As a modern and open economy, Australia is both a destination and source of international business. We have extensive experience assisting both inbound foreign businesses and domestic businesses expanding offshore.
Our clients include a number of Australian businesses who operate internationally, both as a supplier and as a customer. We also work with a number of foreign businesses with Australian subsidiary operations. International tax and compliance is a unique and complex area. We have particular expertise in assisting clients in the structuring of their international affairs, corporate and regulatory compliance, advising on GST and other tax considerations.
Australian businesses expanding off-shore
There are many issues to consider for an Australian business wishing to expand their operations off-shore. We have clients operating in New Zealand, the United Kingdom, the USA, China, Singapore, Brazil and Canada. Some of the common areas of consideration include:
- GST considerations. Exports of goods and services can be GST in many instances, though the rules are not always straight forward.
- Double tax considerations. Australia has double tax treaties with many countries which may affect the way in which a business pays tax in each country. Each circumstance much be considered on a case by case basis.
- Transfer pricing rules. Transactions with related off-shore parties are subject to the transfer pricing rules. These rules are designed to ensure profits are not artificially moved between jurisdictions.
- Government grants. The main grant offered by the government to Australian businesses who export is the Export Markets Development Grant. We can assist in determining eligibility and lodging a claim.
Foreign businesses expanding into Australia
We assist a number of foreign businesses with their Australian operations. Common considerations include:
- Legal structure and corporate compliance. The Australian company regulator, the ASIC, is responsible for regulating offshore corporate businesses operating in Australia. There are a number of structuring considerations for foreign businesses setting up a subsidiary or branch in Australia.
- Transfer pricing rules. Transactions with related off-shore parties are subject to the transfer pricing rules. These rules are designed to ensure profits are not artificially moved between jurisdictions.
- Accounting and back-office functions. We provide bookkeeping and in-house management accounting and reporting services to Australian subsidiaries or branches of international businesses.
- Double tax considerations. Australia has double tax treaties with many countries which may affect the way in which a business pays tax in each country. Each circumstance much be considered on a case by case basis.
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Case Study
Capital gains tax of $700,000 saved on sale of foreign company subsidiaries.
An Australian based manufacturing client sold subsidiaries in the United Kingdom, Germany, Japan and the USA. Capital gains tax of $700,000 was saved by taking advantage of the active foreign company concession.
Our client ran a successful Australian based manufacturing business. The primary markets for their products were overseas, which had led to subsidiaries being setup in a number of foreign countries over the years.
In 2013 the manufacturing business was sold, together with all foreign subsidiaries. There were substantial capital gains on the sale of the foreign subsidiaries, to a total value of AUD$2.35 million.
A concession from capital gains tax is available in some circumstances where an Australian company sells shares in a foreign company. The concession is complicated, with a number of hurdles to clear, and requires that each foreign subsidiary be ‘looked-through’ to their underlying assets. Where the concession is available, a capital gain can be reduced in part or, in some instances, entirely.
Through a careful and thorough review of the relevant legislation and each subsidiary’s circumstances and financial records, we were able to determine that the concession was available for each subsidiary sold. The combined effect of the concession for all subsidiaries was a tax saving to the Australian parent company of $700,000.