ASIC assists small business as we regulate all companies, financial markets and providers of financial services and consumer credit in Australia and manage the registration of business names. From financial years commencing on or after 1 July , a 'small proprietary company' is defined as 'small' for a financial year if it satisfies at least two of the below criteria:.
For financial years commencing before 30 June , a proprietary company is defined as 'small' if it satisfies at least two of the below criteria:. For employment purposes, Fair Work Australia defines a small business as one that has less than 15 employees. Many regulators use the Australian Bureau of Statistics ABS definition which is a business that employs fewer than 20 people. If ASIC finds people or organisations have broken the law we have the power to ban or disqualify company directors, ban individuals from the financial services and credit industries and take civil or criminal action against companies or company officers.
To start a small business, you will need to decide on the structure that best suits you; this could be a business name or a company. If you decide to register a company, you will also need to appoint company directors and officeholders and find out how to meet your legal requirements. Find out more about how to start a small business.
There are several requirements and factors to consider when operating or planning to operate a small business in Australia. Find out about running a small business. ASIC Commissioner John Price, alongside other key government regulators, discusses what help is available at the different stages of running a small business. Find out how you can manage business risks once your business is up and running, your rights and protections, and how to sort out any disputes with other businesses and recover bad debts.
Find out how to protect your small business. The partnership must submit an annual tax return disclosing its income, outgoings and the distribution of profits to partners. However, the partners individually and not the partnership as a whole must pay tax on their share of partnership profits.
These profits become part of each partner's other income or losses. The partnership must submit annual, monthly or quarterly depending on turnover and election business activity statements where the partnership is registered for Goods and Services Tax GST. Limited partnership structures can be established by an agreement in each state and territory in Australia.
A limited partnership structure consists of a general partner GP and a limited partner LP. The GP has unlimited liability and has obligations which mirror those of a partner in a common law partnership. The LP's liability is limited to the amount of capital it has contributed to the partnership. The LP cannot participate in the management of the partnership or bind the partnership. In most states, a company can be an LP.
The establishment of an LP must be overseen by the relevant state government office responsible for administering limited partnerships. If certain requirements are met limited partnerships can be considered by domestic law to be corporate limited partnerships and as a result are treated as companies for Australian income tax purposes.
However, in line with the Australian Government's objective of encouraging foreign investment in innovation, certain limited partnerships are excluded from company tax treatment, such as venture capital limited partnerships VCLPs , early stage venture capital limited partnerships ESVCLPs and Australian venture capital fund of funds AFOF.
What are the formalities for setting up a joint venture? A joint venture is established by an agreement between the parties wishing to share the product of an enterprise as opposed to sharing the profits. Joint ventures are common in the mining industry. They are not separate legal structures and are governed by the terms of the agreement between the joint venturers and by the common law.
Joint venturers often appoint a company to manage the business of the joint venture. Although not strictly correct, the term "joint venture" is often used by business people to refer to both:. A special purpose proprietary company where two or more parties have subscribed for shares to carry out a project. A partnership between two or more parties carrying on a business with a view to making a profit.
A true joint venture does not itself receive income. Only the participants in the joint venture receive income, which arises when they sell the product they receive from the joint venture. The income arising to a party from the products of a joint venture can be aggregated with all other income and expenses of the party. Are trusts available in your jurisdiction?
Trust structures are available. In a trust structure for conducting a business, the business's assets are held by a trustee, which carries on the business on behalf of the beneficiaries. A trust will be a unit, fixed or discretionary trust. Trusts can be private or public. A public trust can be listed. The usual unit trust structure for conducting a business provides for beneficiaries to hold units both:. To which entitlements attach. Which can be transferred in a similar way to shares in a company.
Income arising from a trust is taxed in the hands of the beneficiary rather than the trustee, however where the trust is widely held and carries on a trading business, the trust will be taxed as a company. There are number of recent reforms to the taxation of widely held trusts, in particular with respect to the Managed Investment Trust rules which should be considered.
For GST purposes, trusts are recognised as separate entities that are capable of registering in their own right and if registered must submit annual, monthly or quarterly depending on turnover and election business activity statements. Forming a private company 8. How is a private limited liability company or equivalent corporate vehicle most commonly used by foreign companies to establish a business in your jurisdiction formed? Regulatory framework The principal legislation regulating the formation and operation of companies and certain other business entities is the Corporations Act Cth Corporations Act.
The broader regulatory framework includes regulations made under:. The Corporations Act. Legislation affecting the relevant industry of the corporation or business being acquired. Tailor-made or shelf companies Due to the ease of registration and short time required to register a company registration takes place within one business day , shelf companies are no longer used in Australia. Formation process A company may be registered online using:.
A private service provider such as an accountant, solicitor, or another business that provides online services with ASIC. They will usually charge a fee for their services above what ASIC will charge. Nominate the state in which it will be registered. Register its name limited liability companies must include "Limited" or "Ltd" in their name, and proprietary companies must also include "Proprietary" or "Pty".
A registered office, which must be located in Australia. Appoint the directors at least one of which must be a resident of Australia and other officers which may include a Public Officer for tax administration purposes prescribed for its type. Provide and keep updated information about its shareholders and ultimate holding company. Lodge statements and financial reports as prescribed for its type and circumstances.
As long as all necessary information is provided to ASIC, a company can be registered within one business day. Registration entitles a company to carry on business anywhere in Australia. Issued a Certificate of Registration stating the company's name. Relevantly, where a company fails to quote an ABN when supplying goods or services to a recipient, the recipient may be required to withhold an amount at the top marginal rate of tax from the total payment to the company and send the withheld amount to the ATO.
The company is also issued with a corporate key an eight-digit number , which allows the company to administer certain aspects of its dealings with ASIC online. Company constitution The company constitution is the core document governing the conduct of a company's affairs. It is common practice to adopt a constitution. However, a company can instead choose to rely entirely on the replaceable rules set out in the Corporations Act except for companies in which the sole member is also the sole director.
In addition to company constitutions, many companies are also governed by agreements between shareholders. The company constitution and the shareholders' agreement are not public documents unless the company is a public company, in which case the constitution must be lodged with ASIC and is therefore publicly available.
Company constitutions can be generic or bespoke, depending on the:. Nature of the business conducted by the company. Specific controls on the affairs of the company which the original shareholders wish to impose. Shareholders of a company often prefer for the company constitution to remain a "mechanical" document with more sensitive commercial provisions relating to the conduct of the business to be included in a shareholders' agreement.
Financial reporting 9. What financial reports must the company submit each year? A proprietary company that is owned by a foreign corporation must submit annual financial reports to the Australian Securities and Investments Commission ASIC if it is a "large" proprietary company. As of 1 July , a company is a "large" proprietary company if it satisfies two or more of the following criteria:.
The consolidated revenue for the financial year of the company and any entities it controls is AUD50 million or more. The value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is AUD25 million or more. The company and any entities it controls have or more employees at the end of the financial year. Certain wholly owned subsidiaries can apply for an exemption from filing audited annual financial reports with ASIC if they both:.
Are covered by a relevant ASIC class order. Enter into a deed of cross-guarantee with the Australian holding entity. A registered foreign company that is, a company operating as a branch in Australia must lodge its financial statements with ASIC each calendar year.
The financial statements must include a balance sheet, profit and loss statement and cash flow statement. Trading disclosure What are the statutory trading disclosure and publication requirements for private companies?
A private company must display all of the following:. Its name at each place of business that is open to the public. Its name and the words "registered office" prominently at its registered office. How do companies execute contracts or deeds? A company can execute a document in one of the following ways:. By two directors signing the document.
By one director and one company secretary signing the document. By the sole director who is also the sole company secretary signing the document for a propriety company. By fixing the common seal of the company and having it witnessed by persons specified in the above three bullets. If executed in this manner, a contracting party can assume that the document has been validly executed by the company sections 5 and 6 , Corporations Act.
Alternatively, a company can appoint an attorney under a power of attorney to execute a document. In this case a witness is required. Membership Are there any restrictions on the minimum and maximum number of members? The minimum number of members for company formation is one member for example, in a sole member company. There are no unique requirements that apply to sole member companies.
The maximum number of members for a proprietary company is 50 non-employee members. A public company structure is required for companies with more than 50 members. Minimum capital requirements Is there a minimum investment amount or minimum share capital requirement for company formation?
As long as some share capital is invested, there are no minimum share capital requirements for company formation. For example, a share capital of AUD1 is sufficient for company registration. Are there restrictions on the transfer of shares in private companies?
The only restrictions on transfers of shares in proprietary companies are those imposed by the company constitution and any shareholders' agreement. Accordingly, a company's constituent documents can contain pre-emption rights or any other restrictions. Most company constitutions and the replaceable rules under the Corporations Act provide the company directors with a general discretion to refuse to register the transfer of shares for any reason. However, restrictions under the Corporations Act apply in relation to the buy-back and cancellation of shares.
Shareholders and voting rights What protections are there for minority shareholders under local law? Can additional protections be given? Minority shareholders benefit from certain protections under the Corporations Act. The principal protections are:. The liability of a member is limited to the amount of the share capital invested by that member, and the member is not personally liable for the company's liabilities.
Members can seek court relief if an actual or proposed act, omission or resolution of the company is either:. Are there any statutory restrictions on quorum or voting requirements at shareholder meetings? Must quorum or voting rights be proportionate to shareholdings?
The company constitution determines the quorum and voting requirements at shareholder meetings. However, if the company constitution is silent on quorum, then the Corporations Act provides that the quorum for a members' meeting is two members unless the company only has a sole member. Voting rights are also determined by the company's constituent documents for example, the company constitution and any shareholders' agreement and the terms on which the relevant shares were issued.
Are specific voting majorities required by law for any corporate actions for example, increasing share capital, changing the company's constitution, appointing and removing directors, and so on? Matters can be set out in the company's constituent documents as requiring specific thresholds for voting.
In addition, the Corporations Act requires that certain major actions can only be undertaken in accordance with a special resolution where both:. A listed company must give at least 28 days' notice. Matters requiring a special resolution include changes to the company's constitution and reduction in share capital. Can voting majorities required by law be disapplied to protect a minority shareholder for example, through class rights or weighted voting?
Mandatory voting majorities that must be met under the Corporations Act cannot be reduced. However, the company's constitution can increase the minimum member approval thresholds. Sectoral restrictions What are the conditions or restrictions on establishing a business in specific industry sectors?
Are there industry sectors in which it is not permitted to establish a business? Specific regulatory licences and conditions must be obtained and satisfied by any company foreign or Australian wishing to conduct business in certain industries for example, banking, consumer credit and media.
In addition, Australia's foreign investment regulatory regime may apply in relation to foreign interests wishing to invest in Australia see Question Foreign investment restrictions Are there any restrictions on foreign shareholders? Certain types of proposals by foreign investors persons or corporations to invest in Australia require prior notification and approval by the Foreign Investments Review Board FIRB and Treasurer, depending on the value and sector of the assets or business being acquired.
A foreign person is deemed to have acquired a substantial interest in the ownership of a corporation or business if either:. The types of proposals subject to approval include:. Acquisitions of vacant non-residential land, residential land or shares in urban land corporations or trust estates. It is noted that specific policies and monetary thresholds apply in the case of proposals involving foreign investment in urban and commercial land particularly developed residential real estate, which is unlikely to be approved , and the agricultural sector.
Acquisitions by a foreign person of substantial interests in existing Australian corporations or businesses with total gross assets exceeding the threshold of:. AUD million in sensitive businesses such as media, telecommunications, transport, defence and military related industries and activities, encryption and securities technologies and communications systems, and the extraction of certain minerals or the operation of nuclear facilities ; or.
AUD1, million in non-sensitive businesses. For any other investor outside of the aforementioned countries, any acquisition exceeding AUD million for businesses in all sectors apart from media, which is a AUD0 threshold and AUD60 million for agribusinesses will be subject to FIRB approval.
On 29 March , the Treasurer announced a host of temporary changes to Australia's foreign investment regime in response to the novel coronavirus disease COVID Amongst these changes are:. A temporary reduction of monetary screening thresholds for foreign investments to AUD0 for all transactions, regardless of the nature of the foreign investor, value of the investment or asset class.
An extension of the statutory timeframe for the FIRB approval process to six months, other than for transactions that are deemed to be "urgent" in the COVID environment. The ATO's governance involves the establishment and enforcement of a foreign land ownership register. All foreign investors are required to give notice of their interest in agricultural land and water entitlements or contractual water rights, and report to a relevant commissioner the details of any events before them taking or ceasing ownership.
All foreign investors in residential land are required to lodge a vacancy fee return, and are also liable for an annual vacancy fee if their dwelling was not occupied or rented out for more than days six months in a year. Foreign persons are required to pay a fee for each application made, or notice given, under the Act and the Regulation limited exceptions apply. The fees that are payable for applications depend on the price for the acquisition of the interest.
Fees payable can also be affected by regulations prescribing circumstances when a lower amount may be payable. FIRB approval is usually given within 30 days of lodging an application. The Treasurer can block an investment or require divestment if either the:.
FATA is breached. Investment is considered to be contrary to the national interest. Are there any exchange control or currency regulations? Inward investment is not subject to exchange controls, but this does not preclude the need to obtain approval from the Foreign Investments Review Board FIRB in certain situations. Outward exchange flows are not restricted. However, both outward bound and inward bound exchange flows are subject to cash transaction reporting guidelines imposed on both:.
Cash dealers which include banks, financial institutions, insurance companies, currency and bullion dealers and others. Other persons who send or receive international fund transfer instructions. Cash dealers must report to the Australian Transaction Reports and Analysis Centre AUSTRAC details of certain transactions, and if a cash dealer is considered a "reporting entity" under Australian anti-money laundering and counter-terrorism and financing laws and regulations, it is required to report to AUSTRAC within ten business days of the transaction.
These transactions include:. Significant cash transactions involving the transfer of currency coin and paper money of Australia or a foreign country of AUD10, or more including foreign currency equivalents , unless the transaction has been specifically exempted. International telegraphic or electronic funds transfers to and from Australia, unless the transaction has been specifically exempted.
Transactions that the cash dealer has reasonable grounds to suspect are relevant to criminal activity. Are there restrictions on foreign ownership or occupation of real estate, or on foreign guarantees or security for ownership or occupation? See Question Directors Are there any general restrictions or requirements on the appointment of directors? To be appointed as a director, a person must be at least 18 years of age and provide consent.
There are no restrictions in relation to nationality or residency provided that at least one company director is an Australian resident. A person becomes ineligible to be a director if he or she either:. Becomes bankrupt or has not been discharged from bankruptcy. Has been disqualified by the Australian Securities and Investments Commission ASIC from being a director of a company and continues to be subject to the disqualification order.
Board composition What are the legal requirements for the composition of a company's board of directors? Structure The Corporations Act only recognises a single board structure, and all directors have the same powers and responsibilities although the company's constitution can establish sub-committees of the board due to practical considerations.
One director must be an Australian resident. Number of directors or members A proprietary company must have at least one director who must ordinarily reside in Australia Corporations Act. If this statutory minimum is satisfied, the company's constitution can determine the minimum and maximum number of directors.
Employees' representation Employees do not have a statutory right to board representation. Reregistering as a public company What are the requirements for a business to reregister as a public company? Membership Once a company no longer qualifies as a proprietary company that is, it has more than 50 members , it must convert to a public company. This requires a public company to lodge audited annual financial accounts and comply with the two following additional obligations imposed on public companies under the Corporations Act:.
Appointment of an auditor. Appointment of at least three directors and a company secretary to manage the regulatory affairs of the company. Share capital There is no minimum requirement for share capital for example, AUD1 is sufficient. Tax What main taxes are businesses subject to in your jurisdiction?
The Australian taxation regime comprises federal, state and territory taxes. Income tax which includes corporate income tax and capital gains tax CGT. Stamp duty which includes transfer duty, landholder duty, foreign purchaser surcharge duty, motor vehicle registration duty and insurance duty. Federal taxes are administered by the ATO and state and territory taxes are generally administered by the various state and territory revenue offices.
Income tax Income received by individuals is taxed at progressive rates, with different rates applying to resident and non-resident individuals. Residents who are not temporary residents are subject to tax on worldwide income and taxable capital gains although a foreign tax credit is generally available within limits.
Details of the current tax rates can be obtained at www. Corporate income tax A company is a resident of Australia for income tax purposes if it is incorporated in Australia, or it carries on a business in Australia and either its central management and control are in Australia, or voting power is controlled by shareholders who are residents of Australia. Reduced rates can apply to life insurance companies, complying superannuation funds, friendly societies and other registered organisations.
The effect is to treat the group as a single entity for Australian income tax purposes. Consolidated groups file a single tax return and calculate their taxable income or loss ignoring all intra-group transactions. There are a number of significant consequences to forming a taxation consolidated group in connection with the taxation attributes of the group, including the resetting of the cost bases of assets and the transfer and utilisation of any prior year loss balances, all of which should be considered.
Capital gains tax Gains on the disposal of assets are treated as either revenue gains income or capital gains depending on the relevant facts and circumstances. Capital gains are included in the calculation of the taxable income.
GST GST is a broad-based consumption tax imposed on a wide range of supplies including goods, real property, services and rights. Broadly, GST is similar in operation to the value added tax systems operating in Europe. A taxable supply arises where all of the following apply:.
The supply is made for consideration. The supply is made in the course of an enterprise the supplier carries on. The supply is connected with Australia. The supplier is registered or required to be registered for GST. However, the supply is not a taxable supply if it fits within specific categories of supplies that are GST-free for example, health or education or input taxed for example, financial supplies or residential rent.
An entity must be registered for GST if it carries on an enterprise which includes but is not limited to a business that has a turnover in excess of AUD75, or AUD, for endorsed charities and not-for-profit bodies in any month period from supplies that are connected with Australia.
Each transaction in a supply chain is potentially subject to GST considering the above requirements for taxable supplies. GST registered entities both suppliers and recipients are entitled to claim input tax credits effectively GST refunds for the GST component of the cost of things acquired in the course of carrying on their enterprise, depending on the type of supply the acquisition is used to make that is, input tax credits are allowed where an entity makes taxable or GST-free supplies, but not input taxed supplies.
Stamp duty Generally, stamp duty is not payable on establishing a business. However, a stamp duty liability may arise where an existing business is acquired whether it be by an asset acquisition, or by a share or unit acquisition. Stamp duty is imposed in each state and territory eight jurisdictions in total on the following transactions:. Transfer duty. This includes the:. A trust acquisition occurs when you acquire or increase an interest as a beneficiary in a trust that holds dutiable property for example, land in Queensland or has an indirect interest in dutiable property in Queensland.
A trust has an indirect interest in dutiable property if through a trust interest, there is a connection between the trust and dutiable property of the other trust, or through a series of trust interests, there is a connection between the trust and dutiable property of a trust in the series; and.
Transfer duty is imposed at rates of up to 5. In New South Wales. Transfer duty is calculated on the "dutiable value" of the dutiable property acquired. The dutiable value is the higher of the consideration monetary and non-monetary for the transfer, and the unencumbered market value of the dutiable property. Where GST applies, it is included in the dutiable value. Generally, the person acquiring the asset is liable for any stamp duty arising on the acquisition, however this is not always the case.
The time limits for lodgement and payment vary between the jurisdictions, ranging from 30 days to three months. Landholder duty. This arises on the indirect acquisition of land and interests in land all jurisdictions involving certain acquisitions of shares and units in entities that are "landholders". An entity is a landholder if it directly or indirectly through interests in other entities holds land and interests in land exceeding a minimum local land value.
The landholder duty rates are the same as the transfer duty rates see above, Transfer duty and the person liable and the deadline for lodgement and payment generally mirror the transfer duty provisions. The duty base for landholder duty includes the unencumbered value of the landholder's landholdings which can include not just fixtures but anything fixed to land , as well as certain goods in some jurisdictions. Foreign purchaser surcharge duty.
In addition to transfer duty and landholder duty, foreign purchaser surcharges apply in most jurisdictions to acquisitions direct and indirect of residential property. Some jurisdictions also impose foreign person land tax surcharges. The definition of "foreign person" varies between the jurisdictions but generally includes a:.
What constitutes "residential land" and is consequently subject to the foreign purchaser surcharge duty varies between the jurisdictions. It generally includes:. What are the circumstances under which a business becomes liable to pay tax in your jurisdiction?
Australia imposes tax on the:. Worldwide income of entities resident in Australia for taxation purposes. Australian-sourced income of non-residents. Supplies that are "connected with Australia" above a certain turnover threshold. Tax resident A company is a resident of Australia for tax purposes if:. It is incorporated in Australia or.
Carries on business in Australia and has either:. Trading companies registered with the ATO have various tax compliance obligations, including filing of an annual company tax return and the periodic reporting of activity statements. Non-tax resident Australia asserts a taxing right to any Australian sourced income, and certain capital gains made by non-residents.
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