Setting up a company
There are five main types of business structures in Australia: co-operatives, limited companies, partnerships, franchises and sole proprietorships (which can be public or private).
Due to the complex and ever-changing Australian tax laws, it is advisable to consult a tax expert before you decide which one would fit you and your business intentions.
You can register your Australian company with business service providers who use software that deals directly with the Australian Securities and Investments Commission (ASIC). These providers can be found by searching business directories or the Internet for ‘shelf company services’ or ‘Australian company registration’.
Alternatively, you can complete the application form for registration as an Australian company (Form 201) and send it to ASIC. A fee has to be paid for the application.
Once your company is registered, you can conduct business in all of the individual states and territories in Australia. There are three steps to setting up a company in Australia:
- Register your company name with ASIC and receive an Australian Company Number (ACN). Note that registering a company name is not the same as registering a company.
- You are required to have a registered office, even if you work from home.
- In order to register a business in Australia, you are required to be an official resident.
Under-capitalization is the main reason for small business failure. It is advisable to have a sufficient amount of capital before starting up your company as Australian banks are often reluctant to lend money to new businesses. You are also unlikely to obtain a loan for a start-up without security such as property or other tangible capital. There is no specific amount of money a start-up company needs by law.
Nowadays, states compete for new businesses to settle in their area by offering incentives and grants. However, if you enter Australia as a business migrant, you have to have considerable financial resources to pass a points test. The Australian government encourages successful business people and investors to apply for residence in Australia, although applicants are generally required to invest at least AUD$500,000.
For information on incentives and grants, you can contact the Australian trade commision: Austrade
Of course, there are also ongoing requirements when running a company in Australia. It is estimated that the average small business person spends around four hours a week on government paperwork. Every company must keep up-to-date financial records. Some of the paper work and duties include correctly recording and explaining transactions and explaining the company’s financial position and performance.
For more information, you can visit the website of the Australian Security and Investment Comission.
Taxes
Sole traders use their individual tax file number (TFN) for processing their business taxes. Partnerships, companies and trusts need a separate TFN. Furthermore, you need an Australian Business Number (ABN) and to register for goods and services tax (GST).
Contributions to employees
If you are paying employees, directors or other businesses, your business must be registered for pay-as-you-go (PAYG) and withhold tax from payments you make to them. In case you provide non-cash benefits to your employees, such as the use of a car, you may also need to pay fringe benefits tax (FBT).
Furthermore, you must pay a superannuation guarantee (retirement program) for most employees and certain contractors. Employees are seen differently to contractors in the Australian tax system. You don’t usually withhold tax from payments to contract workers (self-employed) and independent contractors, since they are responsible for their own superannuation.
You may need to withhold an amount from payments to other businesses if they don’t quote their ABN on an invoice or other document, as required by the Australian tax law.