhere to.
  9. 9. 5. Intellectual property Australia has thorough and strict laws on intellectual property (IP) in order to protect their businesses. Australia are also a signatory to many international agreements that protect intellectual property in other countries. Patents, trademarks, designs, formulae and secret processes are all available to be protected under Australian law through official IP offices located all around Australia. Without formal IP protection in place, companies are at risk of having products or services copied without permission or infringing on other people’s IP without knowing it. Both of these can result in major losses with the latter even incurring large penalties. By undertaking an IP check, businesses can ensure they remain in-line with corporate compliance regulation.
  10. 10. 6. Environmental Compliance Australia has strict environmental compliance regulations to administer sustainable business practices. As well as encouraging all businesses to voluntarily practice environmental management, the Australian government also has a legal compliance system in play for businesses that could present a severe threat to the environment. These laws are typically enforced through obtaining a permit or license relating to the activities of the business. These licenses can be administered by the federal government as well as the state as getting an environmental license depends on the threat it poses. If the activity is likely to affect national environments such as the ocean, rainforests or mangroves, the license must come from the federal body, Department of Environment and Energy. If the activity is threatening to the local environment such as parks, heritage sites or air and water, the permits come from the state government. Non-compliance with either of these licensing boards results in severe penalties. It is also worth noting that as well as penalties, there are also federal awards and grants for good environmental protection practices in order to incentivize sustainable business.
  11. 11. 7. Employment law When paying employees, companies are required to withhold tax form their pay, known as ‘pay as you go’ (PAYG) tax. Other taxes such as Payroll Tax and Fringe Benefits Tax also should be made aware to new businesses. Payroll Tax is a tax only paid by employers if they pay a certain amount of Australian wages per month. This amount threshold is set in the state the company is situated. Fringe Benefits Tax (FBT) is a tax that employers pay when they provide certain benefits to their employees. If employees receive yearly bonuses, for example, this amount must be declared and taxed.
  12. 12. 7. Employment law Australia has a system of 10 minimum employment entitlements which are outlined in the National Employment Standards (NES): 1. Maximum weekly hours 2. Requests for flexible working arrangements 3. Parental leave and related entitlements 4. Annual leave 5. Personal/carer’s leave, compassionate leave, and unpaid family and domestic violence leave 6. Community service leave 7. Long service leave 8. Public holidays 9. Notice of termination and redundancy pay 10. Provision of Fair Work Information Statement
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