CLA Consultants Group assists our multi-national Clients’ to timely accurately and completely discharge their annual legal & accounting & audit and tax statutory reporting obligations:

Summary of Australian corporate taxation

• An Australian company is taxed on its worldwide income. Companies in Australia (including branches) pay corporation tax of i) 25% for SMEs and ii) 30% for all other entities. Companies are required to pay their income taxes in monthly or quarterly instalments. The taxation year runs from 1 July to 30 June in the following year. Taxpayers can apply to the ATO to adopt an accounting period which ends on another date – like 31 December;
• Australian companies may indefinitely carry forward their business losses. Carry back of losses is also partially allowed;
• An Australian company can elect to form a tax consolidated group with its wholly owned subsidiaries. The effect is to treat the group as a single entity for Australian income tax purposes. This means that intra-group transactions will be ignored for income tax purposes;
• Non-resident companies are taxable only on their Australia-sourced income. A company is considered resident in Australia i) if it is incorporated in Australia or ii) if it conducts business in the country or iii) is managed and controlled from Australia or iv) its voting power is controlled by Australian resident shareholders;
• Dividends from the foreign subsidiaries of an Australian holding company are generally exempt from tax, but no credit is available for foreign dividend withholding taxes paid. Dividends paid to a foreign parent company are withholding tax-exempt, provided corporate tax was paid on the subsidiary profits;
• Interest paid to foreign entities from an Australia-resident company is subject to a 10% withholding tax, unless reduced by a tax treaty. For example, Australia’s tax treaties with the USA and UK can eliminate all Australian withholding tax on interest payments. Furthermore, an exemption from interest withholding tax applies to interest on debentures, notes and syndicated facilities that meet public offer requirements;
• Royalties paid to a non-resident suffers withholding tax of 30%, unless it can be reduced by a double tax treaty. The Australian entity paying the royalty is required to withhold and remit the tax to the ATO;
• Capital gains tax is 30% for Australia residents and 26% for non-residents. Rollover relief may be available in respect of capital gains made in relation to a disposal event where shares in one entity are exchanged for shares in another entity. Where rollover relief is available, any capital gain made on the disposal of the original shares will be deferred until the disposal of the exchanged asset;
• Small businesses may be eligible for certain capital gains tax (CGT) concessions if the business has an aggregated turnover of less than A$2 million or the taxpayer has assets less than A$6 million. The CGT concessions include i) a 50% reduction in capital gains for active business assets and ii) a retirement exemption whereby active business assets that are sold may be partly or wholly exempt from tax if the proceeds are paid into a superannuation fund and iii) roll-over relief and iv) a 15year exemption whereby tax may not be required to be paid in respect of a gain when an active business asset that has been used for at least 15 years is disposed of;
• The standard GST rate is 10%. Registration is mandatory for companies with turnover exceeding A$75,000. GST returns must be submitted quarterly, except for businesses whose turnover exceeds A$20 million, in which case returns must be filed monthly. An Australian GST-registered business must submit an annual Business Activity Statement (BAS) to the ATO. GST is applicable to cross-border supplies of digital products and services utilised by Australian consumers. Non-resident suppliers are required to register, collect, and remit GST on the digital products and services that they provide to Australian consumers;
• State, territory and local governments impose some taxes which might impact foreign companies operating in the country including i) payroll tax (more applicable to larger employers) ii) stamp duty and iii) land tax;
• Employers are required to collect and withhold pay as you go tax (PAYG) from remuneration paid to employees. Furthermore, employers must contribute 10% of an employee’s gross salary to the Social Security and Unemployment Insurance Fund;
• Fringe benefits tax (FBT) of 47% is payable on certain cash and non-cash benefits provided to an employee in connection with his employment. FBT is imposed on and payable by the employer. Certain benefits, such as superannuation, are exempt from FBT, while other benefits, such as motor vehicles are taxed;
• The sale and transfer of real estate is subject to a property tax up to 7%, which is levied by local authorities;
• Personal income tax in Australia is based on a progressive tax rate, which can be up to 47% (including a Medicare levy of 2%).

Australia corporate legal, accounting, audit and tax considerations

• All businesses operating in Australia are required to have an Australian Business Number (ABN) issued by the Australian Taxation Office (ATO). The ABN is a unique identifying number used in your dealings with the ATO and other government departments;
• The ATO requires businesses to submit a business activity statement (BAS) monthly, quarterly or annually. The BAS is used to i) report and pay goods and services tax (GST) and ii) pay as you go (PAYG) instalments and iii) PAYG withholding tax and iv) corporation tax instalments and v) Fringe Benefits Tax instalments and vi) other tax obligations. When you register for an Australian business number (ABN) and GST, the ATO will automatically send you a BAS when it is time to lodge;
• For corporation tax purposes, businesses will also be required to register for a Tax File Number (TFN) with the ATO. Trading companies registered with the ATO will have various tax compliance obligations, including filing of an annual company tax return and the periodic reporting of activity statements. All returns can be submitted online. Occasionally, the tax return must be accompanied by an International Dealings Schedule (IDS), which will include information on the taxpayer’s dealing with, for example, parties in low tax countries;
• For late filing of i) activity statements ii) tax returns iii) pay as you go (PAYG) withholding annual reports iv) fringe benefits tax returns v) single touch payroll reports vi) annual GST returns and information reports and vii) taxable payment annual reports, the Australian Taxation Office (ATO) may impose a Failure to Lodge (FTL) on time penalty. FTL penalties are levied in units per 28 days as follows i) a small entity will be charged one penalty unit ii) a medium sized company (assessable income or current GST turnover exceeding A$1 million and less than A$20 million) two penalty units and iii) a large entity (assessable income or current GST turnover exceeding A$20 million), five penalty units. For non-payment or late payments, the ATO will levy i) interest on unpaid amounts ii) use any future refunds or credits to repay the amounts owed iii) engage an external debt collection agency;
• Under Australia’s legal system, the information related to the corporate structure, such as shareholders, directors, shares and secretaries, is centralised by the Australian Securities & Investments Commission (ASIC). Within 8 months from the financial year end, all Australian entities are required to prepare and lodge their financial statements with ASIC. Any change in the corporate structure of the entity must immediately be updated in ASIC records;
• If your business employs staff, payments such as salaries, wages, pay as you go (PAYG) withholding and superannuation need to be reported to the Australian Taxation Office (ATO) via Single Touch Payroll (STP). STP reporting occurs as these payments happen via your preferred online payroll solution and helps reduces your reporting requirements at the end of the financial year;
• The following entities must annually prepare audited financial statements:
  • Large proprietary companies.
  • Small proprietary companies controlled by foreign companies.
  • Companies limited by guarantee.
  • Disclosing entities.
  • Registered schemes.
  • Public companies.
• Small Australian owned proprietary companies do not need an independent statutory annual audit if it meets two of three criteria including i) employing less than 100 employees and ii) having less than $50M of annual turnover and iii) owning less than $25M gross assets;
• As stipulated in the Corporation Act 2001, foreign-controlled Australian subsidiaries are required to prepare and lodge audited financial statements with ASIC. This statutory task must be completed within four months of the entity’s accounting year end.
• However, ASIC Corporations (Audit Relief) Instrument 2016/784 and Instrument 2017/204 grant certain reliefs to proprietary companies.
• To obtain exemptions from an audit, the company must meet both of the following conditions:
  • The board of directors and members of the corporation must have unanimously voted in agreement via board resolution to waive the audit;
  • The board resolution must be filed with ASIC during the first year of reliance, or after a year of no reliance, whichever comes first.
• A notice of the above-board resolution should be submitted to ASIC (specifically using Form 382 or Form 384) three months prior to, or within the four months after, the specific financial year-end for which the company requires the audit relief.
• Should the company not complete the above step within the stipulated timeline, it will not be eligible for the audit relief nor will any opportunity for appeal be given.
• Australia has a broad network of Income Tax Treaties with 46 countries around the world, including Canada, China, France, Malaysia, Singapore, the United Kingdom and the United States. These treaties help reduce Australian withholding tax on the repatriation of income overseas. Australia manages double taxation by either a foreign tax offset or a tax exemption;
• In accordance with Australian tax law, every Australian company is obliged to register for tax. Unfortunately, it will take the Australian Taxation Office (ATO) approximately four weeks to issue the Tax File Number (TFN) and the Australian Business Number (ABN) for your firm. Only then can our Client issue sales invoices to customers;
• To increase corporate tax transparency, the Australian government releases an annual report containing i) company name ii) business number iii) total income iv) taxable income and v) tax payable for a) Australian public and foreign-owned corporate tax entities with total income of A$100 million or more and b) Australian-owned resident private companies with total income of A$200 million or more. The reports are available on the Australian government website.
• At financial year-end, an Australian employer must submit a Pay As You Go (PAYG) Payment Summary to the ATO, based on total wages and PAYG withholding accumulated during the year. CLA Consultants Group can assist our Client prepare this report;
• Australia’s transfer pricing rules impose arm’s length terms and conditions on cross border transactions. The purpose of the rules is to ensure that an appropriate level of profit, and therefore tax, is returned to Australia. Transfer pricing applies to transactions such as goods, services, royalties and licencing, loans, guarantees and capital transactions. It also applies to behaviours such as shifting functions and risks outside of Australia or starting up a hub offshore. Australian taxpayers have an annual obligation to self-assess their cross-border arrangements with regard to local transfer pricing legislation, case law and the relevant OECD transfer pricing guidelines. This includes the preparation of specific records that explain and evidence cross-border transactions and pricing arrangements;
• Australia has thin capitalisation rules that disallow debt deductions where the debt-to-asset ratio of Australian operations exceeds prescribed limits. The rules seeks to limit the amount of debt that can be allocated to Australian entities that are foreign controlled;
• Australia currently has comprehensive free trade agreements with Chile, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Peru, Singapore, Thailand, the United Kingdom, and the United States;
• In addition, there is an ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) between ASEAN member states (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam);

CLA Consultants Group fees for accounting & tax support

For an active trading company, CLA Consultants Group will efficiently and effectively discharge your annual company accounting and tax obligations. Following receipt of a set of draft accounting numbers from our Client, CLA Consultants Group will more accurately advise accounting and tax fees. A summary of our fees include:

CLA Consultants Group will be happy to provide a monthly book-keeping service for your Australian company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will timely supply our Client with i) a general ledger and a trial balance and ii) monthly and quarterly management accounts and iii) monthly and quarterly government reporting, including sales tax and payroll.