Section 3 of Doing Business in Australia
Branch offices versus subsidiaries
The main ways in which a foreign company may conduct business in Australia are by:
- establishing a branch office by registering the foreign company in Australia; or
- establishing a subsidiary.
Some differences between branch offices and subsidiaries are summarised in the following table.
Corporate law issues
Foreign investment review
When is opening a branch office required
A foreign company is required to be registered with ASIC (which has the effect of establishing a branch office) if it “carries on business” in Australia.
For registration purposes, a foreign company “carries on business” in Australia if it:
- has a place of business in Australia;
- establishes or uses a share transfer office or share registration office in Australia;
- administers, manages or otherwise deals with property situated in Australia as an agent, legal personal representative or trustee, whether by employees or agents or otherwise; or
- offers debentures or is a guarantor body for debentures in Australia.
The Corporations Act contains a number of exceptions which generally only apply to passive or isolated transactions. For example, a foreign company is likely to be carrying on business in Australia if it made investments in Australia that required repeated administration or management, or if it repeatedly made contracts in Australia.
Failure to register a foreign company carrying on business in Australia is a strict liability offence and could result in fines by ASIC and the courts.
The registered foreign company must lodge the following financial statements (which ASIC may require to be audited) with ASIC once a year:
- balance sheet;
- profit and loss statement;
- cash flow statement; and
- any other document the company is required to prepare by the law of its place of origin.
Branches and tax
For Australian income tax purposes, the mere registration of a foreign company with ASIC does not create a taxable presence in Australia. The jurisdiction of that foreign entity and the extent and nature of the operations in Australia need to be considered in determining whether the foreign company will be taxed in Australia.
Establishing a subsidiary
The following types of companies can be registered with ASIC:
- a proprietary company either limited by shares or with unlimited share capital; or
- a public company limited by shares, limited by guarantee, unlimited with share capital or with no liability (only if a mining company).
The most common type of company is a proprietary company limited by shares, followed by a public company limited by shares.
A company must have at least one member (shareholder). A proprietary company cannot have more than 50 non- employee shareholders.
A proprietary company must also have at least one director, and at least one of its directors must ordinarily reside in Australia.
A public company must have at least three directors, and at least two of its directors must ordinarily reside in Australia. The Corporations Act and case law impose specific duties on directors and secretaries.
A company can generally be set up in Australia within one business day, provided all the relevant information regarding directors, shareholders, company type and share capital is known.
A company must appoint an Australian resident individual as its public officer within three months of commencing business in Australia and notify the ATO of the appointment. The public officer of a company is answerable for doing all things required to be done by the company under Australia’s federal tax law.
Section 5 examines regulation of companies in more detail - ASIC and the Laws and Regulations Governing Corporations.
Alternative options such as trusts and partnerships are available and should be considered in determining the most appropriate structure for the business.
This guide is current as of April 2021.