Post-incorporation Implications in Australia

1. Cost of setup and further spending

Registering a company in Australia isn’t free of charge. You will be charged for such things as the registration of a business name (the price will depend on the duration of the registration – 1 year or 3 years) and the company registration (which will cost you from 600 AUD to about 1500 AUD depending on the provider of incorporation services). Registering a company is more costly than just registering a business name, but once incorporated as a company (Pty Ltd), your business will have an image of a serious undertaking, and it will pay you back each time you deal with bankers, suppliers, and clients.
After the registration of your business name expires, you have to renew it for 1 year or 3 years paying 34 AUD or 79 AUD respectively. Obtaining the Business Number isn’t obligatory unless you are the payer of the Goods and Services Tax; for other businesses it isn’t mandatory, but remember that, if you don’t have the number, companies you deal with will have to pay the withholding tax.
Add to this costs expenses associated with managing your financial accounts (good accountants can be expensive, but you still can choose whether to hire the accountant full-time or enlist them only for the periods of mandatory filing).

2. Tax System

Australia cannot be called a tax haven, but it still has its benefits in comparison with other top-tier countries. For example, small businesses can claim for a list of tax reductions if their annual turnovers don’t exceed 2 million AUD.

Income taxation depends on the source of income, taxpayer’s residence and amount of the earned profit. The company’s income (including dividends and capital gains) is taxed at the fixed rate of 30% without any tax-free threshold. In some cases, companies can claim for tax deductions.

An income of individuals (dividends and capital gains are also taxed) is also subject to the income tax which rate depends on a residence status of an individual and an amount of annual income. For residents, taxation starts from the income higher than 18.2k AUD at the rate of 19%. The rate increases gradually as the income rises. The maximum rate of 45% (plus additional 54.547k AUD of a fixed tax) is applied to incomes higher than 180k AUD.

For non-residents, taxation starts from 0 AUD at the rate of 32.5% and the maximum rate is 45% (plus additional 63k AUD of a fixed tax) for incomes higher than 180k AUD. It is reasonable to seek for ways of obtaining the permanent residence in Australia as it gives a tangible reduction of taxes and dividend credits. Unlike companies, individuals can get up to a half of their capital gains tax-free.

At the same time, a principle of residence allows a non-resident to be more flexible in paying taxes as, in Australia, they get taxed only for incomes earned inside the country while residents get taxed for all incomes regardless of their source. Australia has signed a big number of double taxing agreements which help individuals and companies that earn profits abroad to avoid double taxation in both countries. Once the tax for the income is paid overseas, it is possible to get a tax credit for it in Australia.

Other taxes businesses should mind are: the Medicare levy (up to 2%), Goods and Services Tax (10%), Superannuation tax (over 9%), customs duties, excise duties, withholding taxes (for example, the pay-as-you-go tax you need to withhold and then pass to the Tax Office if you pay salaries to your company’s employees and directors), and so on. Taxation is conducted on 2 levels: in addition to the above-mentioned federal taxes, lots of local taxes (set up by territory governments) can apply (for example, the Stamp Duty and taxes on land and motor vehicles).
Your firm must get registered for paying the Goods and Services Tax if your annual turnover is more than 75k AUD (150k AUD for not-for-profit organisations) or if you run a taxi or car rent business.

3. Records and filing

Companies incorporated in Australia must keep their records for 5 years. There are lots of available electronic tools for this purpose. In Australia, the financial year ends on the 30th of June. Smaller companies can file their tax statements every 3 months or once a year while large companies must handle filing their taxes every month. If you miss the deadline, penalties will apply. You must submit your company’s tax return using a form that specifies your taxable income and the tax paid itself. Even if your business earns nothing during the financial year, you still need to submit the tax return form. The due date for big companies (those with yearly income higher than 10 million AUD) is January 15: you submit the tax return for the fiscal year that ended in the preceding calendar year.

4. Legal Compliance

If you incorporate a business in Australia, you obliged to comply with the laws related to your industry, employment, paying taxes, and so on. Industry regulations change from time to time as they are under the influence of political interests. You should also study the employment standards and all aspects of taxing in order to make a well-informed decision about incorporating in Australia.