This chapter is an extract from LegalVision’s 10 Things To Know Before You Bring Your Startup to Australia Guide. Download the full guide here.
As company tax rates in Australia are determined at a federal level, where you choose to set up your business will not impact how much corporate tax you pay.
Quick Tip: If you decide to move your startup to Australia, you may apply to the Australian Taxation Office (ATO) for a substituted accounting period (SAP). The purpose of a SAP is to align Australia’s tax period with your home country’s tax period. This is much simpler than preparing multiple tax returns covering different time periods across different countries. For example, if your startup operates from San Francisco, you can apply to the ATO to align your tax year with the USA (1 January to 31 December) rather than Australia (1 July to 30 June).
The company tax rate is currently 30%, or 27.5% for eligible small businesses. You must register for goods and services tax (GST) if your GST turnover from sales connected with your Australian business is $75,000 or more. To register for GST, you will require an Australian Business Number (ABN). You can also apply for a Tax File Number (TFN) when you register for an ABN.
From an individual perspective, foreign residents doing business in Australia may be required to register with the ATO and pay tax in Australia.
Tax Consequences for Businesses Expanding Into Australia
The most common structuring options when expanding into Australia are either a branch or a subsidiary. A branch is where a foreign company operates directly in Australia through the foreign company. A subsidiary is where a foreign company incorporates a company in Australia to conduct the Australian business. A US example is below:
Your tax obligations will depend on various factors, including:
- the circumstances and structure of the business;
- the type of income your business makes (for example, business profits, interest or royalties); and
- whether there is a relevant tax treaty that applies.
For example, if your startup is based in Canada and operates directly in Australia without a xed place of business here, its Australian business pro ts are not taxed in Australia. This is because Australia has a tax treaty with Canada which says that a Canadian company’s Australian business pro ts are not taxed in Australia unless it has a xed place of business in Australia. You can access a complete list of countries that Australia has a tax treaty with on the ATO’s website.
Whether a tax treaty exists, as well as how you structure your business, will also impact whether your pro ts are subject to an additional tax.
Generally, an Australian subsidiary company will need a TFN whereas a branch generally only needs a TFN if it is required to pay tax in Australia or has employer obligations in Australia.
Tax Implications for Employees
When expanding your startup into Australia, you may decide to send some team members to help with the launch. For instance, you may want to send a key manager to help set up local operations and instil your startup’s culture. How individual employees will be taxed in Australia depends on:
Expanding into Australia often involves obtaining tax advice in both your home country and Australia at both a company and individual level (including salary packaging and tax advice for foreign employees seconded to Australia).
If you have questions about this Manual or about your online business before you start reading, you can contact LegalVision’s startup lawyers by calling 1300 544 755 or filling out the form on this page.
This chapter is an extract from LegalVision’s 10 Things To Know Before You Bring Your Startup to Australia Guide. Download the free 31-page manual which includes information on government incentives, economic trends, geographical considerations, building a team, visas, how to protect your brand and how to set up in Australia.
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