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Growing Your Business to Australia
For many growing New Zealand businesses, the first big step in expansion to overseas territories will be a move into the Australian market. Australia’s similarities to New Zealand mean that a great deal of a business’s marketing experience and capital will carry over, as opposed to the likes of India or Singapore. The same is true of their tax regulations and market controls however, we still regularly see a number of basic difficulties pop up every year with client’s trying to make the move.
Importation of goods
The most common first area of contact with Australia will be the importation of goods for sale into the Australia. The first step in the registration process is an Australian Business Number (ABN). Like your IRD number, this will act as a reference for all of your dealings with the Australian Tax Office (ATO).
In order to apply for an ABN for a company an Australian tax agent will need the certified identity documents of the company and its directors and shareholders. These will include things, like copies of passports and the incorporation certificate of the company. Once your entity has been provided an ABN, it can apply for GST registration.
The most frequent issue we see with the application for an ABN and the subsequent registration for GST in Australia is simply not allowing enough time to process the application before the goods will arrive in Australia. You should be allowing six weeks for your application and registration. Never leave registration to the final week before the goods arrive because there will be nothing any tax agent can do to expedite the process.
The next step for most businesses will be establishing an onshore presence in Australia. Just as above you’ll need and ABN and GST registration, but there are a host of other considerations involved concerning structure and ties back to New Zealand. For example whether to run a branch of an already existing New Zealand company or establish an Australian company. This is not just a matter of logistics and costs, but also of local preference, Australian businesses prefer dealing with other Australian businesses. So although there are extra costs in establishing a new Australian company, it may be a necessity for operating in your new market.
Other considerations will be the protection of valuable assets such as trade marks from the risks of trading, potential residency issues for any director making a move with the new company, planning for expansion across two countries and other decisions too numerous to list here.
With this in mind below are the steps you need to take to ensure you do not get caught by surprise.
- Identify the best commercial path and then assess the tax consequences – Another frequent issue is businesses becoming fixated on tax consequences at expense of business planning and discussion. It is important to remember that the ATO designs its taxes to impede fraud and avoidance, not legitimate commerce. When discussing plans with your accountant consider the commercial viability of your options first, and then pick the best structure to meet your needs. Tax compliance is important, but it should never be your first consideration in business planning.
- Plan for succession and unexpected events – When setting up a new structure, particularly one engaged in an overseas market, it is important to have redundancies in place to ensure things run smoothly in your absence. Delegation is a necessity in any business as it gets larger however, time zone differences and travel times between countries will really highlight this. For many directors, unexpected events in an overseas territory will be the first time that it will be logistically impossible for them to immediately intervene to solve a problem. Although the effects are quite mild between Australia and New Zealand it can still catch you out. Ensure your staff and managers in both countries are capable of handling things without you. While you’re at it, update your will and instructions whenever you engage in a significant new undertaking. You don’t want your businesses grinding to a halt, just because you did.
- Engage an Australian accountant and solicitor – Although NZ agencies will be able to provide some assistance and help with overall business group planning, for efficiency and up to date knowledge on local requirements you’ll need local advisors. Gilligan Sheppard has a number of contacts across Australia that we have regularly dealt with for years. If we can’t help you with an Australian issue, we can refer you to someone who can.
Although it is a different jurisdiction, the establishment of a business in Australia does not need to be a daunting move provided it is planned ahead of time. The only thing that makes people feel better about new situations and unexpected events is having time to process, plan and deal with them.
Spare a thought…
Australia and New Zealand are identical in one regard. Both tax authorities are engaging in a constant process of modernising their systems. Frequently paper returns and phone contacts are being eliminated in favour of online forms and processes. Make no mistake, this is because the new systems are designed to require less staff. Both agencies are so eager to reduce wage costs that numbers will be cut as soon as possible after the introduction of a new system. As a consequence, tax payers will need to be prepared to sign up for online filing and registration services from commencement of business, regardless of whether or not they have a tax agent. Please also spare a thought for the staff of both agencies when you are dealing with them. For every instance of a truly incompetent IRD phone operator or difficult agent, I have encountered ten individuals who go out of their way to help within the constraints of their organisation, or beyond.