How to Form a
Legal Entities in
Australia’s Compliance Requirements
Regardless of its commercial activity, all Legal Entities located in
Australia must comply with a series of obligations managed by various
These obligations fall within the following categories:
• Tax obligations
• Corporate compliance/ Company directors
• Business fair trading and compliance
• Intellectual Property
• Environmental compliance
• Employment law
Before starting: Business Registrations
One of the first tasks to take care of when incorporating a business in Australia is
compliantly registering the business with the relevant authorities.
The first registration task is obtaining a business name through the Australia Securities
and Investment Commission’s (ASIC) online business name registration portal.
This business name must be renewed every 1-3 years.
Every operational business must get an: Australian Business Number (ABN) and a Tax
File Number (TFN).
If the company is seeking to trade in goods and services, it must be registered for Goods
and Services Tax (GST). All of these tax registrations are available to obtain online through
the same Australian Business Register website. Following this, the company is formally
recognized. Depending on the activities of the company, there may be certain other
licenses and permits required before operations can be underway.
1. Tax obligations
Residents and Non-Resident companies
An entity that is a resident of Australia is generally assessable on ordinary and statutory
income derived from all sources whether in or out of Australia.
In contrast, a non-resident entity is generally assessable only on ordinary and statutory
income from Australian sources. (Australian Taxation Office)
Resident businesses are taxed on their worldwide income, that’s everything from the
money they make in Australia, through to money made when trading or exporting
Non-resident companies, on the other hand, are taxed on the income they make in
1. Tax obligations
Types of taxes
• Corporate Tax: For businesses with an annual turnover of less than AU$50
million, corporate tax is 27.5%, and returns must be filed annually before February
28th, or January 15th if your organization turns over more than AU$10 million per year.
Relying on an experienced accountant is key.
• Goods and Services Tax (GST) in the country is measured at 10%, and companies with a
GST turnover must register with their local authority. Returns should be submitted
quarterly, but businesses turning over more than AU$20 million should file their returns
• Capital Gains Tax currently stands at 30% for residents, reduced to 27.5% for non-
• Payroll Tax: All businesses are responsible for paying contributions to the Social
Security and Unemployment Insurance Fund, which stands at 9.5% of their employees’
salaries. A 46% tax is also levied on fringe benefits (for example, a company car, private
healthcare) given to employees, making it expensive to offer extras. On top of that,
employers are expected to withhold payroll tax, a figure that is decided by local
authorities. On average, the tax rate is 5.5%.
2. Corporate compliance/ Company Directors
Businesses registered in Australia must have at least one director of Australian origin under
Australian law, although resident directors may be employed on a third-party basis to
overcome this if you’re an overseas investor.
On top of this, businesses must report necessary information about their shareholders,
executives, directors and their financial position in their Annual Return. All shareholders and
directors must be listed on the Australian Business Register (ABR) in a bid to increase
commercial transparency in the country.
Due to transparency efforts, there’s nowhere to hide when you do business in Australia,
and you must take this into consideration before incorporating. If you’re operating in a
sensitive industry and require confidentiality, seek legal advice on the ramifications of these
legal compliances on your operations.
When doing business in Australia as a foreign investor, you must follow Australia’s Foreign
Investment Policy and FATA at all times. It’s your responsibility to read through, understand
and follow these policies. Therefore, it makes sense to hire a lawyer or solicitor to guide you
through the process of incorporating and doing business in Australia to ensure compliance.
On top of that, it’s important to remember that licenses and registrations can vary greatly
from industry to industry and from state to state, so speak to local governments
before incorporating an Australian business. It may be that you need to file for a permit or
license in Melbourne, but in Adelaide, you can operate without permits.
Such cases may encourage you to consider your location when incorporating, helping you
save money and overcome legal barriers that can add complexity to your business and
increase your level of risk.
4. Business fair trading and compliance
Being located deep in the South Pacific, Australia is a long way from the major consumer markets of North
America, Europe, and Asia. This makes Australia largely reliant on its trading industry. Thanks to their 6 current
Free Trade Agreements (FTAs) and 2 awaiting ratification, Australia will continue its strong trading prowess.
Nevertheless, businesses operating in Australia seeking to take advantage of its trading expertise must be
aware of the corporate compliance regulations helping to ensure businesses and their customers practice fair
Fair trading laws consist of a mixture of federal and state laws so it is important to be aware of the differences,
especially when trading across multiple states. The fair-trading laws broadly cover the obligations surrounding
market practices, industry codes, product safety, product labeling, price monitoring, and trading regulation.
The specificities of the federal laws are all comprehensively outlined in The Competition and Consumer Act
2010. While the federal laws demonstrate a firm grounding of the system, it is definitely worth reviewing the
state laws as well. To be fully compliant, both sets of these laws are important to adhere to.
5. Intellectual property
Australia has thorough and strict laws on intellectual property (IP) in order to protect their businesses.
Australia are also a signatory to many international agreements that protect intellectual property in other
Patents, trademarks, designs, formulae and secret processes are all available to be protected under
Australian law through official IP offices located all around Australia. Without formal IP protection in place,
companies are at risk of having products or services copied without permission or infringing on other
people’s IP without knowing it.
Both of these can result in major losses with the latter even incurring large penalties. By undertaking an IP
check, businesses can ensure they remain in-line with corporate compliance regulation.
6. Environmental Compliance
Australia has strict environmental compliance regulations to administer sustainable business
practices. As well as encouraging all businesses to voluntarily practice environmental
management, the Australian government also has a legal compliance system in play for businesses
that could present a severe threat to the environment.
These laws are typically enforced through obtaining a permit or license relating to the activities of
the business. These licenses can be administered by the federal government as well as the state as
getting an environmental license depends on the threat it poses. If the activity is likely to affect
national environments such as the ocean, rainforests or mangroves, the license must come from
the federal body, Department of Environment and Energy.
If the activity is threatening to the local environment such as parks, heritage sites or air and water,
the permits come from the state government. Non-compliance with either of these licensing
boards results in severe penalties. It is also worth noting that as well as penalties, there are also
federal awards and grants for good environmental protection practices in order to incentivize
7. Employment law
When paying employees, companies are required to withhold tax form their pay, known as
‘pay as you go’ (PAYG) tax.
Other taxes such as Payroll Tax and Fringe Benefits Tax also should be made aware to new
Payroll Tax is a tax only paid by employers if they pay a certain amount of Australian wages
per month. This amount threshold is set in the state the company is situated. Fringe
Benefits Tax (FBT) is a tax that employers pay when they provide certain benefits to their
If employees receive yearly bonuses, for example, this amount must be declared and
7. Employment law
Australia has a system of 10 minimum employment entitlements which are outlined in
the National Employment Standards (NES):
1. Maximum weekly hours
2. Requests for flexible working arrangements
3. Parental leave and related entitlements
4. Annual leave
5. Personal/carer’s leave, compassionate leave, and unpaid family and domestic violence
6. Community service leave
7. Long service leave
8. Public holidays
9. Notice of termination and redundancy pay
10. Provision of Fair Work Information Statement
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