Most companies entering Australia focus on the commercial plan: customers, premises, staff. The tax structure is usually settled later, often by default. That is where the avoidable costs come from.<\/p>\n\n\n\n
These are the eight questions we work through with companies from China, Hong Kong, Taiwan, Vietnam and Malaysia before they start trading here.<\/p>\n\n\n\n
1. Subsidiary or branch?<\/strong><\/p>\n\n\n\n Most foreign companies set up an Australian subsidiary, a separate company taxed<\/a> at 30% on its own profits. The alternative is to register the overseas company itself in Australia as a foreign company and trade through a branch. A branch avoids a second company but puts the parent directly inside the Australian tax system. The right choice depends on the risk, the size of the operation and how profits will be sent home.<\/p>\n\n\n\n 2. Who will be the directors?<\/strong><\/p>\n\n\n\n An Australian private company must have at least one director who ordinarily lives in Australia, and every director needs a director identification number<\/a>. This is often the first practical obstacle for overseas groups, so it should be solved before the company is registered.<\/p>\n\n\n\n Have You Obtained Your Director ID? Make Sure You Do.<\/a><\/p>\n\n\n\n 3. How will the subsidiary be funded?<\/strong><\/p>\n\n\n\n The parent can fund the subsidiary with share capital or with a loan. Interest on a loan from overseas is generally subject to 10% withholding tax<\/a>. The interest rate must also be at arm’s length under the transfer pricing rules, and larger borrowings may be limited by the thin capitalisation rules<\/a>. These points should be settled before the money moves.<\/p>\n\n\n\n 4. What will the Australian company pay the rest of the group?<\/strong><\/p>\n\n\n\n Management fees, software and system charges, royalties and the price of goods bought from related companies all fall under the transfer pricing rules<\/a>. The ATO expects the pricing to be supported by documentation prepared at the time. Some payments, such as royalties, also attract withholding tax.<\/p>\n\n\n\n 5. Is the group a significant global entity?<\/strong><\/p>\n\n\n\n If the worldwide group has annual income of A$1 billion or more, the Australian company is a significant global entity<\/a> from its first year, however small it is in Australia. That brings country-by-country<\/a> reporting, general purpose financial statements, and much higher penalties for late lodgment. Groups with consolidated revenue of EUR 750 million or more should also consider Australia’s global minimum tax rules<\/a>.<\/p>\n\n\n\n 6. When should the business register for GST?<\/strong><\/p>\n\n\n\n Registration is required once turnover reaches A$75,000, but many businesses register earlier so they can claim GST <\/a>on set-up costs and imports. Early-stage businesses often claim large refunds, and the ATO checks these closely. Clean records from the first day make a real difference.<\/p>\n\n\n\n 7. What happens when staff are hired?<\/strong><\/p>\n\n\n\n Employing people brings PAYG withholding, superannuation guarantee contributions (12% of ordinary earnings), workers’ compensation insurance and, once wages pass the state threshold, payroll tax. Staff seconded from overseas raise further questions about their own tax residency and who bears the cost.<\/p>\n\n\n\n 8. How will profits get home?<\/strong><\/p>\n\n\n\n Dividends paid out of profits that have already been taxed in Australia can usually be franked, and franked dividends paid to a non-resident are not subject to dividend withholding tax. Unfranked dividends, interest and royalties are subject to withholding tax, often at a reduced rate under a tax treaty. Australia has tax treaties<\/a> covering China, Taiwan, Vietnam and Malaysia. There is no general tax treaty with Hong Kong, so the full withholding rates usually apply to payments to a Hong Kong parent.<\/p>\n\n\n\n Getting the order right<\/strong><\/p>\n\n\n\n None of these questions is difficult on its own. The cost comes from answering them in the wrong order, for example by signing a loan agreement before the transfer pricing is considered, or registering a company before the director question is solved.<\/p>\n\n\n\n MNY Group has offices in Brisbane, Hobart, Melbourne, Perth and Sydney, and a team in Ho Chi Minh City. We advise overseas groups in English and Chinese, and can meet in either Australia or Vietnam.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":11636,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1691],"tags":[1468],"class_list":["post-11628","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-tax","tag-tax","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-20"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/11628","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/comments?post=11628"}],"version-history":[{"count":9,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/11628\/revisions"}],"predecessor-version":[{"id":11666,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/11628\/revisions\/11666"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media\/11636"}],"wp:attachment":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media?parent=11628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/categories?post=11628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/tags?post=11628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}This article is general information only and is not tax advice for your circumstances.<\/em><\/pre>\n\n\n\n