A Guide to Corporate Compliance for Australian Companies

If you’re an entrepreneur who wants to start a business in Australia, then there are lots of things that you need to take into consideration. Learn more about legal compliance requirements in Australia. Something that you need to take into account is company structure and ensuring that you can comply with the legal compliance requirements in Australia which are set out by the government and the Australian Securities and Investments Commission (ASIC). In this article, we summarize how you can stay above board and compliant. This guide outlines the ongoing maintenance obligations for a Proprietary Limited (Pty Ltd) company under the Corporations Act 2001.

Key Steps to Establish a Legal Entity in Australia

1. Choose a Business Structure

Select the appropriate legal structure. For most foreign investors, this will be a proprietary company (Pty Ltd) to provide limited liability.

2. Appoint Directors and a Public Officer

Appoint the company’s directors, ensuring at least one is a resident of Australia. Also appoint a resident Public Officer who will be responsible for tax matters.

Expert Tip: The Resident Director and Public Officer Roles

Based on our experience, the resident director requirement is the most significant hurdle for foreign companies entering Australia. The law requires at least one director to ordinarily reside in Australia. Separately, the Australian Taxation Office (ATO) requires the appointment of a Public Officer who is also an Australian resident.

This person is responsible for the company’s tax obligations. We advise clients to engage a professional services firm that can provide a qualified resident individual to fill both of these mandatory roles. This ensures compliance from day one and avoids significant delays in the registration process.

3. Reserve a Company Name

Choose a unique name for the company that is not already registered with ASIC. A name search must be conducted before registration.

4. Register with the Australian Securities and Investments Commission (ASIC)

Submit an application for company registration to ASIC. Upon approval, ASIC will issue a Certificate of Registration and an Australian Company Number (ACN).

5. Obtain an Australian Business Number (ABN) and Tax File Number (TFN)

After registering with ASIC, apply to the Australian Taxation Office (ATO) for an ABN and a TFN. These are required for all tax and business activities.

6. Open a Corporate Bank Account

Use the Certificate of Registration and ABN to open a corporate bank account with an Australian bank. This is essential for managing business finances.

Main Corporate Structures in Australia

Australia offers several business structures, including sole trader, partnership, and trust. However, for foreign investors seeking limited liability, the most common and suitable structure is the proprietary company (Pty Ltd), which is a privately held company.

Legal compliance requirements in Australia

One of the most obvious requirements for forming a legal entity in Australia is having a registered office within the country. As a company owner, you’ll be responsible for informing the ASIC of its location, and letting them know should you move to new premises.

This will serve as your official office and all communications will be sent to this address – whilst this address does not necessarily have to be where your main business operates, it must be a business address, rather than a home address, and it must be in mainland Australia.

Inform ASIC of your main business location

As discussed, your registered company address does not necessarily have to be your main office, so if you operate from a location that’s different from the address you provided to the ASIC, you must let them know. The same goes for any future addresses – should you open a chain, restaurants or clothing stores, for example, every address should be registered.

Keep all financial records

Not only should you keep hold of your financial records for accounting and tax purposes, but you should ensure that these records are up-to-date and easy to access. Every receipt, invoice and transaction record should be kept for up to six years so that you can provide the ASIC with information and an explanation of your day to day business operations.

Disclose your directors

Whether you’re forming a company, a trust or a partnership in Australia, you should make sure that ASIC has a copy of every director’s name, date of birth and residential address. If you have a company secretary, they must also be registered with the ASIC. It’s important to mention that every director must be registered using their home address – you cannot supply a post office box address or a principal place of business address for any of your directors.

Pay fees

When you register a company, make changes to your documents or submit your annual statements later than requested, then ASIC may impose fees or late fees. To ensure that your business is fully compliant and provides necessary information on time, refer to the ASIC website and add important dates – like tax returns – to your calendar for reference.

Keep information up to date

As a business owner in Australia, it is your responsibility to ensure that all information that the ASIC holds on your business is up to date. Whenever you make a change, whether it’s adding a new director to your company, changing the name of your business, moving to new premises or updating your email address, you must notify the ASIC as soon as you can.

Expert Tip: The 28-Day Notification Rule

From our experience, the most common source of late fees is failing to notify ASIC of simple changes. If a director moves house, or a share is transferred, you have strictly 28 days to file Form 484 with ASIC. Late lodgement fees increase significantly if the filing is more than a month late. We advise establishing a clear protocol where directors inform the Corporate Secretary immediately of any change in their personal details.

Do what’s right

This point is something of a grey area, but it’s important to mention nonetheless. If you want to ensure your business remains fully compliant, you should act in the best interests of the company and its people, rather than your own personal interests.

For example, rather than taking a significant bonus that may have an impact on your company’s long-term viability, you should take a reasonable bonus or no bonus at all. Do what’s right for the good of your company, its staff, its shareholders and its creditors – if you don’t, you could be penalized.

Check your statements

Every year, you’ll receive an annual statement from the ASIC. It is your legal responsibility to review the statement and ensure that the details on the register are accurate and that all of your directors complete a solvency report, which leads us on to our next point.

Solvency

You must make sure that your company is solvent. If you cannot pay debts and when they are required, you have low levels of profits or poor cash flow, you have problems with paying creditors on time, or suppliers have taken legal action against your business, you could be insolvent.

You must notify the ASIC as soon as this happens, and take every possible step to ensure your business remains afloat. If your company goes into insolvency and the ASIC believe that your negligence was to blame, you may be required to speak before a judge.

Handle and use information correctly

Finally, you must take responsibility when handling data you obtain through a company. If you use information about staff, clients, or suppliers to gain an advantage over a person or use the information to harm a company, you may be committing an offense. Use information – and handle and encrypt it – carefully as an entrepreneur, and always do the right thing.

The Solvency Resolution

Unlike many jurisdictions that just require a filing fee, Australian law requires directors to pass a “Solvency Resolution” within two months of their annual review date. The directors must formally resolve that, in their opinion, the company can pay its debts as and when they become due. If the resolution is negative (insolvent), they must notify ASIC immediately.

Frequently Asked Questions: Establishing a Company in Australia

Based on our extensive experience these are the common questions and doubts of our clients when looking to operate within the country.

1. What are the common statutory appointments for a company in Australia?

The following are the most common statutory appointments for Australian legal entities: An appointed local director who will be personally liable, both legally and financially for the good operation and standing of the company. More than one local director can be appointed, however at least one of them should be a local national or a foreigner with the right to live/work in the country. In case it is a public company, then a minimum of three directors must be appointed, at least two of whom must reside in the country.

2. Is a registered office address needed for a legal entity in Australia?

Yes, a registered office address or local fiscal address is required for all entities in Australia for the receipt of legal correspondence and governmental visits.

3. What are some of the key legal compliance requirements for a business in Australia?

Some of the key legal compliance requirements for a business in Australia include the following: Inform ASIC of a principal place of business: Your registered company address does not necessarily have to be your main office, so if you operate from a location that’s different from the address you provided to the ASIC, you must let them know. The same goes for any future addresses – should you open a chain, restaurants or clothing stores, for example, every address should be registered. Keep hold of all financial records: Ensure that these records are up-to-date and easy to access. Disclose your directors: You should make sure that ASIC has a copy of every director’s name, date of birth and residential address. Pay fees: When you register a company, make changes to your documents or submit your annual statements later than requested, then ASIC may impose fees or late fees. To ensure that your business is fully compliant and provides necessary information on time, refer to the ASIC website and add important dates – like tax returns – to your calendar for reference. Keep information up to date: Whenever you make a change, whether it’s adding a new director to your company or updating your email address, you must notify the ASIC as soon as you can.

4. What are some taxes that could apply to a business in Australia?

Some taxes that could apply to a business in Australia include the following: Income tax for business Capital gains tax (CGT) Pay as you go (PAYG) withholding Pay as you go (PAYG) installments Good and services tax (GST) Payroll tax

5. How often will a business receive a statement from the Australian Securities and Investments Commission (ASIC)?

Every year, you’ll receive an annual statement from the ASIC. It is your legal responsibility to review the statement and ensure that the details on the register are accurate and that all of your directors complete a solvency report.

What is the difference between an ABN and a TFN?

An Australian Business Number (ABN) is a unique public identifier used for all business dealings with other businesses and the government. A Tax File Number (TFN) is a private number used exclusively for tax and superannuation dealings with the Australian Taxation Office (ATO). A company needs both.

What is ASIC?

ASIC stands for the Australian Securities and Investments Commission. It is Australia’s corporate, markets, and financial services regulator. All companies must be registered with ASIC to operate legally.

Can a proprietary company have foreign shareholders?

Yes, a proprietary company (Pty Ltd) can be 100% owned by foreign shareholders. There is no requirement for local ownership.

What is a registered office?

A registered office is a mandatory physical address in Australia where official communications and notices can be sent to the company. It cannot be a post office box. This is the address that will be listed on the public register with ASIC.

What defines a “Large” proprietary company?

A company is “large” if it meets two of three criteria: Revenue > AUD $50m, Assets > AUD $25m, or Employees > 100.

Biz Latin Hub can help you with legal compliance requirements in Australia

When forming a legal entity in Australia, you should take care to follow the necessary rules and regulations and remain fully compliant – if you do not, then you may be subject to fines or criminal proceedings. Consider working with a solicitor or lawyer to handle paperwork and ensure that everything you do as an entrepreneur and as a company is compliant.

If you’re incorporating a business in Australia and need the help of an experienced team to assist in commercial representation, formation, accounting, legal services or due diligence, get in touch with the experts at Biz Latin Hub Australia today. Reach out to our team now for personalized support.