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Seven reasons for setting up a business in Australia.

Posted in .
Updated May 23, 2024
Seven reasons for setting up a business in Australia

Discover why foreign investors and offshore companies seeking to expand overseas should choose Australia as a destination.

Located in the Asia-Pacific region, Australia is one of the largest economies in the world. Australia is one of the best countries to do business with its highly skilled workforce, strategic location, strong economy, and stable regulatory environment. It is also an open market with few regulations on importing and exporting goods and services.

Below are seven compelling reasons to expand and set up a business in Australia.

Key takeaways

  • Australia boasts a thriving startup ecosystem with numerous accelerator programs, grants, and incentives to support their growth.
  • Setting up a business in Australia is fast and requires minimal capital.
  • Australia’s proximity to Asia-Pacific markets and strong infrastructure make it ideal for regional expansion.
  • Australia’s stable and growing economy offers a safe environment for foreign investors.

1. Research & Development (R&D) Tax Incentive

International companies consider Australia a prime location for conducting research and development – not only because of the regulatory and economic environment, the quality and education of its workforce but also its efficiency and cost competitiveness and the R&D Tax Incentive (R&DTI). These incentives aim to encourage R&D that benefits the Australian economy, and they provide generous rebates to companies with qualifying R&D activities.

The R&DTI provides a tax rebate, known as an offset in Australia, for companies conducting eligible R&D activities. To qualify, the R&D activities must be classified as either core R&D activities or supporting R&D activities.

According to section 355.25 of the Income Tax Assessment Act 1997, core eligible R&D activities are experimental and include:

  • Outcomes which cannot be determined in advance based on current knowledge, information, or experience but can be determined by a systematic progression of work that:
    • Is based on principles of established science
    • Proceeds from hypothesis to experiment, observation, and evaluation and leads to logical conclusions
  • The generation of new knowledge regarding improved materials, products, devices, processes or services

Calculations are complex, but in general, they provide the following benefits:

  • Qualifying R&D entities with an aggregated turnover of less than AUD 20 million receive a refundable R&DTI equal to their corporate tax rate plus 18.5% of their annual eligible R&DTI expenditure.
  • Qualifying R&D entities with an aggregated turnover of AUD 20 million or more receive a non-refundable R&DTI equal to the corporate tax rate plus an incremental premium.

There are a number of factors and key considerations that need to be accounted for regarding the R&DTI and we would encourage any interested parties to ensure they account for these matters before proceeding to avail the R&DTI.

2. Foreign investment opportunities

The Australian government supports foreign investment and encourages foreign companies or investors to enter sectors that are Australia’s strengths.

These sectors include:

  • Agribusiness and food
  • Digital economy and ICT
  • Fintech
  • Major infrastructure
  • Materials science and technology
  • Medical science and technology
  • Resources and energy
  • Tourism infrastructure

Investors seeking to invest in the sectors listed above can apply for temporary visas which supports bringing high-value businesses and extraordinary individuals into Australia.  Eligible individuals may ultimately be able to receive permanent residency and fast-tracked visas for family members.

The Australian government supports foreign investment as it boosts Australia’s economy, creates employment, encourages productivity, brings in new businesses with connections to overseas markets, and creates new export opportunities.

3. Startup accelerator programs, grants, and incentives

Australia is brimming with startups, and because of the large startup ecosystem, there are a variety of accelerator programs, grants, and incentives that support their growth.

Startups can reach out to accelerators for initial capital and mentorship in exchange for equity. The accelerators provide support with product development, networking opportunities, professional services, and improving and growing the business.

Another essential program is the CSIRO Kick-Start program, which provides matched funding for startups and small and medium-sized enterprises (SMEs) to access the Commonwealth Scientific and Industrial Research Organisation’s (CSIRO) research expertise.

This program helps startups and SMEs grow by enabling them to research new ideas, develop novel or improved products, and test products and processes. Eligibility requires an Australian company number (ACN), being a registered company for less than three years, being registered for the goods and service tax (GST), and having an annual turnover of less than AUD 1.5 million.

More information on grants and incentives can be found on the Australian government’s business website.

4. Ease of doing business

Starting a company in Australia only takes two days, which is faster than in most other places. There are no minimum or maximum capital requirements, and the paid-up capital can be as little as AUD 1.00.

To set up a business in Australia, just a few steps need to be completed, including choosing and reserving a company name, appointing company officers, registering with the Business Registration Services (BRS), and registering for taxes.

5. Strategic location

Australia is an Asia-Pacific nation close to the largest populations in the world and some of the fastest-growing economies, including China, India, and the ASEAN group. It is also well-connected to the more mature economies in Asia, Europe, and the Americas.

More than 70% of Australia’s exports are to the Asia-Pacific region, with China and Japan accounting for half of that. The top ten trading partners in 2023 were China, Japan, Korea, India, the USA, South Korea, Taiwan, Singapore, the UK, Indonesia, and New Zealand.

Australia also has 15 international airports and 10 major ports for international shipping, which are:

  • Port of Brisbane
  • Port of Sydney
  • Port of Fremantle
  • Port of Melbourne
  • Port of Hedland
  • Port of Dampier
  • Port of Wellington
  • Port of Darwin
  • Port of Adelaide
  • Port of Newcastle

Australia’s infrastructure and strong connections with Asia-Pacific economies make it an ideal base for expanding business operations throughout the region.

6. Strong economic growth

Australia’s economy has been growing for the past two decades. GDP rose to around 1.7 trillion international dollars in 2023, twelfth in the world and fifth largest per capita. The OECD predicts continued growth of 1.4% in 2024 and 2% in 2025. In the long-term, most sources predict growth of over 2% per year as far out as 2028.

The Australian market is also a safe business environment for multinational companies and foreign investors. Economic freedom is protected by a widely respected rule of law and transparent and efficient regulations. Australia ranked 13th in the world in the 2023 Index of Economic Freedom, with an overall score of 76.2. This places it fourth among the 39 countries in the Asia-Pacific region.

7. Free trade agreements

Free Trade Agreements (FTAs) reduce or eliminate barriers to the trade of goods, services, and investment between participating countries. Australia now has 18 FTAs in force with five more in the works. There are direct bilateral FTAs with China, India, Japan, Korea, the UK, and the US, in addition to multiple bilateral or multilateral FTAs with ASEAN nations.

Australia currently has 18 FTAs in force, which are:

  1. Australia – New Zealand (ANZCERTA)
  2. Singapore – Australia (SAFTA)
  3. Australia – United States (AUSFTA)
  4. Thailand – Australia (TAFTA)
  5. Australia – Chile (ACIFTA)
  6. ASEAN – Australia – New Zealand (AANZFTA)
  7. Malaysia – Australia (MAFTA)
  8. Korea – Australia (KAFTA)
  9. Japan – Australia (JAEPA)
  10. China – Australia (ChAFTA)
  11. Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
  12. Australia – Hong Kong (A-HKFTA) and associate Investment Agreement (IA)
  13. Peru – Australia (PAFTA)
  14. Indonesia – Australia Comprehensive Economic Partnership Agreement (IA-CEPA)
  15. Pacific Agreement on Closer Economic Relations (PACER) Plus
  16. Regional Comprehensive Economic Partnership (RCEP) (Australia, Brunei Darussalam, Cambodia, China, Japan, Laos, New Zealand, Singapore, South Korea, Thailand and Vietnam)
  17. Australia-India Economic Cooperation and Trade Agreement (ECTA)
  18. Australia-United Kingdom Free Trade Agreement (A-UKFTA)

FTAs awaiting implementation, under negotiation or consideration:

  • Trans-Pacific Partnership (TPP)
  • Australia – European Union Free Trade Agreement
  • Australia – Gulf Cooperation Council (GCC) Free Trade Agreement
  • Australia – India Comprehensive Economic Cooperation Agreement (AI-CECA)
  • Australia-UAE Comprehensive Economic Partnership Agreement

Conclusion

Australia presents a highly attractive destination for foreign investors and companies seeking to expand overseas. From its R&D Tax Incentive program and ease of doing business to a strategic location and strong economic fundamentals, Australia offers a supportive and promising environment for businesses of all sizes.

How Acclime can help

This information is of a general nature and is not intended to address the circumstances of any particular individual or entity.  We would recommend addressing your specific circumstances as relates to these topics with an appropriately qualified expert.

If Australia is an appealing location for your business, get in touch with Acclime. Our teams of accountants, tax experts, and legal professionals are based in Australia’s major cities and can deliver integrated solutions that enable your business to maximise all the opportunities and incentives that Australia has to offer.


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About Acclime.

Acclime helps established multinational companies and startups start and operate their business in Australia and beyond. By seamlessly navigating our clients through the complexities of the local regulatory systems, we maximise opportunities while ensuring compliance.

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