Guide to Investing: How to Set Up a Business in Australia

There is a wealth of opportunity for foreign investors who want to start up a new business in Australia. Even though the world has been hit by a global pandemic, the Australian Bureau of Statistics showed that that 87,806 new businesses were set up in Australia between 2020 and 2021. There are a number of steps that foreign investors need to be aware of to ensure they are legally allowed to set up a business. Key to being successful is knowing what is required and who can help navigate the foreign investment review board application.

The foreign investment framework is administered by the Foreign Investment Review Board (FIRB), which is an Australian Government statutory body. This board ensures that the foreign investment regime is followed and that any foreign national applying to invest in this country meets the relevant criteria. Let’s look at how the process works.

Deciding On the Structure of the Business

The first point to decide on is regarding how the business is going to be set up. Foreign investors need to decide between the following.

• Buying an existing business;
• Establishing a new company; or
• Registering as a foreign company.

In this country there are four types of business structure from which to choose. A person trading in their own name is known as a sole trader. If working with a group of people or other entities, it may be better to form a partnership. This differs from a company. A company is a separate legal entity which has to be distinct from the shareholders/owners. Foreign investors can consider registering a business as a foreign company; alternatively, they can consider buying an existing Australian company. The fourth type of business structure is a trust, and this is a unit that holds income or property on behalf of and for the benefit of its trustees.

Buying an Australian Company

If buying into an existing Australian company, foreign investors should note that all companies in this country are regulated by the ASIC or the Australian Securities and Investment Commission. ASIC keeps a register of all the guidance documentation and the regulatory requirements linked to the takeover of companies.

It is very important the foreign investors who are looking to buy into existing Australian businesses take note of the ASIC notices regarding which type of documents are required along with the relevant time periods. Equally important is the requirement for a formal submission to FIRB who will review the proposal for the acquisition by the foreign investor and advise the Government on whether or not this should be approved. If this is the type of investment being considered, then it is important to talk this through with the experts who can help submit a foreign investment review board application.

Establishing an Australian Company

If wanting to set up a totally new Australian company or subsidiary which operates as an Australian company, then registration with ASIC is a requirement. The company would need to ensure that it registered with the Australian Government Business Registration Services to get an Australian Business Number (ABN). This also means that the company can register a domain name to use on the website and social media that ends with .au or net.au therefore being recognisable to its clients as an Australian enterprise.

The Australian Tax Office issues a unique Tax File Number (TFN) to all entities and all individuals in Australia. If establishing a trust, company, or partnership, then an application needs to be made for a TFN. On the other hand, sole traders running a business under their own name can use their own individual TFN for tax purposes.

Depending on the type of business, where it is located, and how it operates, different licences will be required. The Government website has very clear information about what type of licence is required, and depending on where the business is situated, the local council websites are also very helpful.

Foreign investors may also be able to apply for Business Innovation and Investment Visas if nominated by a territorial or state government. If the foreign investor has obtained at least $1 million in venture capital funding in Australia or has annual business turnover of at least $3 million, net business and personal assets of $1.5 million plus, and wholly or partially owns an overseas business, they also may be eligible for a Business Talent Visa.

Registering as A Foreign Company

ASIC also is responsible for registration and regulation of foreign companies. It sets out the rights foreign companies have in Australia and the criteria that defines foreign companies. For example, the name of the business cannot be identical to the name of an existing enterprise in Australia. There are also phrases that cannot be used unless approved by an Australian government minister such as “building society” or “university”. Names that could mislead people into thinking there are connections with other organisations such as an ex-service organisation, the Australian Government or the British Royal Family, are also not allowed.

Once the name has been approved, then information has to be provided about the proposed company and how it should be run; this is known as a Form 402 along with a range of supporting documentation. This is where a number of foreign investors fail to succeed in their application because their supporting documents do not meet the exacting requirements. Current certified copies of the entity’s constitution, its incorporation or registration, a memorandum of appointment of the local agent, and a memorandum setting out the powers of certain directors are required.

Trading On the Australian Stock Exchange

Opportunities are available to allow for trading on a 24/7 basis and the primary stock exchange is the Australian Securities Stock Exchange or ASX. Australian and overseas companies can apply for listing on the ASX but need to meet the prescribed requirements set out in the stock exchange rules.

Investing in a new enterprise is always a challenging business even more so when investing in another country, but it can be made a lot easier when getting help with your foreign investment review board application.