Commencing or acquiring a business operation in a new country requires a great deal of planning and analysis. Once the decision has been made, the practical issues need to be dealt with. This is where having trusted advisers in the new country is crucial.
When commencing business operations in Australia there are many things that need to be considered. Whether you are purchasing or establishing a business, you need to consider the crucial due diligence issues (legal, financial and tax), the way the purchase is structured (share or asset purchase) and the associated tax and legal considerations.
Top ten considerations
1. Legal structure: Will you form a local company or operate as a branch? If you are acquiring an existing entity who should hold the shares?
2. A local director or agent: Australia companies require a local resident director, and if you are operating as a branch of a foreign company you need a local agent. Do you have someone who can fill this role or do you need a professional adviser to take on this role?
3. Tax implications: What will be the tax implications of the structure and how can the tax outcome be optimised? Key issues include:
a. Transfer pricing policy and documentation
b. Thin capitalisation (debt and equity levels)
c. Withholding tax on interest and royalties
d. If operating as a branch, do you have a permanent establishment
4. Visa issues: If you will be placing key people in Australia you will need to ensure that all of the relevant visa issues are dealt with well in advance.
5. Funding requirements and exchange risk: Getting the right mix of debt and equity and the right balance of local and overseas funding is important in order to optimise the outcomes and manage exchange and asset risk.
6. Registrations: In order to commence a business, you need to obtain an Australian Business Number and a Tax File Number. Other registrations include GST, state-based payroll tax and worker compensation insurance schemes. If you are importing goods you may benefit from registering for deferred GST arrangements on imported goods. Consideration should be given to whether the Foreign Investment Review Board (FIRB) approval is required.
7. Intellectual property registrations: Protection of intellectual property is a vital part of doing business globally and the need for registration of IP in Australia should be considered.
8. Employment: Employing people is one of the more involved but also one of the most important areas to manage well:
a. Initial considerations include ascertaining whether an Industrial Award will apply to your employees, nominating a default superannuation fund for employees, having suitable employment contracts and ensuring you have the correct procedures in place for new employees.
b. You will need to determine whether you have the resources to process payroll or whether you require assistance.
c. There are strict timeframes for the payment of employee withholding tax and superannuation so systems need to be implemented to ensure these payment timeframes are met.
d. Australian tax rules tax employers on the value of benefits provided to employees (e.g. housing, vehicles and health insurance).
9. Financial reporting: Having efficient and effective accounting processes are vital in order to monitor the performance of a business from another location. Large companies with experience in other countries will usually have standard reporting packs. Smaller companies starting their global expansion will need to develop appropriate reporting systems. Cloud-based accounting packages make global access to accounting data something that is now accessible to all sized companies.
10. Audit and corporate filings: Most small companies operating in Australia are likely to be eligible for relief from the requirement to audit and file financial statements.
The above list is not exhaustive but covers the major and most common issues relevant to most business entities. An overseas entity wishing to expand into Australia that engages an IR Global firm can be assured that the expertise to address all of the issues associated with doing business in Australia is accessible within the network of firms that regularly collaborate.