A step-by-step guide to forming a company in Australia

Proprietary limited (Pty Ltd) companies are the preferred business structure for foreign companies entering Australia, suitable for private ventures or subsidiaries. They offer limited liability, which limits shareholders' financial risks. With no minimum capital, they provide flexibility for companies of all sizes.

By Ro Elvinia

A proprietary company can have up to 50 non-employee shareholders and cannot publicly offer shares. There are two types: small and large. Large proprietary companies meet at least two criteria, including consolidated assets over A$25 million, revenue above A$50 million or 100+ employees, requiring audited financials.

Starting a proprietary company in Australia involves following several important steps. This guide provides non-resident individuals a clear outline of the process, including necessary laws and expected timeframes.

1. Obtain a director identification number (DIN)
Before registering a company, all directors, specifically those outside of Australia, must apply for a DIN. This requirement is part of the Corporations Act 2001 – a key piece of legislation in Australia that regulates the formation, operation and dissolution of corporations, particularly public and proprietary companies – and aims to improve accountability and good governance amongst directors.

How long does it take to get a DIN?
For non-resident directors, the DIN application can only be submitted through a paper form. The processing time for issuing DINs to foreign directors currently ranges from 3 to 12 months. Non-resident directors are considered compliant as long as they have applied for a DIN, even if they have not yet received it. Therefore, it is advisable to plan accordingly, especially if you are located outside Australia.

2. Identify a legal address
According to the Corporations Act 2001, every company must have a legal address or registered office in Australia. This address is the official location used by a company for legal correspondence and notices. It is where important documents, such as legal notices or court papers, are sent. It must be accessible during business hours. It can be a registered office address (physical office) or a virtual office address.

Choosing between a registered office address and a virtual office address depends on the specific needs, goals and structure of your business. You may contact ABN Australia’s team to know more about key factors to consider when deciding which option is best for your company.

3. Appoint a resident director
Australian law requires that at least one director of a company must live in Australia. This resident director plays a crucial role in ensuring the business complies with local regulations, including the Corporations Act 2001, which governs corporate conduct in the country. Having a local director provides not only compliance with legal obligations but also a point of contact within Australia for regulatory bodies, such as the Australian Securities and Investments Commission (ASIC). ASIC oversees corporate activity, ensuring that companies meet their registration, reporting and governance obligations. A resident director with expertise in corporate governance, tax and compliance helps a company navigate the complexities of the Australian regulatory environment.

While many international businesses may consider appointing a local employee, a family member or friend to meet the resident director requirement, this can lead to potential issues such as unexpected resignation or a lack of understanding regarding the director’s responsibilities and legal risks. Opting for a professional with a deep knowledge of Australian business regulations ensures continuity and avoids these risks. An experienced resident director also helps establish credibility with clients and partners while ensuring the company meets ongoing ASIC requirements, safeguarding the company’s operations and compliance with local laws.

4. Register for an Australian Business Number (ABN)
All businesses operating in Australia need an ABN. This 11-digit number is issued by the Australian Business Register (ABR), a government-maintained database that contains information about businesses and organisations operating in Australia, and is necessary for tax purposes, invoicing and government services. This requirement is part of the A New Tax System (Australian Business Number) Act 1999.

How long does ABN registration take?
As a standard method, the ATO guideline says they typically process ABN applications within 28 days after receiving proof of identity documents. However, processing times may vary significantly depending on application volume and ATO resources. Based on our experience, for foreign-based businesses, processing often takes 45–70 days once proof of identity documents are posted to Australia.

For those needing faster service, ABN Australia offers a fast-track option, allowing ABN processing to be completed within one day.

5. Register for Goods and Services Tax (GST)
If your business is expected to earn more than A$75,000 per year (or A$150,000 for non-profit organisations), you must register for GST under the A New Tax System (Goods and Services Tax) Act 1999. GST is a 10% tax applied to most goods and services sold in Australia.

Businesses can register for GST through the Australian Taxation Office (ATO), the principal revenue collection agency for the Australian government. You can register for GST when you apply for your ABN.

6. Secure an office or virtual address
As covered in point 2, a registered office address is a specific type of legal address that must be registered with the ASIC. The registered office address is where official documents from ASIC and other regulatory bodies are sent, making it a vital point of communication for the company with the government.

In contrast, a virtual office address provides businesses with a prestigious business address without the need for a physical office space. This service often includes additional features such as mail handling and forwarding. While a virtual office address can be used as a registered office address if it meets ASIC’s requirements, it is important to note that it must be a physical location, not a P.O. Box. Virtual office addresses are particularly beneficial for small businesses, startups or international companies seeking to establish a presence in Australia without incurring the overhead costs associated with renting a physical office. They can enhance a company's professional image and provide a local point of contact.

In summary, while registered office addresses and virtual office addresses are all essential for a company's operations in Australia, the registered office address has specific legal obligations under ASIC regulations, while the virtual office address offers flexibility and professionalism without necessitating a physical office.

7. Open a business bank account
Once your company is registered and you have your ABN, you may wish to open an Australian business bank account. This account is crucial for managing business transactions. Most banks will ask for identification, company registration details and your ABN when you open an account.

How long does it take to open a bank account?
Depending on the bank, it can typically take 6-8 weeks to open a business account, as the banks will conduct their strict KYC processes, as well as verifying documents.

Compliance requirements for proprietary companies

After setting up your company, you must continue to meet several compliance obligations to stay in good standing with Australian authorities. These requirements ensure that your business follows the laws regarding governance and taxation.

8. ASIC compliance
Once registered, your company must comply with the ASIC regulations. Under the Corporations Act 2001, you must notify ASIC of any changes to your company, such as changes to directors or your registered office. You will also need to submit annual reports and pay any fees to keep your company registered.

Failing to meet ASIC requirements can lead to penalties or deregistration.

9. Tax compliance
Your company must also comply with Australian tax laws, as set out in the Income Tax Assessment Act 1997. This includes submitting an annual company tax return to the ATO. If you are registered for GST, you will also need to submit quarterly Business Activity Statements (BAS) to report your GST and other taxes. If you have employees, you must comply with payroll tax and superannuation obligations.

How ABN Australia can help you

Navigating the complexities of setting up a Pty Ltd company in Australia can be challenging, especially for international businesses. With origins dating back to 1976, ABN Australia brings nearly five decades of experience and deep local knowledge to help guide you through every step of the process. From obtaining a DIN and ABN to appointing a resident director and managing compliance with ASIC and tax obligations, we have the expertise you can rely on.

As locals, we understand the Australian business landscape inside and out, and with our innovative approach and the right systems in place, we can help expedite the process, ensuring that you meet all the regulatory requirements efficiently.

Let us handle the details, so you can focus on growing your business. Contact ABN Australia today for trusted, innovative support in setting up and running your business in Australia.

Published: 18^th Nov 2024 | Last updated: 18^th Nov 2024