As an accountant, I regularly get enquiries from my overseas colleagues who want to start a business in Australia (and I have done that numerous times now). And I always ask WHY? With a population of just over 26 million, the market is not huge. Yet, in terms of size, Australia is 6th largest country in the world, giving us one of the lowest population density. This does not spell commercial sense. Why incur the cost of running an operation in such a “small” country?
Without a doubt, all those who want to do business in Australia want to do so because of the lifestyle they believe that Australia can offer. It’s not just about pure profits (although you cannot ignore that). Having lived and worked in Malaysia, England and now Australia, I agree wholeheartedly. The opportunities are not the same as what USA can offer – but Australia also offer a lifestyle that no other countries can offer.
Starting a business in Australia can be challenging. When the covid pandemic hit, Australia earned its “hermit country” reputation – the borders were locked down and no one was allowed to leave or enter without a special permit. As temporary residents went home and none arrived to take their place, labour shortages created a real headache for businesses particularly those in industries that relied on itinerant overseas workers e.g. farmers, restaurants, etc. The old prison colony returned with a vengeance!
Prior to the covid pandemic, Australia had a reputation as a vibrant thriving country that has a stable economy, a skilled workforce, friendly business environment and a strong regulatory framework. It was ideal. It is still ideal. The challenges caused by the covid pandemic can be found in every country. So we should not let that put us off.
In this article, I will discuss the steps that non-Australians can take to start a business in Australia and what they need to do to run the business successfully. Below is a flowchart giving a outline of the basic steps involved in starting a business in Australia:
RESEARCH THE MARKET
Generally, by the time I get a request, the decision has already been made to start a business in Australia. For the benefit of those who have not yet done so, it is important to do your research and understand the Australian market. You should familiarize yourself with the local laws and regulations, the competition, the target audience, and the cultural nuances that may impact your business. You can do this by reading up on local news, speaking with local business owners and investors, and attending networking events and conferences.
When I first arrived in Australia as a qualified UK chartered accountant in the seventies, I was met with the not uncommon belief that you had to have “local knowledge” to be able to work. To a large extent that has now disappeared – we have to thank the internet for that. Today, we all listen to the same music, watch the same movies and eat the same food (Mcdonalds is available in every country LOL). However, the Australian slang is very different and so is our Jingle Bells!
THE PROCESS FOR STARTING A BUSINESS IN AUSTRALIA
1. Choose a Business Structure
You need to choose the appropriate business structure for your business, depending on your goals, resources, and legal obligations. Each structure has its own advantages and disadvantages, so it is important to choose the structure that best suits your needs.
There are 4 most common business structures in Australia are:
- Sole Trader: A business structure where the owner is the only operator and responsible for all aspects of the business.
- Partnership: A business structure where two or more people or entities share the ownership and management of the business.
- Company: A separate legal entity that can be owned by individuals or other entities, and has its own legal obligations and tax requirements.
- Trust: A structure where assets are held and managed by a trustee for the benefit of the beneficiaries.
Often, it’s a pragmatic choice. An overseas company wanting to set up a branch or subsidiary in Australia will generally incorporate a company. A company is a well understood structure world wide. A migrant who has taken to taken up permanent residency in Australia is more likely to use a trust structure. The rule is – get advice before you start.
2. Appoint A Local Representative
As a general rule, if you do not intend to take up residency in Australia, then you must appoint an Australian as a local representative to look after your affairs. The Australian Tax Office (ATO) and the Australian Securities and Investments Commission (ASIC) both require local representatives.
The biggest difficulty for overseas business owners will be to find a local representative that can be trusted – it must be someone you can trust as you will be providing that local representative with access to your bank accounts, etc.
Secondly, it is getting increasingly difficult to find an Australian prepared to be the appointed local representative. The risks attached to being a local representative is too high for the compensation the company is prepared to pay.
3. Make It Legal
Once you have finalised Step (1) and (2), and you’ve decided on your structure, you now have to legalise it. If you choose to operate as a company, you will have to incorporate with ASIC. If you choose another business structure, you may need to register your business name with the Australian Business Register (ABR).
When I was running my accounting practice, you would not believe how many of my clients originally came to me and they had been running a business that has not been properly registered, using business names they were not entitled to use, etc. Do not let that be you. Legalising your structure is not difficult. It’s a one-time task that must be done if you are to legitimately do business in Australia.
4. Register With Relevant Authorities
Having legalised your entity, you just have 2 more steps before you are fully compliant if you want to do business in Australia.
As a business owner in Australia, you will be required to pay taxes on your business income. You will need to register for an Australian Business Number (ABN) and a Tax File Number (TFN) with the ATO and ensure that you file your tax returns on time. You may have to register for the Goods and Services Tax (GST) if your annual turnover exceeds AUD75,000. You may also need to register for other taxes such as Pay As You Go (PAYG) withholding, Fringe Benefits Tax (FBT), and Superannuation
Depending on the nature of the business, non-Australians may need to obtain licenses and permits from state or federal authorities. For example, businesses in the food and hospitality industry may need to obtain a food safety certificate and food license from the local council, while businesses that import or export goods may need to obtain customs licenses.
If you are starting a construction business, you will need to obtain a building license from the state government. You should research the specific licenses and permits that you need for your business and ensure that you obtain them before you start operating. We do like our paperwork in Australia!
5. Set Up Operations
Irrespective of the business you’re planning to set up, you will have to do the following:
- Open a business bank account
You will need to open a business bank account in Australia to manage your business finances. You can choose from a range of banks and financial institutions, and you will need to provide proof of identity and proof of business registration to open an account. Believe it or not, this is the most painful part of the process and can cause the biggest delay!
Banks in Australia require 100 point identification checks and some banks will not even open a bank account for the new entity unless you physically turn up at the bank for the identification process!
- Appoint A Local Accountant/Tax Advisor
If you’re lucky, the local representative you have already appointed will be qualified and will be able to attend to most of the compliance issues for you. If not, then you must appoint a local tax advisor to lodge your annual tax returns, etc.
- Hire Employees
If you’re planning to hire employees, then you will need to follow the Australian employment laws and regulations. This includes adhering to minimum wage requirements, providing safe working conditions, and complying with anti-discrimination laws. The best website for information is Fair Work. The website has information for both employers and employees on the correct pay and entitlements, complying with workplace health and safety regulations, and compulsory insurance coverage in place. Australian labour laws are complicated, with state and federal awards for different industries, etc.
If the plan is to move one of the current overseas directors to Australia to manage the business, then you need to make sure that you apply for the correct visa. The last thing you need when you’re starting up a new business in Australia is to find that you’re in breach of Australian immigration law. This is definitely not an area where you can do it yourself.
6. Ongoing Compliance
Finally, put systems and support in place to ensure that you stay up-to-date with any changes to local laws and regulations (and there will be many) and ensure that you adjust your business practices accordingly. The best way to do this is to ensure that you have a good tax accountant who can keep you informed. You will be too busy running your business to have to worry about keeping up to date with the 101 legislation changes in Australia. Leave that to the experts!