Boasting one of the world’s most lucrative and stable economies, and a high GDP per capita of USD$53,799.94, it is little wonder why so many foreign investors choose to start a company in Australia. As well as being an economic powerhouse and offering entrepreneurs endless untapped earnings potential, the country has unmatched links with many of the world’s most advanced and lucrative economies through free trade agreements, making Australia’s import and export market one that’s packed with opportunities for significant return on investment.
However, in order to capitalize on these unique opportunities in a market such as Australia, it is vital that you get to grips with the country’s accounting and taxation requirements. Doing so will enable you to remain compliant and build a business with legs in the country – even if it does take some getting used to. To offer support, we’ve put together the most important accounting and taxation requirements for businesses in Australia…
Table of Contents
Australian Tax Requirements and Regulations
If you incorporate a company in Australia, you conduct business in Australia that is managed in the country, or you conduct business in the country have Australian resident shareholders, then your company is considered to be resident in Australia. Companies which are resident are taxed on their worldwide income – that is, income generated in Australia and by trading with other countries around the world. Non-resident companies, on the other hand, are only required to submit accounts and pay tax on their income that was generated in the country.
All companies in Australia are required to pay a corporate tax rate of 27.5%, provided their turnover is less than AU$50 million per year. For those companies with a turnover of more than AU$50 million per year, the full 30% corporate tax rate applies to all taxable income.
For companies with a turnover of more than AU$10 million per year, accounts and returns must be submitted by January 15th after the tax year ends, or February 28th for those who generate less than AU$10 million per year. Ensuring you submit your taxes on time is critical, as you may be fined or asked to appear in front of a judge if you don’t provide the necessary information on this date. Therefore, working with an experienced accountant makes sense.
It’s important to note that you may carry forward your business losses indefinitely. However, you can only carry forward capital losses by offsetting them against capital gains. Ensuring you incorporate under the right Australian business structure, and seeking the assistance of a reputable business accountant, is key to remaining compliant when carrying losses forward.
Goods and Services Tax (GST)
The standard Goods and Services Tax (GST) rate in Australia is 10%. All businesses with a Goods and Services Tax turnover of AU$75,000 must register, and returns should be submitted to the government on a quarterly basis. For businesses generating a turnover of AU$20 million or more, filings should be returned monthly – keeping on top of your finances is critical here.
Australian Payroll Tax
When taking on employees in Australia, you must be aware of the financial responsibilities of doing so and factor this into operating costs. Employers must pay into the Social Security and Unemployment Insurance Fund at a rate of 9.5% of an employees’ gross salary, whether setting up as a Sole Trader or a Trust, as well as paying an eye-watering 46% tax on fringe benefits provided to workers, whether that be healthcare, gym membership, or childcare. On top of that, employers are expected to withhold payroll tax that is due on all employees’ wages, which averages at around 5.5% depending on the local authority you operate within.
Withholding Tax in Australia
When operating in Australia as a foreign investor, it’s important to understand withholding tax and know how to distribute earnings to yourself, other shareholders, and businesses both in and out of Australia. If you run a subsidiary business, then you’ll be pleased to know that dividends paid to Australian and foreign parent companies are withholding tax-exempt, so long as the necessary corporate tax has been paid on profits. The interest that is paid to foreign entities has a 10% withholding tax, and real estate sales and transfers are subject to a property tax levied by your local authority (this figure can be anything from 4% to 7%).
What is interesting to note, however, is that Australia has taxation treaties with fifty countries around the world, reducing withholding tax on payments abroad. These countries include Argentina, Austria, Belgium, Canada, Chile, China, Czech Republic, Denmark, Fiji, Finland, France, Germany, Greece, Hungary, India, Indonesia, Ireland, Italy, Japan, Kiribati, Korea, Malaysia, Malta, Mexico, the Netherlands, New Zealand, Norway, Papua New Guinea, the Philippines, Poland, Romania, Singapore, Slovakia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taipei, Thailand, Turkey, the United Kingdom, the United States of America and Vietnam. Refer to your local government for more information before you get started.
Corporate Tax Transparency
In order to create a fair and transparent Australian tax system, the government offers up a lot of information about companies that operate in the country. Indeed, should you incorporate in Australia and create a successful business that generates more than AU$100 million per year, you must be prepared for an annual report to be released, that includes your company name, business number, and income figures (such as taxable income and tax payable). In cases where confidentiality is critical, operating as a subsidiary may be a necessary step.
Work with Biz Latin Hub
If you need assistance in sorting accounts or taxation in Australia, you can depend on the experts at Biz Latin Hub. Our local team is on hand to guide you through the process of incorporating, filing returns, organizing payroll, distributing profits and everything in between, so do not hesitate to contact our Australian experts to find out more about how we can help.
Contact us now and we’ll get back to you soon with a personalized strategy designed to take your business to new heights.