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► A SECURE AND ATTRACTIVE LEGAL ENVIRONMENT
► THE AUSTRALIAN TAX SYSTEM IN 10 POINTS
A SECURE AND ATTRACTIVE LEGAL ENVIRONMENT
The system of Common Law in Australia, derived from the British system of law, offers a good level of protection to business people. Although this system of law is a lot more “liberal” than those found in continental Europe, it nonetheless necessitates a certain degree of vigilance.
Spend time carefully drafting the contract
Written French law has traditionally established protection measures for co-signatories. With the exception of consumer law (including franchise law), the Australian Common Law system provides only minimal protection for these parties. You should therefore pay particular attention to the contract, as this is the principal means of risk protection. Contracts in Australia can be very long and should be drafted and proof read with care. By way of example, in Australia there is no legal protection for retail tenants who do not own commercial property. All aspects of the relationship must be agreed upon contractually, in particular in relation to the options for lease renewal.
Know when to apply Australian law
The “liberal” nature of Australian law is quite attractive to foreign business people who may benefit from a more favourable legal position than in their home country. It is therefore often preferable to submit legal relationships to Australian law. For example, in France it would be necessary for the business owner to compensate his/her agent in the event that the relationship breaks down. No such obligation exists in Australia. As a result, it would be wise for the company employing an agent in Australia to submit the contract to local law.
Establish your operations via the creation of a company
The establishment of a company, along with a representative or branch office, is the most common means of establishing operations overseas, and is a fast, simple and affordable process. In contrast, the registering of a branch office can be a long and tedious process. This is largely due to the need to provide translated and certified copies of many documents. Unless there is a specific reason, particularly tax related, you should favour the creation of a company.
Flexible labour laws and social welfare costs
Australian labour laws are very flexible and tend to favour employers, especially SMEs. Social welfare costs are compulsory but relatively low: 9% of wages must go towards employee superannuation (pension), 1.5% towards public health care (Medicare) and around 2% towards an employee compensation fund for workplace accidents.
Australia is a highly regulated country in terms of immigration. The application process for obtaining an employee visa (via a Business Sponsorship agreement) is a long one, but provided the required conditions are met, it usually has a favourable outcome. Individual migration however is a lot more restrictive. A point system limits the number of visas for certain categories of skills and experience. It is essential to do research and seek qualified advice on this topic.
Mergers and acquisitions
This is a very mature and dynamic market in Australia with a large number of transactions carried out each year. The legal framework for foreign investment is quite flexible and is only restrictive for certain industries considered sensitive or with operations totalling more than AU$231m. Industry competition is controlled by the Australian Competition and Consumer Commission (ACCC) but this remains within the norms of other OECD countries. The tax system applicable to the acquisition of company shares reinforces this favourable environment. A similarly neutral tax system applies to the payment of dividends to French parent companies.
THE AUSTRALIAN TAX SYSTEM IN 10 POINTS
1. The financial year runs from 1 July to 30 June each year both for individuals and companies. Exceptions are possible for company subsidiaries that close their accounts on different dates.
2. Australia enjoys a tax system that is relatively simple for businesses to manage. By way of example, a French SME with 10 employees will lodge between 60 and 70 statements (tax or corporate), equal to an average of 5 to 6 a month, creating an equally considerable administrative burden. In Australia, a SME of identical size will only lodge around 30 statements per year.
3. The same federal tax department is responsible for the management and collection of taxes. The amount of tax payable is always the balance between what is owed to the state and the tax credits owed to the company.
4. Companies are subject to a tax of 30%. The conditions for tax deductions are generally consistent with the same principles as in France. The French-Australian tax agreement does not allow for tax deducted at source for dividends, if the holding of company capital is greater than 10%.
5. The Goods & Services Tax (GST), equivalent to the TVA, is a tax of 10% on all merchandise and services, excluding certain necessities (eg. food products), medical services, bank products/services, education and exports.
6. A Fringe Benefits Tax also applies to in-kind advantages enjoyed by employees, and is fixed at a rate of 46.5%. Such employee benefits are exempt from tax as long as they constitute a supplement to one’s salary.
7. Payroll (salary) tax applies to all companies generating revenue above the threshold of AU$658,000 (taxes vary between the states; it is 5.45% in NSW).
8. The tax entity is represented by the individual and the company. The notion of a household tax does not exist, just as there is no family pooling of tax liabilities. Each family member earning a salary must submit his/her own tax statement.
9. A system of tax deducted at source requires the employer to take an amount out of each employee’s salary (PAYG: Pay As You Go), in accordance with an income tax table, and forward this onto the Australian Tax Office (ATO).
10. Australia finances its universal healthcare system (Medicare) via a 1.5% salary contribution and its social welfare service (Centrelink) via taxes. The financing of retiree pensions (Superannuation) is carried out via a minimum compulsory employer contribution of 9% of wages. This tax may be greater if it is part of a remuneration package. There are no other compulsory salary contributions in Australia.