Are you a Kiwi business owner looking to expand into Australia? Check out our helicopter guide to the Australian tax system for Kiwi businesses.

1. Expanding into Australia:
A brief introduction and key
issues
Paul Pham – Senior Manager, Economos Group
James Meli - Director of Tax, Economos Group

2. Who are Economos Group?
• Professional services firm (Chartered Accountants) based
in Sydney CBD;
• Established in 1978;
• Paul Pham (Head of Trans-Tasman and native Kiwi) and
James Meli (Director of Tax) focus on:
– inbound structuring;
– international tax;
– ongoing compliance and implementations;
– HR support for secondees (tax equalisation); and
– pre-arrival planning for inbound migrants.
• Credible, cheaper alternative to Big 4 and large mid-tiers;
• Personalised service, availability, honesty and integrity.

3. How does Australia tax?
• Residency and source;
• Individual residents/non-residents taxed at different rates;
• Companies:
– small business (<$10m turnover) - 27.5%;
– all others - 30%;
• Despite domestic tax law, DTA provides concessions re:
– NZ residents that do not have a permanent establishment (“PE”)
in Australia;
– NZ businesses seconding employees to Australia for up to 90
days; and
– NZ businesses sending employees to Australia for up to 180 days
(subject to separate criteria).

4. Snapshot of Australia’s GST system
• Registration threshold – AUD$75,000+
• GST applies to taxable supplies and taxable importations;
• GST excludes both GST-free and input taxed supplies;
• Difference between GST-free and input taxed:
– GST-free: suppliers do not pay GST but can claim credits;
– Input taxed: suppliers do not pay GST and cannot claim credits;
• Recent legislative changes aimed at:
– keeping certain foreign suppliers outside the Australian GST net
re: B2B supplier for no net gain to the Revenue (other supplies
still subject to GST, including under ‘reverse charge’ rules);
– Capturing the supply of certain offshore digital products (i.e.
‘Netflix tax’).

5. Deferred GST regime
• GST payable on taxable importations;
• Negative cash flow implications;
• Solution – deferred GST regime;
• Requirements:
– have an ABN and registered for GST;
– lodge and pay BAS on monthly basis (electronically);
– be up to date on your tax returns & payments;
– not be penalised/convicted within 3 years;
• GST not paid up-front (on importation) and simply netted
off at month-end.

6. Structuring drivers
• What type of business is it?
• Will it have a presence in Australia?
• If so, will it give rise to a PE in Australia?
• If it does not have a PE initially but may in the future, do
you structure for that eventuality from the outset?
• What are your structuring options?
• Which structures give rise to double taxation?
• Which structures facilitate access to foreign tax credits?
• Is taxation of dividend income from year to year or the tax
implications on exit more significant?

7. Structuring options
• Branch;
• Subsidiary (ordinary);
• Australian trust;
• NZ trust;
• NZ LTC;
• Australian LTC?;
• Partnership;
• Limited partnership;
• Sole trader;
• Joint venture.

8. Popular structuring option - subsidiary
• Australian subsidiary is most common structuring option;
• Not ideal from an effective tax rate perspective for NZ
founder/owner:
Australian profit $100
Australian corporate tax ($30)
Net Australian profit $ 70
Australian dividend (fully franked) $ 70
Australian dividend WHT $ 0
NZ income $ 70
NZ tax at 33% tax rate ($23)
Net cash $ 47
Effective tax rate 53%

9. Transfer pricing
• NZ companies entering cross-border transactions with
related entities – transfer pricing is a critical
consideration;
• Under traditional structures (i.e. parent/subsidiary model),
transfer pricing used, within commercial boundaries, to
alleviate effects of double taxation;
• Recent legislative changes gave rise to new
administrative measures which reduce documentation
requirements, but generally still require determination of
arm’s length rate.

10. Transfer pricing
• Simplified transfer pricing record keeping:
– Small taxpayers;
– Distributors;
– Intra-group services;
– Low-level inbound loans;
– Materiality;
– Management & administrative services;
– Technical services; and
– Low-level outbound loans.

11. Transfer pricing
• Small taxpayer concession:
– turnover for Australian economic group is <$AUD25m;
– no related-parties in specified countries;
– do not have specified service related-party dealings (either as
expenses or as income) greater than 15% of your turnover;
• Intra-group services concession:
– international related-party dealings of either $1m or less or > $1m
but cost of services you receive or provide cannot be more than
15% of total revenue of Australian economic group;
– mark-up on costs must be 7.5% or less for services received or
7.5% or more for services provided;
– no related-party dealings with entities in specified countries.

12. R&D tax incentive
• What is the R&D tax incentive?
– R&D tax incentive is a:
• refundable, 45% cash refund on your eligible R&D spend
(turnover <$20m); or
• non-refundable 40% cash refund on your eligible R&D spend
(turnover >$20m);
• What is eligible R&D?
– broadly, eligible R&D is the development of products or
processes that are technologically (as opposed to commercially)
novel;
– split into both ‘core’ R&D activities (experimental activities aimed
at generating new knowledge) and ‘supporting’ R&D activities;
• R&D entity must be an Australian company, but it does
not have to own the IP being developed.

13. Related issues
• What are the on-costs of hiring Australian employees?
PAYG, SG, Workers compensation, Payroll Tax, Leave,
Leave Loading, Penalty Rates etc
• What happens if the founder(s) relocate to Australia?
– will they become Australian tax residents?
– if so, will they qualify for the concessional temporary resident
regime?
– either way, what is the impact (if any) on their NZ entities? NZ
companies? NZ trusts?
– pre-departure/pre-arrival planning is critical!
• Do you need Australian legal assistance? Economos
work with a panel of expert lawyers in diverse practice
areas including contracts, employment, property and
leasing, IP and litigation.

14. Questions
Disclaimer – This presentation does not constitute specific advice and cannot be relied upon as such. It
contains general information subject to myriad qualifying criteria, exceptions and/or exemptions and owners,
employers and employees should only proceed based on specific advice tailored to their particular
circumstances based on the relevant law at the particular time.