Seven reasons for setting up a business in Australia.

We have listed seven reasons why foreign investors & offshore companies seeking to expand overseas should choose Australia as one of their destinations.

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

1. Research & development (R&D) tax incentives

Foreign companies consider Australia an appropriate location for conducting research & development because of the regulatory and economic environment but also because of the R&D tax incentive. The tax incentive aims to encourage and support businesses to conduct R&D activities that will benefit the Australian economy.

The R&D tax incentive provides a tax offset for companies conducting eligible R&D activities. To be qualified, your 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 activities which include:

• Whose outcome cannot be known or determined in advance based on current knowledge, information or experience but can only be determined by applying 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
• Are conducted to generate new knowledge (including new knowledge in the form of new and improved materials, products, devices, processes or services)

The R&D tax incentive provides the following tax incentive:

• R&D entities with an aggregated turnover of less than AUD 20 million will receive a refundable tax offset of your corporate tax rate plus an 18.5% premium
• R&D entities with an aggregated turnover of AUD 20 million or more may receive a non-refundable R&D tax offset rate equal to the corporate tax rate plus an incremental premium.

2. Foreign investment opportunities

The Australian government supports foreign investment and encourages foreign companies or investors to invest in 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 the Global Talent visa, which supports bringing high-value businesses and extraordinary individuals into Australia. Eligible individuals will receive permanent residency and fast-tracked visas for family members.

The Australian government supports foreign investment as it helps boost Australia’s economy, creates more employment opportunities, encourages infrastructure and productivity, brings in new businesses with connections to different markets in different countries 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 the growth of startups.

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

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 businesses to research new ideas, develop novel or improved products and test products and processes. To be eligible, you must have an Australian company number (ACN), be a registered company for less than three years, be registered for goods and service tax (GST) and have an annual turnover of less than AUD 1.5 million.

You can search for more grants and incentives on the Australian government’s business website.

4. Ease of doing business

According to the World Bank’s Doing Business Index, Australia ranked 7th place for Ease of Starting a Business with a score of 96.6 out of 100, and the total time for starting a business is two days, which makes it easier to start a company in Australia than in other countries.

When setting up a company, there are no minimum or maximum share capital requirements; 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 located in the Asia-Pacific region, close to the largest continent by nominal GDP, Asia. It also connects Australia to some of the fastest-growing economies such as Singapore, India, China, Indonesia and Japan. Its strategic location is a gateway to a huge Asian population of approximately 4.68 billion people.

Australia has a significant relationship with Asia-pacific as more than 70% of Australia’s exports are to the Asia-Pacific region, and the top trading partners of Australia during 2018 and 2019 were China, Japan, the United States, South Korea, Singapore, New Zealand, India, Malaysia and Thailand.

Australia also has ten 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 strong connection with Asia-Pacific allows businesses to expand their operations into other countries in the region.

6. Strong economic growth

Australia’s economy has continued to grow in the past two decades and is a highly developed market. In 2021, Australia was the 13th largest national economy with a nominal Gross Domestic Product (GDP) of USD 1,610.56 billion.

The Australian market is a safe business environment for entrepreneurs and foreign investors to set up a business, and its stable economy will allow your business to grow.

Australia also ranked 3rd place in the 2021 Index of Economic Freedom with an overall score of 82.4, making it one of the freest economies in the world, behind Singapore and New Zealand.

7. Free trade agreements

 Free Trade Agreements (FTAs) are agreements between two or more countries to reduce or eliminate specific barriers to trade and investment and enhance trade and ties between the countries.

FTAs additionally give Australian exporters, importers, investors and producers better access to international markets.

Australia currently has 16 FTAs in force, which are:

• Australia – New Zealand (ANZCERTA)
• Singapore – Australia (SAFTA)
• Australia – United States (AUSFTA)
• Thailand – Australia (TAFTA)
• Australia – Chile (ACIFTA)
• ASEAN – Australia – New Zealand (AANZFTA)
• Malaysia – Australia (MAFTA)
• Korea – Australia (KAFTA)
• Japan – Australia (JAEPA)
• China – Australia (ChAFTA)
• Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
• Australia – Hong Kong (A-HKFTA) and associate Investment Agreement (IA)
• Peru – Australia (PAFTA)
• Indonesia – Australia Comprehensive Economic Partnership Agreement (IA-CEPA)
• Pacific Agreement on Closer Economic Relations (PACER) Plus
• Regional Comprehensive Economic Partnership (RCEP) (Australia, Brunei Darussalam, Cambodia, China, Japan, Laos, New Zealand, Singapore, South Korea, Thailand and Vietnam)

FTAs that are under negotiation include:

• Australia – European Union Free Trade Agreement
• Australia – Gulf Cooperation Council (GCC) Free Trade Agreement
• Australia – India Comprehensive Economic Cooperation Agreement (AI-CECA)
• Trade-in Services Agreement (TiSA)

Conclusion

With a highly developed economy and skilled population, Australia is a strategically located country in the Asia-Pacific region that serves as a gateway for many businesses to other populous markets in the rest of Asia. Australia’s economy and business regulations make it one of the destinations you should consider setting up a company or expanding into.

If Australia is an attractive location for your business, get in touch with us. Our team of accountants, tax agents and legal professionals deliver an integrated service that enables your business to maximise all the opportunities and incentives that the Australian market offers.