As the world becomes further integrated, your foreign business may look to set business operations in Australia and/or sponsor employees to begin or continue operations in Australia.
Foreign business’ have two options if they would like to sponsor employees to work in Australia (this is for a situation when the work of the employee is of an ongoing nature)
A foreign business that is lawfully operating a business outside Australia and does not lawfully operate a business in Australia may apply for approval as a standard business sponsor in order to employ a 457 visa holder to work for them in Australia to establish a branch or subsidiary, or some other business activities such as joint ventures and agency distributorship. They may also seek to become an approved standard business sponsor so that they can employ a 457 visa holder to fulfil contractual obligations in Australia on their behalf. To be approved as a standard business sponsor, the business must be able to demonstrate that it is legally established under the relevant laws of the country in which they operate.
In order to begin the standard business sponsorship process, the Foreign business will need to apply for an Australian Registered Body Number (ARBN) with ASIC. An ARBN can be obtained by an entity other than companies incorporated under the Corporations Act, for example registrable Australian bodies and foreign companies. Foreign businesses wishing to conduct business activities in Australia are required under Part 5B.2 of the Corporations Act to register with ASIC. On registration, such businesses are allocated a unique ARBN. These businesses are required to lodge copies of their financial statements and notices of particulars of certain changes with ASIC.
There may be a situation where the foreign business has established operations in Australia beyond acquiring an ARBN. Should the business be trading in Australia, the Australian entity will need to apply as the sponsor.
A business that has been trading for less than 12 months is considered to be a start-up business. Start-up business are eligible to sponsor. However, a start-up business:
|Comparison||Australian subsidiary (start-up business)||Offshore business with an Australian office|
|Corporate law issues||The Australian subsidiary will be a separate legal entity. The Company may be a private or public company and must be registered with the Australian Securities & Investments Commission (ASIC) and given a unique identifying number, an Australian Company Number (ACN). Liabilities remain with the subsidiary unless parent company has provided a guarantee or subsidiary has been trading whilst insolvent.||Not a separate legal entity. The foreign company is registered with the ASIC and given a unique identifying number, an Australian Registered Business Number (ARBN). Liabilities are those of the foreign company.|
|Taxation||The business will be a resident for Australian tax purposes and will be taxed on all word wide income wherever sourced. Presently, tax on all profits at the rate of 30%. Must apply for Australian Business Number (ABN), Tax File Number (TFN) and may need to be registered for the Goods and Services Tax (GST).||Double tax agreement may apply. Taxed as if it were a separate entity in Australia. Taxed on profits attributable to an Australian permanent establishment. Presently tax on all profits at the rate of 30% Must apply for Australian Business Number (ABN), Tax File Number (TFN).|
|Debt/Equity||If funded by debt owed to a foreign parent, the ratio of debt to equity cannot exceed 3:1 to qualify for tax deductions for interest paid to parent.||If funded by debt owed to a foreign parent, the ratio of debt to equity cannot exceed 3:1 to qualify for tax deductions for interest paid to parent.|
|Ongoing administrative and reporting formalities||Must lodge annual returns and annual financial information if the company is not a ‘small proprietary company’.||Must lodge annual returns and financial and other corporate information with the ASIC.|
|Exchange controls||Significant cash transactions to be reported.||Significant cash transactions to be reported.|
Please note: the advice given is general advice. Circumstances and facts may alter the advice given. We suggest you also seek the advice of an accountant and solicitor on how to best structure the business, advise you on taxation matters and advise you on the extent of liability for foreign corporations.