Australia - Background
Australia is the sixth largest country by area in the world and consists of mainland Australia, the island of Tasmania and many smaller islands.
The country is one of the wealthiest in the world, boasts the 12th largest economy and rates highly in international comparisons in areas such as health, education, quality of life and political rights and civil liberties.
Australia has one of the largest capitalist economies in the world with a GDP of US$ 1.7 trillion and a total wealth of US$ 6.4 trillion. The country, on its own, accounts for approximately 1.7% of the world economy and is the nineteenth largest importer and the nineteenth largest exporter.
The country’s economy is dominated by its service sector which accounts for 68% of GDP. Mining and related sectors account for 19% of GDP. Current economic growth is mainly dependent on the mining and agriculture sector with most exports being made in the East Asian market.
Australia’s primary trading partners have changed since the latter half of the twentieth century, shifting from a reliance on North America and Europe for business in favour of Japanese and East Asian markets.
The financial and economic centre of Australia is Sydney which is located on the south east coast of the continent on the Tasmanian Sea. The city and metropolitan area of Sydney has a cosmopolitan and international population of approximately 4.6 million people. The city is very prosperous and residents enjoy the second highest level of earnings in the world.
Sydney produces around 25% of Australia’s GDP with businesses in business services, manufacturing, retail, and health and community services. The city is also home to the headquarters of over half of all Australia’s top companies and over ninety banks as well as the headquarters of over five hundred multinationals.
The Sydney central business district is the main commercial centre of Australia. Stretching southwards from Sydney Cove for around three kilometres, the CBD, often referred to as ‘The City’, hosts the headquarters of many of the largest Australian Corporations, many banks and financial institutions and the Asia-Pacific headquarters for many large international companies.
Melbourne, which is situated around the large natural bay of Port Philip on the south coast of the continent, is the second most populous city in Australia with a population of some 4.25 million. The city has a diverse economy with finance, research, IT manufacturing and tourism all playing a part. The city’s CBD is an important financial centre containing major banks’ headquarters and a thriving superannuation sector. Melbourne is also the home of the headquarters of many of the nation’s major corporations.
The country’s capital city is Canberra. Situated at the northern end of the Australian Capital Territory, Canberra has a population of 367,000 and the 8th largest city in the country. Canberra is the seat of Australia’s government and home to many government departments and agencies. The city’s main industry is public administration and services which employs nearly 40% of the workforce.
Australia - Opportunities
Australia is widely regarded as a good place to do business and many multinationals utilise Australia as the best location to locate headquarters for the targeting of the Asia Pacific economic region.
The country has many well developed and well serviced central business districts include Sydney, Melbourne, Brisbane and Perth all where prime office space is the lowest priced in the Pacific region and even the world.
Australia provides significant cost benefits for all types of business including low cost prime office space, factory space and industrial land in metropolitan areas. The country also offers an excellent infrastructure and low cost utilities.
The government of Australia recognises the benefits of open markets and as a result there are few barriers to entry, few import tariffs and setting up a business and conducting business in the country is simple and transparent.
Currently, areas for growth in the Australian market are; information technology, low carbon industries, rail, port and logistics, oil and gas, biotechnology and financial services. The consumer market in Australia is immense and, with many people enjoying disposable incomes well above the international average, the demand for high end consumer products of all kinds creates an attractive market for many different types of businesses.
Australia does however pose some hidden challenges which may not be obvious to those not familiar with the country, the main one being logistical. For European investors there is the time difference and the sheer distance to be travelled to reach Australia. A trip from the UK to Australia by plane takes around twenty four hours and the time difference is; nine hours ahead in the summer and eleven hours ahead in the winter. Another challenge in some industries is the sheer scale of the country and it should not be forgotten that Australia is a continent, much of which is sparsely populated.
Culture in Australia is also a consideration. Whilst most regulatory frameworks and business methods might be the same, North American and European are sometimes surprised at how different the culture of doing business in Australian business can be.
As well as Australia’s booming home market, its geographical location makes it an ideal for a base from which to exploit the nearby economies of the Asia Pacific region and Australia’s close trade links with these countries simplify doing business in this region.
Entrepreneurs should be aware though that there can be difficulties in finding skilled labour. Unemployment is low in Australia and, in some industries such as oil and gas and mining; it is as low as 5%, which can make recruitment a challenge.
Importers in Australia need to have a thorough understanding of the taxation regime as well, to ensure that they maintain competitiveness and profit margins. On high value goods, for example there is a consumer tax levied of 10%.
Overall, Australia represents an excellent opportunity for foreign businesses. The simple and straightforward company formation and regulation, an open market philosophy, affluent population and close proximity to the Asian markets all help to make Australia an ideal target for entrepreneurs from around the world.
Australia – Setting up in Business
Australia has, for a long time, been a business friendly country and foreign entrepreneurs are welcomed. Businesses both small and large have flourished in the country for many years and both central and local territory governments welcome business migrants and offer a range of support and services to assist them.
Investors considering entering the Australian market have a number of options open to them in terms of vehicles for trading, primarily; setting up a branch office, registering as a foreign company, acquiring an existing company or establishing a new company.
If the choice is to set up a new business then there a number of business structures available each with tax and regulatory considerations. The Australian government provides all the information that is needed online to help with the decisions and there many reputable local legal firms and accountants who will assist with the setting up process.
Foreign companies who wish to trade in Australia must register with The Australian Securities and Investment Commission (ASIC). Their website provides all the information needed for registering and the rights that foreign companies in Australia have in their guide to Foreign Companies.
Setting up a company in Australia is a very simple affair and takes only around two and a half days. The process is outlined below:
1. Complete and deposit an application form with the ASIC and obtain a certificate of registration and an incorporation number.
2. Register with the Australian Taxation Office and obtain an ABN (Australian Business Number).
3. Sign up with an insurance company or agency for Worker Compensation Insurance.
An alternative to forming a new company is the setting up of a branch office in Australia. A branch office must be registered with the ASIC as mentioned above and can carry on business on behalf of the overseas company.
A branch office is not a separate legal entity, all liabilities and assets will remain those of the main company, but it will have to produce and lodge annual accounts consisting of balance sheet, profit and loss account and cash flow statement and the accounts will be subject to Australian taxation.
Business entering the Australian market may also wish to register their trademarks and domain names which can be easily done. Full information is available on government websites.
With the caveat of the logistical problems caused by Australia’s location, the time difference to the USA and Europe and the potential limited availability of skilled labour, Australia provides an attractive destination for business wishing to exploit the affluent home consumer market or as a base for entering the nearby lucrative Asian markets.