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Australia Foreign Subsidiary Creation and Other Alternatives

By January 8, 2022February 3rd, 2022No Comments
Australia Foreign Subsidiary Creation and Other Alternatives

If overseas expansion is in your business plan, you may be curious about what it takes to establish an Australia foreign subsidiary. Setting up a permanent subsidiary in any foreign market is a complicated process, as you’re probably aware. There are visa requirements, high cost and time commitments, and compliance practices that companies cannot ignore.

Here is a guide to help you understand the process of establishing a subsidiary in Australia to make sure you’re successful during global expansion.

Setting Up an Australia Foreign Subsidiary

With more than 24 million people living in Australia and its high standards of living, it’s a popular place for international growth. For companies seeking a permanent presence in-country, there are two options:

  1. Establishing or acquiring an Australia foreign subsidiary.
  2. Creating a branch in Australia.

The largest differences between the two options are that a subsidiary is a separate legal entity from the foreign company and companies must have at least one director who is a resident in Australia. A branch does not require a director because it’s not a separate legal entity.

Establishing an Australia foreign subsidiary requires a partnership with a resident who can conduct the daily business operations and manage the signing of relevant documentation. Finding a trusted partner is a necessary task for all global operations. A partner can help companies tap into new markets by connecting with potential customers or employees.

Other steps for establishing a subsidiary include:

  • Setting up a local bank account.
  • Connecting with suppliers, if needed.
  • Finding property for an office space.
  • Maintaining employee compliance requirements surrounding payroll, taxes, and benefits.

There are many risks involved with establishing a subsidiary overseas. It’s a huge commitment for international businesses. Aside from the initial startup costs, there are yearly maintenance costs and on-site requirements for business leaders, which takes time and dedication from everyone in the organization.

For small to midsize firms seeking global expansion, the better option may be to use an agile approach such as Foreign Subsidiary as a Service (FSaaS) and International PEO (Professional Employer Organization). Let’s explore the Employer of Record (EOR) options in more detail.

Employer of Record Options for Expanding into Australia

An EOR is an organization that helps your company maintain legal responsibilities associated with employment. These groups minimize complex issues related to HR functions, market access, and paying overseas employees. On paper, the EOR is the primary employer of your staff in Australia.

There are two common EOR options, which include FSaaS and International PEO.

Foreign Subsidiary as a Service (FSaaS)

Setting up a Foreign Subsidiary as a Service (FSaaS) manages risk and compliance for your business while you focus on getting established in your new market. With FSaaS, your company creates a legal presence in Australia without the cost and time commitment associated with setting up a subsidiary company in Australia.

It also gives you the option of getting out of the market in Australia if things don’t work out as planned, a common risk of establishing new foreign subsidiaries.

International PEO

International PEO manages your company employment responsibilities in Australia. This service takes care of employees’ monthly withholdings including income tax and employer social security contributions.

Also, a PEO drafts local employment contracts, which can help with managing permanent team members and contractors. In this EOR scenario, you’re borrowing or leasing the International PEO’s company for your employees to access to the country or to decrease overhead.

When choosing an EOR partner, make sure you’re asking the right questions. Ensure that the firm has an excellent support team, fair pricing, and has experience in Australia.

If you want to learn more about expanding into Australia, contact our team. We have experience in the country and can answer your questions about global expansion.