Your guide to doing business in Australia
Australia is the world’s sixth-largest country and lies between the Indian and South Pacific oceans. Historically, Australia’s economy was built on an abundance of natural resources including mineral and gold mining, along with a strong agricultural tradition which included the farming of sheep and cattle. Modern Australia has developed into one of the largest economies in the APAC region and the world - with a GDP over AUD$1.6 trillion, and an annual growth rate (since 1990) of around 3.3%. While the mining and manufacturing industries remain important, service sectors including finance, tourism, telecommunication and logistics also contribute significantly to the economy. Australia benefits from free trade agreements with partners across the globe, and is the 19th-largest exporter in the world. Australia is a member of the United Nations, the WTO, the OECD, and the Asia-Pacific Economic Cooperation forum. In 2018, Australia ranked 14 on the World Bank’s Ease of Doing Business survey.
There are numerous business reasons to invest in Australia, including:
The Australian Government proactively encourages inward investment, with a wide array of incentives to encourage investment in the national economy. In recent years the Government has tried to put measures in place to encourage employers to hire Australian nationals where possible, and to only use expatriate workforce where skill shortages exist.
A company wishing to employ staff within Australia must have a legal presence in Australia. This is usually via a branch or a subsidiary.
There are various withholding and remitting requirements in Australia. This may require registration with the (‘ATO’) Australian Taxation Office, and, depending on the level of wages and location of activities, with one or more State Revenue Offices.
Much of the Australian Taxation Office and State Revenue Office registrations can be completed online.
A company must apply for pay as you go (‘PAYG’) withholding registration by the day on which you're first required to withhold an amount from a payment.
Common types of registrations that need to be completed by companies looking to process payroll:
Although specific criteria vary by state, businesses may be exempt from paying the Work Cover levy if they pay below a certain total wage amount (around $7,500), or if they do not employ any apprentices or trainees.
It is not mandatory to make payments to employees or the authorities from an in-country bank account.
The standard working days in Australia are typically Monday to Friday. The working day for commercial offices is usually eight hours, typically from 8:30AM to 5:00PM. Lunch breaks range from half an hour, to one hour.
Australia is the world’s sixth-largest country: beyond its mainland, it comprises the island of Tasmania and several smaller islands. Australia is surrounded by ocean - with the Pacific on its eastern coast, and the Indian Ocean to the west. Its closest neighbours are Papua New Guinea and Indonesia to the north, and New Zealand to the south-east. Indigenous people inhabited the Australian continent for millennia before settlement by Europeans, in the 17th and 18th centuries, brought trade, population growth and rapid urbanisation. The modern Australian nation was formed in 1901 when its separate territories federated as a commonwealth, and the country became a parliamentary constitutional monarchy. A population of over 21 million people is concentrated in Australia’s urban centres, which are mostly situated around its temperate coastal regions. By contrast, Australia’s sparsely-populated interior is hot, arid and dry. Australia’s geographic profile stretches from deserts to dense jungle, and the country is home to a huge diversity of animal, marine and insect life.
Full Name: Commonwealth of Australia
Population: 23.7 million (Census, 2015)
Largest City: Sydney
Major Language: English
Monetary Unit: 1 Australian dollar = 100 cents
Main Exports: Ores And Metals; Wool, Food And Live Animals; Fuels, Transport Machinery And Equipment
GNI per Capita: US $64,540 (World Bank, 2015)
Internet Domain: .au
International Dialling Code: +61
Dates are usually written in the day, month and year sequence. For example, 1 July 2015 or 1/7/15. Numbers are written with a comma to denote thousands and a period to denote fractions. For example, AUD$ 3,000.50 (three thousand and fifty cents).
The standard tax year runs from 1st July to 30th June.
Taxation is calculated in line with the Australian Tax Office (ATO) tax rates and is based on whether the employee is a resident or not. Employees are able to claim various reductions or additions through the payroll, for example, if they have a Higher Education Loan Payment (‘HELP’) debt with the ATO they are able to have more tax deducted for each pay period.
If the company is a large remitter for taxation, they are required to pay taxes to the authorities within seven days of the funds being withheld from the employee. Otherwise, the taxes get paid monthly by the 21st of the following month. This is paid electronically by the payroll provider.
Employers are required to pay superannuation for employees. The superannuation rate is currently 9.5% of ordinary time earnings(‘OTE’), which came into effect from July 1st 2014. Employers are able to cap the amount of superannuation being paid (if in the employee’s contract) to employees once the employees earning reach a threshold imposed by the ATO at the commencement of each new financial year ( the cap amount changes each year). The cap amount changes each year. Employees are also able to increase their contributions from pre-tax dollars to a certain limit based on their age. Superannuation must be paid to the authorities by the 28th of the month following/subsequent to each quarter.
All companies are required to obtain an Australian Business Number (‘ABN’) and Tax File Number (‘TFN’) from the ATO where they are carrying on business in Australia or employing staff in Australia. This can take from 21 days to two months depending on the location of directors.Again your nominated in country can assist in registering for these numbers.
The Australian Securities and Investment Commission (‘ASIC’) regulates the incorporation and administration of companies. Incorporation of subsidiary companies normally takes less than a week.
There is no requirement for a third party to be licensed in order to make any tax withholding and remittance on behalf of a client. However, only licensed tax agents or BAS preparers are permitted to file fringe benefits tax returns or business activity statements on behalf of clients.
Further information can be found via the following governmental websites:
If a company is a large remitter for taxation, they are required to pay taxes to the authorities within seven days of the funds being withheld from employees. Otherwise, they get paid monthly by the 21st of the following month.
Failure to lodge (FTL) PAYG tax on time will result in a penalty notice being issued automatically. The FTL penalty depends on the size of the organization, $170 for small entities, $340 for medium entities; $850 for large entities applies. The maximum penalty that can be imposed is for five periods. A compounding interest charge is applicable to all interest based taxation penalties.
The ATO has a document available entitled “About Penalties and Interest” on their website.
Superannuation must be paid to the authorities by the 28th of the month following/subsequent to each quarter. Employee deductions on behalf of Centrelink must be paid to the government agency by the 6th of the following month.
Employees are allowed to make a salary sacrifice to contribute to their superannuation fund, this salary sacrifice is before tax and as such represents a tax-efficient way of saving. The tax free amount that can be contributed is subject to a contribution cap.
Previously, the maximum amount of concessional superannuation contributions (e.g. employer-paid and salary sacrificed contributions) that could be paid in a financial year were as follows:
As of 1 July 2017, the maximum amount of concessional contributions which can be made during a financial year (e.g. between 1 July and 30 June) is AUD 25,000 per annum, regardless of age. An employee whose total contributions in a year exceed the contribution cap may be liable for additional tax on the excess contributions.
The Australian Government has legislated to simplify business reporting obligations via a concept known as Single Touch Payroll (‘STP’). Businesses familiar with the United Kingdom RTI (Real Time Information) process for reporting employee wages and taxes will note that the STP system will be very similar. The most significant difference will be the lack of Tax Code adjustments in STP.
The salient points to note are:
Employers are required to register a new start by sending a TFN declaration form to the ATO – this is done electronically through the payroll software. The employee must provide the employer with their TFN to avoid paying an increased tax of 47.5%. When employing a new start, an employer should request to file the employee’s personal details. The information required (but not limited to) is as follows:
Expat employees must be registered within 14 days of receipt of document
Employees who leave an organisation must receive their final payment within the following payment cycle unless requested earlier by the client. Alternatively, this can be a date mutually agreed between the employer and employee. This process can vary and may be stated in the award or EBA specific to that employer or industry. If requested by an employee, a separation certificate is completed by the agent on behalf of the client and submitted to the government agency called Centrelink, but this is only upon request.
Australian payroll regulations vary by state and territory but employers generally process employee pay through a pay-as-you-go-system. PAYG allows employers to withhold taxes from their employees’ salaries - that tax is charged progressively, up to 30% for the highest earners. Broadly, employer withholding obligations apply to:
PAYG deductions must be reported on a Business Activity Statement (BAS), submitted to the Australian Taxation Office on a monthly or quarterly basis. A payroll tax is also payable in Australia - the tax is assessed on wages over a certain threshold amount which are paid (or payable) to employees by an employer. Once again, threshold amounts vary by state and territory. The complexity of Australia’s state and federal payroll laws means that foreign businesses may wish to engage a global payroll provider to ensure that their pay process is completed accurately and efficiently, and in compliance with regulations.
Payslips must be issued to employees within one working day of salary payment - and may be delivered online. Payroll reports must be maintained for at least 7 years.