Businesses looking to expand their organizations internationally may first consider markets such as Europe, the United States or Latin America, but Australia is another territory that has seen a rise in foreign direct investment (FDI) as more and more organizations understand its potential. Indeed, FDI hit a record-breaking AU$60,499 million in 2017, a figure that is set to be beaten or at least equaled as we head into 2019 with more businesses jumping onboard.
However, rather than setting up shop and establishing an entirely new business in Australia, it may be advantageous to establish a brand office that connects to your existing business. This option serves as the ‘best of both worlds’, allowing you to enter into the territory and access its people and market, whilst maintaining a core business under the same umbrella.
Access To Market and Its People
Foreign investors are constantly looking for new opportunities to spread the word about their products and services and take them to new markets. Australia is in many ways one of the most exciting and dynamic markets in the world. Not only has it enjoyed unprecedented GDP growth and stability for decades, but it’s home to a growing middle-class citizenship which is perfect for businesses hoping to sell luxury products and services to the mass market.
With low inflation levels and an impressive banking system, the country also boasts trading relationships with partners across Latin America, Asia, and the Middle East, which can be utilized from a branch office in the country. Indeed, Australia can serve as a gateway into markets you would not otherwise be able to access, allowing you to forge relationships and maximize your sales performance not only in Australia but in territories around the world.
On top of Australia’s booming market, you’ll gain access to its people. Australia’s populous is highly educated and ready to take on new challenges. Whether you’re looking to hire staff for your business development or want to utilize experienced professionals across development and FinTech for your business operations back in your native country, you’ll be able to find exactly what you’re looking for when you step foot in the country and open a branch office.
Avoid Traditional Company Formation Process
If you’re looking to invest in Australia, it may be wise to avoid traditional Australia company formation and choose to open a branch office instead, rather than opening a subsidiary of your existing company. It’s important to note that a foreign branch office will not serve as its own legal entity, which removes some of the pressures of doing business in a new country, but that you must still partake in company registration and comply with legislation, so you should look to swat up on as much local business law and knowledge to ensure compliance.
In order to open a foreign branch in Australia, you will need to be able to provide corporate documentation to the Australian Securities Investment Commission (ASIC). In fact, branch offices require significantly more documentation than if you were to start a company in the country, and so it’s important to do your research and understand government requirements.
The ASIC will also require your foreign branch to lodge annual balance sheets, profit, and loss, as well as any other documentation or files that are required to be prepared by law in your native country. The idea is not for the ASIC to interfere with your key business but to provide transparency and ensure that all profits made in Australia are correctly documented.
Potential Taxation Benefits
Another significant benefit to establishing a branch office in Australia is that companies may not be taxed, depending on whether they constitute a ‘permanent establishment’ in the country. If you do not have a fixed place of business in the country, or you’re set to work in a branch office for a fixed period of time, then you may be eligible to pay zero tax on profits.
Additionally, branches may not have to pay withholding tax in the country, although the sale of branch assets are likely to be subject to Capital Gains Taxes (CGT). As always, it pays to work with an accountant so that you can maximize expenses and reduce your overall tax bill.
Finally, it’s important to point out that losses made through your foreign branch office in the country may be utilized in your home country for taxation purposes. The costs associated with setting up an office in the country, paying for transportation and new Australian staff may be offset in your local tax bill, although laws differ from country to country so it pays to check.
Having a physical establishment in Australia increases sales from partners and clients, as they’re more likely to trust a company that is based in their home country. Being able to market your business as having a local office will build trust and credibility, allowing you to position yourself as a key player in the market, rather than a virtual brand with no presence.
Testing The Waters
Opening a branch office in Australia allows businesses to ‘test the waters’ and determine whether there is enough of a demand for their products or services to invest in incorporating a separate business in the country. Indeed, it’s easy to spend hundreds of thousands of dollars on incorporation, acquiring an office and hiring staff to start a business in Australia, whereas a foreign branch office is low-risk and can be established in just a week or two.
Being able to wind down your Australian branch office is an additional benefit. It would be much easier to pack up and head back to your home country having run a branch office than it would be a subsidiary; you simply have to cease trading, and your branch will automatically close. A subsidiary, on the other hand, would need to be formally wound down, which can be a costly and time-consuming process requiring lawyers and endless paperwork.
Establish a New Branch Office in Australia
Australia is a key destination for foreign investors looking for long-term growth, and a branch office can help you to unlock your potential without the associated risks of incorporating a new company from scratch or going through the lengthy and risky subsidiary process.
When opening a branch office in Australia, it is recommended that you rely on the services of a professional business support company, such as Biz Latin Hub Australia. Reach out to our Australian founder Craig Dempsey for personalized support.