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.
| Issue | Branch Office | Subsidiary |
| Corporate law issues | Not a separate legal entity (liabilities are those of the foreign company). Foreign company must be registered with ASIC. Assigned Australian Registered Body Number. Annual lodgement of financial reports with ASIC, including financial accounts of foreign company unless relieved by ASIC (note: ASIC usually accepts reports prepared in accordance with laws of the foreign company’s origin). | Separate legal entity where liabilities remain with subsidiary unless parent / foreign company gives guarantees or subsidiary trades while insolvent. Company is registered with ASIC (third parties in Australia are more likely to deal with an Australian company). Assigned Australian Company Number. Annual lodgement of financial reports with ASIC unless relieved by ASIC (note: small proprietary companies may be relieved but control by a foreign company may exclude such relief). |
| Foreign investment review | Approval may be required before assets/ land are acquired. | Approval may be required before assets/ land are acquired. |
| Taxation | May be taxed as a separate entity in Australia. May be taxed on all income sourced from Australia at the applicable tax rate. May be subject to Goods and Services Tax (GST) obligations and obliged to obtain Australian Business Number (ABN). | Generally a resident for tax purposes. Taxed on all income regardless of source at the applicable tax rate. May be subject to GST obligations and obliged to obtain ABN. |
Issue
Branch Office
Subsidiary
Corporate law issues
Not a separate legal entity (liabilities are those of the foreign company).
Foreign company must be registered with ASIC.
Assigned Australian Registered Body Number.
Annual lodgement of financial reports with ASIC, including financial accounts of foreign company unless relieved by ASIC (note: ASIC usually accepts reports prepared in accordance with laws of the foreign company’s origin).
Separate legal entity where liabilities remain with subsidiary unless parent / foreign company gives guarantees or subsidiary trades while insolvent.
Company is registered with ASIC (third parties in Australia are more likely to deal with an Australian company).
Assigned Australian Company Number.
Annual lodgement of financial reports with ASIC unless relieved by ASIC (note: small proprietary companies may be relieved but control by a foreign company may exclude such relief).
Foreign investment review
Approval may be required before assets/ land are acquired.
Taxation
May be taxed as a separate entity in Australia.
May be taxed on all income sourced from Australia at the applicable tax rate.
May be subject to Goods and Services Tax (GST) obligations and obliged to obtain Australian Business Number (ABN).
Generally a resident for tax purposes.
Taxed on all income regardless of source at the applicable tax rate.
May be subject to GST obligations and obliged to obtain ABN.
Branch offices
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.
Reporting obligations
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 .
Other structures
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.