Guide Business 2011

What wouldyou like to grow?

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Doing businessin AustraliaAn introductory guide

Contents

1 Introducing Australia 3

2 Foreign investment in Australia 6

3 Structure of business entities 10

4 Australian Securities Exchange (ASX) 14

5 Visa and immigration for business 17

6 Corporate tax 20

7 Goods and services tax (GST) 25

8 Personal tax 28

9 Overview of Australian employment law 31

10 Intellectual property 39

11 Consumer law 42

12 Anti-trust and competition law 44

13 Environmental law in Australia 46

14 About PwC 49

15 Contact details 52

Introducing Australia

Doing business in Australia | An introductory guide 4

Size and population

Australia is the worlds sixth largest country, comprising anarea of approximately 7.7 million square kilometres. It is avast continent covering a distance of approximately 3,700kilometres from its most northerly point to its most southerlypoint and is almost 4,000 kilometres wide from east to west.

Australia is comprised of six states and two territories:

the Australian Capital Territory, which includes Canberra,the political capital of Australia

New South Wales in which Australias largest city Sydney,is located

Northern Territory

Queensland

South Australia

Tasmania

Victoria

Western Australia.

In 2010, Australias total population exceeded22 million people.

The Australian lifestyle

Australia has one of the worlds best lifestyles with lifeexpectancy at 83.5 years for females and 78.5 years formales. With the low cost of living, affordable quality housing,extensive healthcare benefits and one of the best educationand social systems in the world, Australia has much to offerexpatriates and their families. Surveys of world citiesconsistently rate Sydney as offering a great lifestyle.1

Resources and climate

An industrialised continent, Australia is blessed with anabundance of mineral and agricultural resources and arguablythe best climate in the world. Australia is located in thesouthern hemisphere, therefore summer is in the months ofDecember to February while winter is in the months of Juneto August. In Australias north, summer is hot with rain fromNovember to March. Elsewhere, the average temperature is28C in January and dry. In the southern states, winter is mildwith an average temperature in July of 16C.

12007 Worldwide Quality of Living Survey byMercer Human Resource Consulting

A multicultural community

Occupied by indigenous Australians and later settled as aBritish penal colony in the 18th century, Australia is anincreasingly diverse, multicultural nation. Collectively over 200different languages and dialects are spoken including over 50indigenous languages. Australia is home to people from morethan 200 countries and has an enviable international reputationfor diversity.

Australia is a harmonious community which has benefited froman active program of immigration over the last 50 years. As atJune 2005, nearly 1 in every 4 residents was born overseas.Of those born overseas, 30.8 per cent were born in North WestEurope, 17.3 per cent in Southern and Eastern Europe and12.7 per cent in South East Asia.2

Certainty and security

The Australian legal system is a mixture of common law andstatute, similar to the legal systems in the United Kingdom,other Commonwealth countries and some European countries.The common law tradition which applies in Australia expectsand values judicial independence. Decisions of the courtsconform to due process and are made in the context ofprevailing law. Contractual arrangements are thereforeprotected by the rule of law and the independence of thejudiciary. Domestic companies, foreign companiesand individuals have the same standing before the law.

Regulatory framework

The Australian government (Government) recognises theneed for a regulatory framework to keep pace with financialmarket developments. In 2001 the Government completeda major reform of Australias Corporations law aimed atstreamlining regulation while maintaining market integrityand investor protection.

The Reserve Bank of Australia (Reserve Bank) has effectivelysuspended most of the provisions of the Banking (ForeignExchange) Regulations 1959 (Regulations) (in force under theBanking Act 1959) through granting general authority andexemptions. While the terms of the Regulations ought to stillbe considered on a case by case basis to avoid potentialexposure, the Reserve Bank generally regards exchangecontrol as having been effectively abolished.

2www.immi.gov.au


The Australian economy

Australia has one of the strongest, most competitive, openand flexible economies in the world.

Over the past 15 years, the standard of living in Australiahas risen significantly, surpassing that of Canada, France,Germany, Italy, Japan, Russia and the United Kingdom.3

Australias economy has grown (on average) by approximately3.3 per cent per annum since 1990. In 2009, the GrossDomestic Product of Australia was approximatelyU$924,843 million.

Australias strong economic growth has been coupled withlow inflation. Over the last 15 years, the inflation rate hasbeen stable, at an average of 2.5 per cent over the period.

The unemployment rate in Australia has fallen substantiallyfrom almost 11 per cent in 1992 to approximately 5.3 per centin July 2010.

Australia is one of the largest economies in the Asia Pacificregion after Japan, China and Korea. China is Australiaslargest trading partner.

Australias time zone spans the close of business in theUSA and the opening of business in Europe.4

A good place to do business

Multinational companies view Australia as presenting the bestbusiness case for regional headquarters to target the dynamicAsia Pacific region.

Key business centres in Australia include Sydney (New SouthWales), Melbourne (Victoria), Brisbane (Queensland) andPerth (Western Australia). Prime office space in Australia isthe lowest-priced in the developed region and amongst themost competitively priced in the world.5 Australiastelecommunications costs are among the lowest in the region.

The Government has recognised the benefits of openmarkets by more than halving tariff rates on imports overthe past decade. For business, this has meant lower inputcosts and increased productivity and efficiency. Changes tothe tax system have also led to major reductions in businesscosts, especially for exporters. For example, the corporatetax rate has been cut from 36 to 30 per cent, one of the lowestrates in the Organisation for Economic and Co-operationDevelopment countries.

32006 Economic Survey by the Organisation for EconomicCooperation and Development

4Axiss Australia, Australia: The new centre of global finance

5The Global Office Occupancy Costs Survey 2004

Australias corporate tax rate of 30 per cent is verycompetitive when compared with other major economies,with higher company income tax rates applying in theUnited States, China, Japan, Germany, France and India.

Australia is a leading financial centre in the Asia Pacificregion. The Australian Securities Exchange is the 9th largestlisted exchange in the world with a market capitalisation ofA$1.29 trillion. Australias alliance with markets throughoutthe region is increasingly providing business people witha comprehensive range of financial services in the AsiaPacific region.6

Australia offers real cost advantages for every category ofbusiness needs from prime central business district officespace, metropolitan factory space and industrial land, totransport infrastructure and low-cost utilities.

There is a strong and enduring tradition of democracy inAustralia where rule of law and regulatory frameworks prevail.

The work force

Australia continues to offer a multilingual, highly educatedand skilled workforce. Australia has a comprehensiveeducation and training system with around 50 per centof Australias work force having some form of tertiaryqualification. Australians also possess a diversity oflanguage skills with approximately 15 per cent of thepopulation speaking a language other than English.7

Education in Australia

Australia offers one of the best education systems in theworld. With a 99 per cent literacy rate, Australia is able toprovide a highly educated, skilled and computer literatelabour force to investors.

6Axiss Australia, Australia: The new centre of global financeand www. asx. com.au

7Axiss Australia, Australia: The new centre of global finance

Foreign investmentin Australia


Foreign investment An introduction

The Government welcomes and encourages foreigninvestment consistent with community interests. Australiasscreening process for foreign investment is transparentand very liberal. The Government has the power to blockproposals that are required to be notified and which aredetermined to be contrary to the national interest.

The Foreign Investment Review Board (FIRB) is a non-statutory body that examines proposals by foreign personsto undertake direct investment in Australia and makesrecommendations to the Government on whether thoseproposals are suitable for approval under the GovernmentsForeign Investment Policy and whether they are in compliancewith the Foreign Acquisitions and Takeovers Act 1975(Cth) (FATA).

FIRB also provides information on Australias foreigninvestment policy guidelines and, where necessary, providesguidance to foreign investors to ensure compliance with theGovernments policy.

Foreign persons

Australias foreign investment legislation and policy applies toinvestment proposals by foreign persons. A foreign person isdefined as:

a natural person, not ordinarily resident in Australia

a corporation in which a natural person not ordinarilyresident in Australia or a foreign corporation holds asubstantial interest

a corporation in which two or more persons, each ofwhom is either a natural person not ordinarily residentin Australia or a foreign corporation, holds an aggregatesubstantial interest

the trustee of a trust estate in which a natural person notordinarily resident in Australia or a foreign corporationholds a substantial interest

the trustee of a trust estate in which two or more persons,each of whom is either a natural person not ordinarilyresident in Australia or a foreign corporation, hold anaggregate substantial interest.

Substantial foreign interest

A substantial foreign interest exists where a single foreignperson (and any associates) holds 15 per cent or more of theownership or voting rights of any corporations business ortrust or where several foreign persons (and any associates)hold 40 per cent or more in aggregate of the ownership orvoting rights of any corporation, business or trust.

Investments requiringprior approval

Types of investment proposals which are subject to the FATAor the Foreign Investment Policy and which require FIRBapproval are:

the acquisition of shares or rights to issued shares (whichincludes options, convertible notes and other instrumentswhich may be converted to shares) representing asubstantial interest in an Australian corporation valuedat more than $231 million. For US investors, differentexemption thresholds apply, namely $231 million forinvestments in prescribed sensitive sectors, or $1004million in any other case

the acquisition of assets resulting in control of an Australianbusiness valued at more than $231 million. The thresholdsfor US investors are the same as for the acquisition ofshares referred to above

takeovers of offshore companies whose Australiansubsidiaries or gross assets exceed $231 millionFor US investors, the $1004 million threshold referredto above applies, except for offshore takeovers involvingprescribed sensitive sectors where the $231 millionthreshold applies

direct investments by foreign governments or theiragencies irrespective of size

the acquisition of interests in Australian real estate(including interests that arise via leases, financingand profit sharing arrangements) that involve:

developed non-residential commercial real estate,where the property is subject to heritage listing,is valued at $5 million or more and the acquirer isnot a US investor

developed non-residential commercial real estate,where the property is not subject to heritage listingand is valued at $50 million or more ($1004 millionfor US investors)

vacant non-residential land (irrespective of value)

residential real estate (irrespective of value)

shares or units in Australian urban land corporationsor trust estates (irrespective of value)

proposals where any doubt exists as to whether theyare notifiable, (funding arrangements that include debtinstruments having quasi-equity characteristics will betreated as direct foreign investment).


Sensitive sectors

Restrictions apply in more sensitive industry sectors whichreflect community concerns and matters which are contraryto the national interest. Specific restrictions on foreigninvestment apply in sectors such as residential real estate,banking, media, telecommunications, shipping, civil aviationand airports. Normally, these categories include sectors whereother government departments or interested parties would beinvolved in the screening process or have major carriage of theassessment of the application.

Australia United States FreeTrade Agreement (AUSFTA)

AUSFTA came into force on 1 January 2005, and is seenas the most important bilateral economic agreement everundertaken by Australia. For the purposes of foreigninvestment in Australia, a US investor is a:

national or permanent resident of the US

US enterprise

branch (of an entity which is itself not a US enterprise)located in the US and carrying on business there.

As stated above, different monetary thresholds apply toUS investors in respect of investment proposals in Australia.

For US investors subject to AUSFTA, there are certainprescribed sensitive sectors in which special Governmentguidelines and scrutiny apply to proposed investments.These sensitive sectors are:

media

telecommunications

transport (including airports, port facilities, railinfrastructure, international and domestic aviation andshipping services provided within, or to and from, Australia)

the supply of training or human resources, or themanufacture or supply of military goods, equipmentor technology to the Australian Defence Force or otherdefence forces

the manufacture or supply of goods, equipmentor technology able to be used for a military purpose

the development, manufacture or supply of, or the provisionof services relating to, encryption and security technologiesand communication systems

the extraction of (or holding rights to extract) uraniumor plutonium or the operation of nuclear facilities.

Acquisitions in these sectors are subject to different thresholdsunder the FATA.

Real estate

The Australian government has a specific policy in relation toresidential and commercial real estate. Unless a proposedacquisition of real estate falls within an exempt class, theforeign person is required to notify FIRB of any suchinvestment proposal.

Residential real estate

Residential real estate means residential land and housing,excluding commercial and rural properties. Acquisitions ofresidential real estate requiring notification include (subject toeligibility requirements):

single blocks of vacant land

new dwellings

established (second hand) dwellings

redevelopment of established (second hand) dwellings.

Commercial real estate

Commercial real estate includes vacant and developedproperty which is not for residential purposes. It may includerural property that is not used wholly and exclusively forcarrying on a substantial business of primary production.Commercial real estate acquisitions requiring notificationinclude (also subject to eligibility requirements):

developed commercial property

vacant land

mining tenements

forestry.

Approval process

The Australian Treasurer authorises FIRB to makedeterminations on foreign investment proposals which areconsistent with the Foreign Investment Policy and do not involveany sensitive issues (mostly proposals involving real estate).

Proposals are examined to see whether they conform with therequirements of the Foreign Investment Policy and the FATA.Whilst the majority of proposals are approved, the Treasurer hasthe power under the FATA to prohibit proposals that are contraryto the national interest or to impose conditions on the approval.8

In most cases, approval is granted within 30 days of receivinga statutory notice (with FIRB having a further 10 days to advisethe parties of the decision). FIRB may extend the period by afurther 90 days if necessary.

8FIRB Annual Report 2007-2008, p.7


The national interest

In the majority of industry sectors, smaller investmentproposals are exempt from the FATA or notification under theForeign Investment Policy and larger proposals are approvedunless it is determined that they are contrary to Australiasnational interest. The screening process undertaken by FIRBallows comments to be gathered from relevant interestedparties and other government departments in determiningwhether larger or more sensitive foreign investment proposalsare contrary to the national interest.

FATA does not provide a definition of national interest.Therefore, the government determines what is contraryto Australias national interest by reference to widely heldcommunity concerns.

The following factors may be considered when assessingwhether a foreign investment proposal is contrary to thenational interest:

whether the investment proposal meets the requirementsoutlined in the Foreign Investment Policy

existing government policy and law

national security interests

economic development.9

The screening process undertaken by FIRB in assessingapplications provides a clear and simple mechanism forreviewing the operations of foreign investors in Australiawhenever they seek to acquire business interests or purchasereal estate in Australia.10

Following approval

Approval under the Governments Foreign Investment Policyis usually only given for a specific transaction and where it isexpected that the transaction will be completed in atimely manner.

If:

an approved transaction does not proceed at the time itis approved

the parties enter into new agreements at a later date

if a transaction is not completed within 12 months

further approval must be sought from FIRB for the transaction.

9FIRB Annual Report 2007-2008, p.7

10Australias Foreign Investment Policy dated September 2009 athttp://www.firb.gov.au

As stated above, the time period for an approval may be variedin circumstances where it can be shown that an extendedperiod is fundamental to the success of a proposal and thatextending the timing of the proposal does not involve anactivity (for example, real estate speculation) that would becontrary to the national interest. In such circumstances, theextended period will be stated in the approval.

Government incentives to industry

The government offers a number of incentives to promoteforeign investment in Australia. These incentives range fromtaxable grants and tax relief to the provision of infrastructureservices at discounted rates.

The primary Government body established to promote andencourage foreign investment in Australia, is Austrade.

Austrade

Austrades mission is to increase national prosperity byassisting Australians to succeed in export and internationalbusiness, as well as promoting and supporting productiveforeign investment in Australia.

Austrade is a government agency dedicated to providingexport and investment services to Australian companiesengaging in business outside Australia and to internationalbuyers and investors. In relation to international buyers andinvestors, Austrade:

helps international companies source goods and servicesfrom Australia

provides information on Australia's investment environment

identifies potential investment projects and strategicalliance partners

supports pre-feasibility studies and assisting with theinvestment approval process.

Structure ofbusiness entities


Business entities An introduction

A person can conduct business in Australia as a sole trader,in partnership, through a trust, through a joint venture or asa corporation.

Companies that are incorporated outside of Australia thatwish to carry on business in Australia must either incorporatea wholly owned or partly owned subsidiary company inAustralia or register a branch office in Australia.

Most foreign companies conduct business in Australiathrough a wholly or partly owned subsidiary or throughan Australian branch.

Incorporation

Foreign companies may establish an Australian subsidiaryby registering a new company or by acquiring a recentlyincorporated shelf company which has not yet engagedin trade.

The Corporations Act 2001 (Cth) (the Corporations Act)provides that a company may be:

unlimited with share capital

limited by shares

limited by guarantee

no liability (although this only applies if the companys soleobjects are mining or mining related objects).

The most common form of business entity in Australia is acompany limited by shares. Companies limited by shares areeither proprietary companies or public companies. Only publiccompanies may be listed on the Australian SecuritiesExchange Limited (ASX).

Proprietary companies

Proprietary companies are often used for private ventures oras subsidiaries of public companies.

A proprietary company:

may either be classified as a large proprietary company ora small proprietary company depending on certain criteria(see below for details)

results in the liability of the shareholders upon winding upof the company being limited to the amount unpaid ontheir shares (if any)

may not have more than 50 non-employee shareholders

cannot engage in fundraising activities in Australia thatwould require the lodgement of a prospectus or otherdisclosure document, except in limited circumstances

must have at least one Australian resident director butneed not have a secretary

must have the words Proprietary Limited or Pty Ltd inits name if it is a limited proprietary company.

A proprietary company is considered to be a large proprietarycompany if it satisfies two out of the three following criteria:

the consolidated revenue for the financial year of thecompany and any entities it controls is $25 million, or more

the value of the consolidated gross assets at the end ofthe financial year of the company and any entities itcontrols is $12.5 million, or more

the company and any entities it controls have 50 or moreemployees at the end of the financial year.

If a proprietary company does not satisfy two out of the abovethree criteria it is regarded as a small proprietary company.

Public companies

Public companies:

are often used for larger public ventures

may have an unlimited number of members/shareholders

must have at least three directors, at least two of whommust ordinarily reside in Australia

must have at least one company secretary that ordinarilyresides in Australia

may issue a prospectus for the offer of securities (subjectto applicable laws)

can list on the ASX

must have the word Limited or Ltd at the end of itsname if it is a limited public company.

Australian branch

The establishment of an Australian branch may be preferableto incorporating a subsidiary if one of the objectives is toconsolidate the financial results of the company in the placeof residence of the overseas company. If a foreign companychooses to establish a branch office in Australia, it must beregistered as a foreign company under the Corporations Act.

The foreign company must lodge an application form with theAustralian Securities and Investments Commission (ASIC),with certified copies of the current certificate of incorporationin its place of origin and other prescribed documents.

A registered office also needs to be established in Australiaand a local agent must also be appointed.

Upon registration, an Australian Registered Body Number(ARBN) will be allocated to the foreign company.

Once registered, the branch must file the foreign companysannual accounts and comply with other reporting requirements.


Representative offices

Where a foreign company does not intend to carry onbusiness in Australia it may seek to establish a representativeoffice. Such an office must however only engage in activitieswhich will not amount to carrying on business (for example,undertaking promotional activities). If the representativeoffice engages in activities other than those which wouldnot amount to carrying on business, an Australian branchmust be registered.

Company and business names

A formal register of company and business names registeredin Australia is maintained by ASIC.

A name is available to a company for registration unlessthe name:

is identical to a name that is reserved or registered underthe Corporation Regulations or included on the nationalbusiness names register

breaches the legal principles codified in the TradePractices Act 1974 (Cth) in the areas of misleading anddeceptive conduct, misrepresentation and passing off.

Companies incorporated in Australia will be issued with aunique nine-digit Australian Company Number (ACN).

All companies registered under the Act are entitled to anAustralian Business Number (ABN) which a company willneed to register for the purposes of the Goods and ServicesTax (GST).

If a company wishes to trade using another name (that is,other than its registered company name) then the tradingname must be registered as a business name. Businessname registrations are obtained under individual AustralianState or Territory legislation, and must be registered in eachAustralian State and/or Territory in which the companyintends conducting business under the business name.

Constitution of a company

The activities of a company are carried out by the personsresponsible for the management and control of the activitiesof the company. Such powers are normally divided betweenthe directors and the shareholders. The way in which thepower is shared between these two groups is determined bythe terms of the companys constituent documents, namelyits constitution.

The constitution of a company sets out the:

companys name

terms of the liability of its members

rules by which the company is to be internally regulated.

Process of incorporation

The process involved in incorporating a proprietarycompany is:

Step 1: The foreign company must choose a company namefor the Australian subsidiary and ensure that the name isavailable and acceptable for registration.

Step 2: The foreign company must complete the relevantapplication form and lodge the form with ASIC. ASIC will onlyregister the company if the name is available.

The form asks for details about the corporation, including:

the registered office and principal place of businessin Australia

the share structure

shareholders

the proposed directors/secretaries of the Australiansubsidiary (the details required include the names,residential addresses, date and place of birth).

At least one director must be an Australian resident andcompanies cannot be directors.

After the company has been incorporated, the company willneed to comply with the following post-incorporation matterswhich require the company to:

apply for an ABN and Tax File Number (TFN)

keep an up to date company register. This register willcontain company records and will need to record minutesof all directors and shareholders meetings. The companywill also be required to make an annual solvencydeclaration (that is, the directors must resolve that thecompany can pay its debts as and when they fall duefor payment)

keep and lodge audited financial statements and reportseach year (applicable to large companies or companieswholly owned by a foreign entity). There is currently no feefor lodgement of financial statements with ASIC as long asthey are lodged within the required time period. Late feeswill apply if they are lodged out of time.

ASIC must be notified of changes to the following:

company name, such notifications are to be made within14 days of the change

company details (for example registered office or principalplace of business), such notifications are to be madewithin 28 days of the change

company constitution, such notifications are to be madewithin 28 days of the change

directors details (for example name, address, newappointment or resignations), such notifications are to bemade within 28 days of the change

share structure or shareholder details, such notificationsare to be made within 28 days of the change.


Share capital

The minimum number of shareholders for both a proprietaryand a public company limited by shares is one.

The number of shares which can be issued by a companyis unlimited.

The manner in which a company deals with its share capitalis strictly regulated by the Corporations Act.

Company officeholders

Under the Corporations Act a company is required to appointofficeholders to act on behalf of the company. Theseofficeholders are responsible for ensuring the company fulfilsthe legal requirements prescribed by the Corporations Act.

The directors of a company are responsible for the day to daymanagement of its affairs. A public company must have atleast three directors and a proprietary company, at leastone director.

In the case of a public company at least 2 of the directorsmust be Australian residents and a proprietary company musthave at least one director who ordinarily resides in Australia.

The secretary of a company is responsible for acting asexecutive officer to the board of directors and administrativeofficer of the company. Whilst a proprietary company is notrequired to have a secretary, a public company must have atleast one secretary. A secretary must ordinarily residein Australia.

Every company carrying on business or deriving propertyincome in Australia must also appoint a Public Officer. ThePublic Officer appointed must be an Australian resident. ThePublic Officer is responsible for undertaking or ensuringcompliance with all things which are required of a companyunder Australian income tax legislation.

A company officeholder does not need to be an Australiancitizen to qualify as an Australian resident. Whether theindividual is to be regarded as an Australian resident is aquestion of fact and a number of criteria must be consideredand satisfied.

Registered office

An Australian company must have a registered office inAustralia. The registered office must be a street addresssituated in Australia. A postal address will not satisfy therequirement that the company maintains a registered office.

Auditors and financial reporting

All public companies must appoint an auditor within onemonth of the date of their incorporation.

The following entities are required to prepare an annualfinancial report which must be audited:

all public companies

all large proprietary companies

small proprietary companies which are controlled byforeign entities.

ASIC will, in certain cases, grant relief from the requirementto prepare and audit financial reports for:

large proprietary companies in which a foreign companyhas an interest

small proprietary companies controlled byforeign companies.

Under the Corporations Act auditors have obligations withrespect to independence, disclosure and financial reporting.

Books, accounts, registers andfiling requirements

The Corporations Act requires companies to maintain variousrecords and registers of their accounting and administrativetransactions. It is usually the company secretary (if one isappointed) who carries out such tasks.

The Corporations Act also requires certain documents to befiled with ASIC from time to time so that an updated record ofthe companys affairs is available for inspection by the public.A public company must prepare and lodge with ASIC annualfinancial reports.

Every company will receive a company statement from ASICannually in which a director or secretary of the companymust notify ASIC of any changes to the relevant details ofthe company for the public register, including names andaddresses of all officers, registered office, address ofprincipal place of business and details of shareholders andtheir shareholdings

Australian SecuritiesExchange (ASX)


Australian Securities Exchange An introduction

Australias national stock exchange is the Australian SecuritiesExchange (ASX) registered under the name ASX Limited.

Smaller stock exchanges exist, however they do not have thedepth and breadth of the ASX. The ASX was formed in 1987through the amalgamation of six independent stock exchangesand became a listed company on 13 October 1998. On 25 July2006, the Australian Stock Exchange Limited merged withSydney Futures Exchange (SFE) Corporation Limited, makingthe combined entity the 9th largest listed exchange inthe world.

The stated objectives of the ASX are to provide a fair, well-informed market for financial securities and an internationallycompetitive market. To this end the ASX issues listing ruleswhich all listed entities must observe. The ASX Listing Rules(Listing Rules) govern:

listing

quotation

market information

reporting

disclosure

trading and settlement

administration

general supervisory matters

various other aspects of a listed entitys conduct.

The Listing Rules aim to protect the interests of listed entities,maintain investor protection and regulate the operation of themarket. The Listing Rules are enforceable against listedentities and their associates under the Corporations Act.

Admission categories

An Australian incorporated company wishing to list on the ASXmust fall within one of the following categories:

general admission a company seeking admission underthis category must satisfy either the Asset test or theProfit test

foreign exempt a company seeking admission under thiscategory must be listed on an overseas exchange which isa member of the International Federation ofStock Exchanges

debt issuer a company seeking admission under thiscategory will issue debt securities only.

General admission

For an Australian registered company to be generally admittedto the official list, the following conditions must be met to theASXs satisfaction:

profit/asset test

satisfactory shareholders spread

prospectus/information memorandum issued.

The ASX has absolute discretion to admit an entity tothe official list and determine the category of an entitysadmission.

Profit/asset test

A company seeking admission to the official list must satisfyeither the Profit test or the Asset test.

To seek admission under the Profit test, the companys:

aggregated profit from continuing operations (before tax)for the last three full financial years must have been at least$1 million

consolidated profit from continuing operations (before tax)for the last 12 months (to a date no more than two monthsbefore the company applies for admission) must be morethan $400,000.

To seek admission under the Asset test:

the entity (except for investment entities see below)must have either net tangible assets at the time ofadmission of at least $2 million after deducting the costsof fund raising, or a market capitalisation of at least $10million (based on the offer price under the prospectus)and either:

less than half of the companys total tangible assets(after raising any funds) must be cash or in a formreadily convertible to cash

half or more of the companys total tangible assets(after raising any funds) are cash or in a form readilyconvertible to cash, and the company has commitmentsconsistent with its business objectivesto spend at least half of its cash and assets in a formreadily convertible to cash

the company must have working capital of at least $1.5million, or an amount that would be $1.5 million if thecompanys budgeted revenue for the first full financial yearthat ends after listing was included in the working capital.

For an investment entity (whose principal activities involveinvestment in securities, rather than the control of a business)to satisfy the Asset test, the entity must satisfy one of thefollowing:

have net tangible assets of at least $15 million afterdeducting the costs of fundraising

be a pooled development fund and have net tangibleassets of at least $2 million after deducting the costs offund raising.


Shareholders spread

The ASX requires a company seeking general admission tohave a satisfactory spread of shareholders.

The company will meet this requirement if it has:

at least 500 shareholders who each hold shares in themain class of securities with a value (based on theprospectus issue price) of at least $2,000

at least 400 shareholders who each hold shares in themain class of securities with a value (based on theprospectus issue price) of at least $2,000 provided thatat least 25 per cent of the companys shares are held byordinary members of the public, that is, unrelated partiesof the company.

Restricted securities, being shares that are required to besubject to escrow by the ASX will not count towardssatisfying the shareholder spread requirements.

Prospectus/informationmemorandum

Generally, an entity seeking to list on the ASX in conjunctionwith fundraising will need to issue a prospectus. This willrequire the company to prepare and lodge a prospectus withASIC and issue the prospectus to the public.

If the company:

does not need to raise funds in conjunction with itsapplication to list on the ASX

has not raised funds in the three months prior to itsapplication to the ASX

will not raise funds in the three months after its applicationto the ASX

an information memorandum (rather than prospectus) may beaccepted by the ASX.

Foreign exempt entity

Under the Foreign Exempt Entity provisions of the ListingRules, a foreign entity that is listed on a reputable overseasexchange may apply to be listed on the ASX in the ForeignExempt Entity category. The rationale behind this rule is togive Australian investors access to a wider range of securities.

The threshold for admission to this category requires the entityto have either net tangible assets of A$2 billion or operatingprofit for each of the past three years of at least A$200 million.

In order to be admitted under this category, an entity mustprovide the ASX with a copy of its latest annual report andany subsequent interim reports. Following admission, theentity must continue to provide the ASX with copies of itsannual reports. Notably, an entity admitted to this categoryhas the considerable advantage of not having to comply withthe continuous disclosure requirements and timetables forcorporate actions prescribed by the Listing Rules (as the entitywill still be governed by similar requirements in the jurisdictionof its principle listing).

The ASX uses CHESS, an electronic sub-register system,to facilitate the transfer of legal title and the settlement oftransactions. For foreign companies whose local laws do notrecognise the use of CHESS to effect the transfer of legal title,a depository system is used, with Chess Depositary Interests(known as CDIs) being issued to security holders in Australia.

Additional Information

Please see our publication entitled Listing a Company onthe Australian Securities Exchange for additional informationwhich is available on our websitehttp://www.pwc.com.au/legal/publications/index.htm

Visa and immigrationfor business


There are a number of visa categories available to businessesand business people wishing to come to Australia. Themigration program allows for the permanent and temporaryentry of business people and highly skilled individuals intoAustralia and visa requirements vary.

Business visitors

Business people planning to enter Australia for a businessvisit are able to apply for the Business (Short Stay) visa whichusually allows a stay of up to three months in Australia oneach visit.

The Electronic Travel Authority (ETA) and the eVisitor visaare similar to the Short Stay visa referred to above and isavailable to nationals of certain countries. Care should betaken to obtain the Business ETA or the eVisitor visa onbusiness grounds, and not the Tourist ETA or eVisitor visa ontourism grounds.

Sponsoring staff to Australia

Companies operating in Australia, or companies operating inother countries wishing to establish an entity in Australia, areable to sponsor individuals to come to Australia on aTemporary Business (Long Stay) visa (Subclass 457 visa).Individuals sponsored on these visas are able to work in aspecified position within the company or associated companyas defined under the Corporations Act for a period of up tofour years.

Sponsors of Subclass 457 visa holders must:

demonstrate that they are lawfully operating a businessthat is actively engaged in business activities

demonstrate that they are the direct employer of thesponsored employees (for a group of related andassociated companies, the sponsor can be related orassociated to the direct employer of thesponsored employee)

demonstrate that there is no adverse information (egimmigration, discrimination, industrial relations, OH&S,taxation) relating to the sponsor or its directors, or anentity associated with it, or there is adverse informationthat should be reasonably disregarded

provide an attestation as to their strong record, ordemonstrated commitment to employing local labour andnon-discriminatory employment practices

where the sponsor is an Australian business, demonstratethat they meet relevant training benchmark criteria. Wherethe Australian business has been operating for less than12 months, they produce an auditable plan for meetingthese training benchmarks.

An employer operating an overseas business that has noformal operating base or representation in Australia may alsosponsor employees on a Subclass 457 visa but would need todo one of the following:

establish a branch or other business activity such as ajoint venture, agency distributorship or subsidiary inAustralia of the sponsoring entity

fulfil obligations on behalf of the sponsoring entity for acontract or other business activity in Australia.

Companies operating in Australia may also sponsor staff forpermanent residence where the nominated position is apermanent full time position and the position of the applicantis highly skilled.

Business owners and investors

Under the Business Skills program, business people canapply to come to Australia to start their own business,manage a new or existing business, or invest in Australiawithout the need for a sponsor, subject to meeting relevantcriteria and the prerequisite business background and assets.These visas are available to:

business owners

senior managers of businesses who meetrelevant requirements

senior executives of major businesses who meetrelevant requirements

successful business owners or investors wishing to investfunds in a Government approved Designated Investment(being an investment of at least A$1,500,000 in anAustralian State or Territory where not sponsored by aState/Territory) for at least four years.

In most cases people will enter Australia on a provisional ortemporary visa. After a minimum of two years they may beeligible to apply for a permanent Business Skills visa providedthat all obligations of their existing provisional/temporary visaand additional requirements of the permanent visa are met. Insome circumstances, sponsorship by State/TerritoryGovernments may be obtained to assist business applicantsby reducing usual business and investment criteria.


There are also other opportunities for business people tomigrate to Australia if they are able to satisfy requirements inone of the General Skilled visa categories, which will look atthe applicants:

age

English language ability

occupation

qualifications

work experience (including experience in Australia)

where applicable, any Australian citizen, permanentresident or eligible New Zealand relatives residingin Australia.

State and Territories may also provide additional sponsorshipto an applicant to assist in meeting requirements under theGeneral Skilled visa categories where the applicant proposesto enter a particular State/ Territory or rural location wheretheir occupation is in need.

In response to the global economic crisis and the risingAustralian unemployment rate, the Government revised its2009-2010 Migration program by reducing the program intakein the Permanent Skilled stream (primarily in the GeneralSkilled visa categories) by 14 per cent to 115,000. TheGovernment also introduced a new order of processingapplications in the skilled stream with a preference toemployer-sponsored permanent migration applications,applicants nominated by State and Territory Governments,and applicants who nominate an occupation identified as incritical shortage.

Changes to the subclass 457Visa program

On 14 September 2009, significant changes to the Subclass457 visa program (and other subclass 400 series of visacategories) came into effect with the introduction of theWorker Protection Act 2008 and related amendmentregulations. These amendments introduced, amongst otherthings, amended requirements for business sponsorship andassociated visa applications, and a new sponsorshipframework with new legally enforceable sponsorshipobligations that apply to both new and existing Subclass 457visa employees.

An area of particular change is that employers are no longerrequired to satisfy a standard minimum salary level for theirSubclass 457 visa employees. Instead, the employer mustprovide evidence and pay the proposed employee not lessthan the market salary or earnings than an Australianemployed in an equivalent position and locationwould receive.

Employers should have particular regard however totransitional provisions that apply to pre 14 September 2009granted Subclass 457 visa holders, such as provisions thatrelevant minimum salary levels will continue to apply to thesevisa holders until 1 January 2010 and related arrangements toprotect this particular group.

Sponsors of Subclass 457 visa employees (where grantedthe visa prior to 14 September 2009) will continue to beresponsible for meeting the health costs of employees (andaccompanying family members) in a public hospital. However,Subclass 457 visa holders who were granted their visas from14 September 2009 are themselves responsible for holdingappropriate private health insurance during their stay inAustralia as a requisite for visa grant and as a condition oftheir visa.

Since 14 September 2009, sponsors are no longerresponsible for any Government debts that the Subclass 457visa employee (and accompanying family members) mayhave accrued whilst in Australia. Additionally, travel costs atthe end of their employment in Australia must only be metwhere a written request by the Subclass 457 visa holder orthe applicable Minister on his/her behalf is received.

All businesses sponsoring temporary residents are subject topotential monitoring by inspectors regarding their complianceas against an extensive number of legally enforceableobligations. One major ongoing obligation that employersshould be alert to is the obligation to ensure that a Subclass457 visa employees terms and conditions are, and continueto be, no less favourable than those provided to an Australianin an equivalent role in the same workplace (eg paying marketsalary). A failure to comply with an obligation can lead to anadministrative sanction such as a bar to use the program, aninfringement notice, or a court ordered civil penalty.

Other issues

Permanent residents are free to purchase property whereasrestrictions are placed upon the ability of temporary residentsto purchase property. Employers sponsoring staff to Australiashould also examine possible exemptions for theSuperannuation Guarantee Charge and obtain relevanttaxation advice in this regard.

Compliance with immigration law in general is taken seriouslyand employers should have regard to ensuring that peoplethey employ have the correct authorisation.

Corporate tax


Corporate tax issues

The following summary provides a brief outline of the taxissues that may be applicable to a foreign entity doingbusiness in Australia and originating from a country whichparticipates in the international double-tax arrangements towhich Australia is a party.

Direct tax

Income tax

A company is a resident of Australia for income tax purposesif it is:

incorporated in Australia

not incorporated in Australia, however, it carries onbusiness in Australia and either its:

central management and control are in Australia

voting power is controlled by shareholders who areresidents of Australia.

An Australian company is liable to pay Australian tax on all ofits worldwide assessable income at the general corporate taxrate of 30 per cent.

Capital gains tax

Capital assets held by an Australian resident company willgenerally incur tax payable on any capital gain on theirdisposal at the corporate tax rate.

Disposal of shares in an Australian subsidiary by a non-resident shareholder should be exempt from Australian capitalgains tax if these shares have been held on capital accountand the Australian subsidiary does not qualify as a land richcompany (that is broadly, when the market value of thesubsidiarys land assets does not exceed the market valueof its non-land assets).

Dividends paid by an Australian company

If fully franked dividends (that is, dividends derived fromprofits on which Australian corporate tax has been paid) arepaid by an Australian subsidiary to its foreign parent, nodividend withholding tax is payable. To the extent thatdividends are unfranked, dividend withholding tax of 30 percent (or as reduced under the relevant double tax treaty) ispayable on the gross unfranked amount.

Debt funding of an Australian company

Interest withholding tax of 10 per cent is imposed on interestpaid by an Australian company to a foreign non-residentlender entity. If, however, the beneficial owner of the non-resident lender has a permanent establishment in Australiaand the interest is effectively connected with the permanentestablishment, such interest is taxable by assessmentin Australia.

Under debt and equity classification rules applying from1 July 2001 there may be situations where interest payableis treated as if it were a dividend. Similarly, dividends paid onshares that are classified as debt interests will notbe frankable.

Legislation also limits the amount of interest that can bedeductible under the Thin Capitalisation rules, wherebroadly, debt exceeds 75 per cent of net assets(excluding debt).

Royalties payable to a foreign company

If an Australian company pays royalties to a foreign resident,the royalties will be subject to royalty withholding tax at therate of 30 per cent (or as reduced under the relevant doubletax treaty) and may give rise to transfer pricing issues.

Transfer pricing

Australian transfer pricing rules adopt the arm's lengthconcept as promulgated by the Organisation for EconomicCo-operation and Development (OECD). Transfer pricing isseen as a major issue by the Australian Taxation Office(ATO), which has recently revisited transfer pricing as a focusarea for potential tax collection and enquiry and is activelypursuing multinationals in Australia.

Where a taxpayer has cross border related party dealingstotalling more than $1 million, the nature and quantum ofthese transactions are required to be disclosed to the ATOin a schedule to the tax return, known as the schedule 25A.While there is no legal requirement to prepare transfer pricingdocumentation, the schedule 25A also requires the taxpayerto disclose the percentage of transactions covered by itstransfer pricing documentation. The ATOs view on the natureand structure of transfer pricing documentation is generallyconsistent with the content recommended by theOECD guidelines.

Group taxation

A tax consolidation regime applies for income tax and capitalgains tax purposes for 100 per cent owned group companies,partnerships and trusts for such entities that are resident inAustralia. Australian subsidiaries that are 100 per cent ownedby a foreign company and that have no common Australianhead company between the non-resident parent and theAustralian resident subsidiaries are also allowedto consolidate.

Groups that choose to consolidate must include all100 per cent-owned entities and the choice is irrevocable.Transactions between group companies are then ignoredfor income tax purposes.


Tax incentives

Inward investment

Depending on the nature and size of the investment project,the relevant Australian State governments may give rebatesfrom payroll, stamp and land taxes on an ad hoc basis andfor limited periods.

Capital investment

The incentives for capital investment that may apply arelisted below:

Accelerated deductions are available for capitalexpenditures on the exploration for petroleum and otherminerals. Certain capital expenditures incurred after16 August 1989 in respect of quarrying operations alsoqualify for concessional treatment.

Under the existing Research & Development (R&D) TaxConcession rules, up until 1 July 2010, where anAustralian company carries out R&D on its own behalf, abase tax deduction of 125 per cent may apply subject tocertain conditions. Accelerated deductions for expenditurein acquiring or gaining access to technology for R&Dpurposes, known as core technology expenditure, is alsodeductible at up to 100 per cent depending on the relatedR&D spend. Subject to certain conditions, there is also a175 per cent incremental deduction for certain expenditurewhere current year R&D spend exceeds an establishedaverage level of R&D spending for that company. Forsmall companies, (under $5 million group turnover) a cashrebate may also be available in relation to R&D spending.

Where an Australian incorporated company carries outR&D on behalf of a foreign member of its company group,a base 100 per cent deduction for R&D expenditure and a175 per cent incremental deduction for R&D spendingabove an established average level of Australian groupR&D spend may apply.

From 1 July 2010, changes to the R&D concession rulesare expected to take place which are intended to simplifythe operation of the existing program. Pursuant to thesechanges a 45 per cent refundable R&D tax credit will beavailable for companies with a grouped annual turnover ofless than $20 million and a 40 per cent non-refundableR&D tax credit will be available for companies with agrouped annual turnover of more than $20 million The newprogram is also expected to allow increased benefits forAustralian based R&D undertaken for a foreign parentcompany (ie. intellectual property retained overseas).

While the new program increases the benefits available tocompanies, it is expected to be offset by some tighteningof the eligibility criteria to access the program, or havedeductions limited by any direct commercialisationof R&D.

Non-resident pension funds that are

tax-exempt in their home jurisdiction

residents of Canada, France, Germany, Japan,United Kingdom, United States or some otherprescribed country

satisfy certain Australian registration requirements

are exempt from income tax on the disposal ofinvestments in certain Australian venture capital equityheld at risk for at least 12 months. From 1 July 2002, thisexemption was extended to certain other tax-exempt non-resident investors.

Until 31 December 2006, eligible investment companiescould be registered as pooled development funds.

Pooled Development Funds (PDFs)

PDFs are investment companies established to provide equitycapital to small and medium-size enterprises. PDFs are taxedoon their net income at 25 per cent, except for income fromsmall and medium-size enterprises, which is taxed at 15 percent. PDFs are entitled to imputation credits on the receiptof franked dividend income. Dividends from PDFs are taxexempt. Gains on the sale of shares in a PDF are exemptfrom tax, and losses are not deductible. The PDF programhas been replaced with an early stage venture capital limitedpartnership (EVSCLP) investment vehicle and as such,the PDF program was closed to new registrations from1 January 2007.

The ESVCLP program is aimed at stimulating Australiasearly stage venture capital sector by allowing generous taxconcessions for funds meeting the registration andinvestment criteria.

An ESVCLP is a venture capital fund, legally structured as alimited partnership and registered with Innovation Australia inaccordance with the Venture Capital Act 2002 (Cth) Act. AnESVCLP is a tax flow-through vehicle that is, the ESVCLPwill not be taxed at the partnership level. In addition, incomeand capital gains earned as a result of investment in anESVCLP will be exempt from tax in Australia in the hands ofthe partners. Tax losses by ESVCLPs, however, will not flowthrough to nor be deductible by partners.

ESVCLPs must have their investment plan and partnershipdeed approved by Innovation Australia before they commencetheir investment activities. There are also a number oflegislative requirements which restrict both the financialstructure of ESVCLP investments and the nature of theinvestee entities.

Among those requirements are:

ESVCLPs must not invest in entities whose value exceeds$50 million

ESVCLPs must divest an investment once its valueexceeds $250 million

ESVCLPs may only invest in entities whose predominantactivities are eligible activities. Activities which are noteligible include property development, land ownership,banking, providing capital to others, leasing, factoring,securitisation, insurance, construction or acquisition ofinfrastructure or related facilities and making investmentsdirected at deriving income in the nature of interest, rents,dividends, royalties or lease payments

the size of the ESVCLP fund must be at least $10 million(and not greater than $100 million)

no single partners interest in an ESVCLP may exceed30 per cent of the total committed capital.


In addition, ESVCLPs are required to lodge quarterly andannual reports with Innovation Australia. The total amounta partnership invests in interests (including debt & equityinterests) of a company/unit trust and any associate or othermember of the same wholly owned group of thatcompany/unit trust must not exceed 30 per cent of itscommitted capital. There are exceptions to this rule, whichinclude superannuation funds, authorised deposit takinginstitutions and life insurance companies.

Offshore banking units

The taxable income derived from pure offshore bankingtransactions by an authorised offshore banking unit inAustralia is taxed at the rate of 10 per cent.

Investment allowance

Where business taxpayers acquire a depreciating asset ormake improvements to an existing depreciating asset which isused for the principal purpose of carrying on a business, theInvestment Allowance may provide a significant one-offtax benefit.

For small business entities with a turnover of less than $2million a year, a tax deduction of 50 per cent of the cost of theasset will be available where the business commits toinvesting in the asset between 13 December 2008 and 31December 2009 and first uses the asset, or installs it ready foruse by 31 December 2009. Small business entities can claimthis deduction where the investment in the asset is greaterthan $1,000.

For other business entities with a turnover of $2 million ormore a year, a tax deduction of 30 per cent of the cost of theasset will be available where the business commits toinvesting in the asset between 13 December 2008 and 30June 2009 and first uses or installs the asset by 30 June2010. An additional 10 per cent may be deducted where theasset is acquired and is first used or installed between 1 July2010 and 31 December 2010. A further 10 per cent deductioncan be claimed where the business invests in the assetbetween 1 July 2009 and 31 December 2009 and first uses orinstalls it by 31 December 2010.

A minimum expenditure threshold of $10,000 applies to beeligible to claim the 30 per cent or 10 per cent deduction forthose entities with a turnover of $2 million or more a year.

This Investment Allowance can be claimed through theincome tax return in which the capital allowance for thedepreciating asset is also claimed for the asset.

Indirect tax

Stamp duty

The various States and Territories of Australia impose stampduty at various rates on transactions including mortgages,securities, insurance policies, non-marketable share transfers,lease documents and contracts regarding the transfer ofassets, businesses or real estate. In certain States andTerritories, some of the above transactions are stampduty exempt.

Land tax

The government of each State of Australia and the AustralianCapital Territory levies land tax (which is a tax levied on theowners of land, excluding a persons principal place ofresidence) based on the unimproved capital value of land.Varying rates of land tax apply across Australia and the ratepayable generally increases according to the value of theproperty. Usually the land tax liability arises for land owned ata particular date, which in New South Wales, is at midnight on31 December in each year.

Payroll tax

Payroll tax is levied on employers. This is a State based taxand the rates payable vary between the States, as do therules regarding exactly what income is liable to payroll tax.For example, the current New South Wales rate of payroll taxis 5.55 per cent from1 July 2010 to 31 December 2011. Thisapplies whether or not an individual is paid from a foreign orfrom a local payroll.

There are exemptions for small pay rolls. Currently in NewSouth Wales the exemption level is $638,000.

Customs duty

Customs duty is generally levied on the sum of the customsvalue of goods, based on the Free On Board (FOB) value atthe foreign port of export (ie in a majority of cases includesforeign inland freight). The customs value is determined inaccordance with Australian customs law and may notnecessarily be the same as the sale price of the goods.Customs duty is payable at the time the goods enter intoAustralia. This can be the date the goods clear through theborder or the date they are withdrawn from a customsbonded warehouse.

The Customs Act regulates the import of goods into Australiaand their export. Part VIII provides for the payment andcomputation of the duty payable on those goods. Tworelevant factors in assessing the amount of duty payable arethe country from which they originated and their value.Generally, the rate of duty payable on most goods is 5 percent, including automotive vehicles and parts. Textiles,clothing and footwear generally attract a tariff rate of 10 percent. The amount of customs duty payable on imported goodsmay be reduced through the application of various TariffConcession Orders (TCO)s, By-Laws, or Free TradeAgreements (FTAs). Application of these concessionsdepends on a variety of factors related to the nature of thegoods and the purpose for which the goods are imported.

Importers should enquire as to whether or not an existingTCO is available to allow for the duty free import of theirgoods. Generally speaking, where a TCO does not exist,importers can apply for a TCO if it can be demonstrated thatthe imported goods are not made in Australia and do not havea substitutable equivalent made in Australia.


In addition, AusIndustry administers a program called theEnhanced Projects By-laws Scheme (By-law 71), whichallows for the duty free import of goods for capital worksprojects (in eligible sectors) with a capital expenditure of over$10 million, provided certain criteria are met. The program isfrequently used by companies in the resources andmanufacturing industries. In order to obtain concessions fromthe scheme, applicants must demonstrate that theprocurement practices provided a full, fair and reasonableopportunity to Australian companies to bid for the supply ofgoods and services for the project.

Australia currently has several free trade agreements in placeand under negotiation. Most recently, the ASEAN - Australia -New Zealand Free Trade Agreement (AANZFTA) came intoforce on 1 January 2010. The AANZFTA is a comprehensiveFree Trade Agreement covering all areas of economic activitybetween member countries, specifically, trade in goods andservices, investment, intellectual property, e-commerce,temporary movement of business people, and economiccooperation. It offers significant benefits to Australianbusinesses trading in South East Asia by progressivelyeliminating all barriers to trade in goods, services andinvestment in all their forms. Below is a listing of Australiasexisting free trade agreements and free trade agreementsunder negotiation. More information is available on AustraliasDepartment of Foreign Affairs and Trade website.

Australia's existing FTAs include:

ASEAN-Australia-New Zealand FTA (AANZFTA)

Singapore-Australia FTA (SAFTA)

Thailand-Australia FTA (TAFTA)

Australia-United States FTA (AUSFTA)

Australia-New Zealand Closer EconomicRelations (ANZCERTA)

Australia-Chile FTA (ACFTA).

FTAs under negotiation include:

Australia-China FTA Negotiations

Australia-Gulf Cooperation Council (GCC)FTA Negotiations

Australia-Japan FTA Negotiations

Australia-Korea FTA Negotiations

Australia-Malaysia FTA Negotiations

Pacific Agreement on Closer Economic Relations(PACER) Plus

Trans-Pacific Partnership Agreement.

In addition to the administrative processes involved withimporting goods, importers should take care to ensure thattheir import declarations adhere to the customs regulationsof Australia.

For example, the Australian Customs and Border ProtectionService has become more rigorous in how they view and treattransfer pricing adjustments. In 2009, the Australian Customsand Border Protection Service released a Practice Statementto address the impact of transfer pricing arrangements on thecustoms value of imported goods. Companies importing intoAustralia from related parties should review their transferpricing adjustments for Customs implications, and determinewhether there are any overpaid or underpaid duties.Regardless of the financial impact, related companies areencouraged to obtain a valuation advices from Customs toconfirm that the way they price goods between their relatedentities adheres to the customs valuation legislationin Australia.

Goods and servicestax (GST)


An overview of GST

A broad based goods and services tax (GST) has applied inAustralia since 1 July 2000. The GST is based on the valueadded tax (VAT) model adopted in most countries around theworld. Its effect is a tax of 10 per cent on the consumption ofmost goods, services and property in Australia (includingimports). Generally does not apply to exports of goods orservices consumed outside Australia.

Some key points in relation to GST are listed below:

If an entity is carrying on an enterprise, and its GSTturnover equals or exceeds the annual GST registrationturnover threshold, then it must register for GST. Thisthreshold is currently $75,000 ($150,000 for non-profit bodies).

GST is payable at the rate of 10 per cent on the supply bya registered entity of most goods, services or intangibles,except to the extent that the supply is input taxed, GST-free or outside the scope of GST (see below). Thesupplier is legally liable for any GST payable. Typically theGST is recovered by the supplier from the recipient of thesupply as part of the contract price.

Subject to certain exemptions, GST is also payable on theimportation of goods at the rate of 10 per cent of the valueof the goods. The value includes the customs value of thegoods, as well as the customs duty and the cost oftransporting the goods to Australia and insuring such goodsfor that transport, to the extent these are not alreadyincluded in the customs value. The Australian Customs andBorder Protection Service will collect GST from importers ofgoods at the time of importation, unless the entity isregistered for the deferred GST scheme.

Some importations of services may also be taxable, undera reverse charge rule.

Registered entities are generally entitled to claim a creditfor GST paid on things acquired in carrying on theirenterprise. A four-year time limit has recently beenproposed to limit retrospective input tax credit claims. Noinput tax credits are available for acquisitions that relate tomaking input-taxed supplies, or for anything acquired orimported for private consumption.

GST returns must be lodged on a quarterly basis bysuppliers with GST turnover of less than $20 million, unlessthey elect to lodge returns on a monthly basis. Supplierswith GST turnover of $20 million or more must lodgeelectronically on a monthly basis. Taxpayers can elect tolodge annual GST returns if they are not required to beregistered for GST.

Different types of supply for GST purposes

Some supplies will be GST-free (usually referred to aszero-rated in other GST or VAT regimes). Where suppliesare GST-free, the supplier is not liable to pay tax on thesupply, however there is no restriction on credits for theGST paid on costs relating to making the GST-free supply.

The following supplies may be GST-free (subject tocertain conditions):

exports of goods

international air and sea travel

domestic air travel if purchased overseas by non-residents

most health, education and child care services

food

water, sewerage and drainage.

Other GST-free supplies include, but are not limited to:

the sale of an existing business (what is called in thelegislation the supply of a going concern)

the first supply of precious metals

supplies through inwards duty-free shops

grants of freehold and similar interests by government

certain supplies of services for consumption outsideAustralia

certain supplies of farm land.

Some supplies are input taxed (usually referred to asexempt in other GST or VAT regimes). This means thesupplier does not pay GST on the supply, but is notgenerally entitled to claim input tax credits on the thingsacquired to make the supply (except in certaincircumstances where a partial input tax credit may beavailable for acquisitions of a specified kind that relateto making financial supplies).

The following are some examples of input-taxed supplies:

certain types of financial services

residential rents and the supply of residential premisesother than the sale of new residential premises (whichare taxable)

the subsequent supply of precious metals after the firstGST-free supply of the precious metal.

Supplies that are not for consideration, not made throughan enterprise or not connected with Australia are generallyoutside the scope of GST.

Real property

The sale of a freehold or other interest in land by aregistered entity will be subject to GST under the generalrules. The parties can choose to apply the margin schemeprovisions to calculate a reduced amount of GST on thesupply, provided the supply is eligible and the supplier andrecipient agree in writing that the margin scheme is toapply. Where the general GST rules apply, GST iscalculated on the full selling price of the property. Wherethe margin scheme is applied, the amount of GST payableis 1/11th of the margin for the supply. Normally, the marginis the amount by which the consideration for the supply (theregistered persons sale price) exceeds the considerationfor the acquisition of the interest. Under a margin schemetransaction, the purchaser cannot claim an input tax creditfor the GST paid on the margin.

A sale of residential premises by an unregistered privateindividual(s) to another unregistered private individual(s) isoutside the scope of the GST.


Resident agents acting for non-residents

The GST on any taxable supplies made by a non-residentthrough a resident agent is generally payable by theresident agent and not the non-resident. This rule appliesequally for claiming GST on acquisitions andpaying/claiming import GST.

Supplies of insurance

The supply of an insurance policy by an insurer is generallytaxable. Life insurance is input taxed. Insurance suppliesthat qualify as exports and/or private health insurancepolicies are GST-free.

Proposed changes to the GST legislation

A number of changes to the GST legislation are currentlybefore Parliament with a view to being implemented witheffect from 1 July 2010. These include changes to thefollowing:

time limits on input tax credit claims

timing of when entities can form a GST group or GSTjoint venture

simplification of the requirements for a document to bea tax invoice

GST adjustments for third party rebate arrangements

the GST rulings system.

Personal tax


Australian tax implications ofresident status

For individuals, the tax implications of resident status may besummarised as follows:

Residents are subject to tax on worldwide income andtaxable capital gains (although a foreign tax credit isgenerally available within limits).

The top marginal tax rate is 45 per cent and this appliesto income over $180,000 (tax on the first $180,000 is$54,550 for the year ended 30 June 2011).

Medicare is Australias universal health insurance scheme.Contributions to the health care system are generallymade through the tax return via the Medicare Levy. Thelevy is 1.5 per cent of taxable income and reportable fringebenefits. A Medicare Levy Surcharge of an additional1 per cent of taxable income and reportable fringe benefitsis payable for higher income earners who do not haveappropriate private hospital insurance. An exemption fromthe Medicare Levy is available to expatriates from certaincountries, low income earners, and some other taxpayersmeeting certain requirements.

Inbound expatriates who are temporary residents will beexempt from tax in Australia on any foreign sourcedinvestment income. They are also subject to capital gainstax on a narrower range of assets.

Residents may be subject to an accruals taxation systemin respect of investments in certain foreign trusts,controlled offshore companies and interests in certainforeign investment funds and foreign life assurancepolicies. Temporary residents are exempt fromthis regime.

There is a requirement for each employer to make acompulsory contribution into an Australian approvedretirement fund on behalf of each employee (excludingcertain senior expatriate executives). The amount iscurrently 9 per cent of salary up to a specified salary cap,$42,220 per quarter for the year ended 30 June 2011.However, certain exemptions may apply forinbound expatriates.

Taxation of employment income

A resident individuals worldwide employment income willgenerally be subject to Australian tax, regardless of whetheror not the income is remitted to Australia.

Employment income subject to tax includes base salary,wages, allowances (other than exempt living-away-from-home allowances), commissions, directors fees and othercash remuneration such as bonuses and profit sharingpayments including employee share/option schemes.

Any contract of employment should be reviewed by anAustralian employment lawyer and/or taxation adviser priorto finalisation. This is important for purposes of identifyingpossible questions of residency and putting in place taxeffective remuneration packages, particularly living-away-from-home benefits.

Fringe benefit tax

Fringe benefit tax (FBT) applies to most non-cash benefitsprovided by an employer to an employee or an associateof an employee, previous employee or future employee.

The main areas generally affected by this tax are motorvehicles provided to employees, low or no interest loans,and payment or reimbursement of private expenses.

Fringe benefits are not taxable in the employees hands.Instead, a separate tax collection procedure applies to fringebenefits, which is levied on the employer at the highestmarginal tax rate. However, it is not uncommon for theemployer to pass on the FBT costs as part of a totalremuneration package for the employee.

FBT is levied on the employer and is payable with respectto benefits paid by both an Australian company and anoverseas company where the employee is working inAustralia. However, there are numerous FBT exemptionsand concessions for benefits which relate to employmentassignments and re-locations.

Net capital gains

Capital gains that have been derived on the disposal bysale, or otherwise, of assets acquired after 19 September1985 are generally included in assessable income. Effective21 September 1999, where the asset is held for more than12 months (subject to certain exemptions) only 50 per centof the net capital gain is assessable. Foreign residents andtemporary residents are only subject to capital gains tax on alimited range of assets. There are also special rules that applyto valuation of assets for capital gains tax, where an individualbecomes a tax resident for the first time. The disposal of amain residence is generally not subject to capital gains tax.

Planning for investments

As previously indicated, residents of Australia who are notconsidered temporary residents are subject to Australiantax on their worldwide income, less a foreign tax creditwhere applicable. It is essential therefore to review personalinvestments and other related matters prior to becoming aresident of Australia to determine tax exposure andplanning opportunities.


Taxation of ForeignArrangements (TOFA)

These measures prescribe the way in which foreign exchangegains and losses are identified and calculated and providestrict timing rules for ascertaining when foreign exchange(forex) gains and losses are recognised for tax purposes.

The TOFA legislation may apply to bank accounts and loansdenominated in foreign currency if the accounts and loanswere established, entered into, re-financed or varied on orafter 1 July 2003. Certain exemptions may apply wherespecific conditions are met. Individuals who are consideredtemporary residents however, are not subject to these rules.

Before becoming a resident

Anyone contemplating becoming a resident ofAustralia should always seek specific advice regarding theapplication of Australias tax rules and planning opportunities.

Overview of Australianemployment law


Australian employment law An introduction

Broadly speaking, Australian employment law is derivedfrom the following sources:

the common law, notably the employment contract andimplied duties imposed on employers and employees

the statutory and regulatory framework

industrial instruments, such as modern awards andenterprise agreements.

The common law

The common law is a primary source of obligations inemployment in Australia. The most obvious source ofobligations at common law arises from the contract ofemployment. A contract of employment (whether writtenor oral) governs every employment relationship in Australia.

The employment contract involves the employer offeringand the employee accepting employment with the rights andduties associated with that relationship. The following fourthings must exist before there is an establishedemployment contract:

offer

acceptance

consideration

an intention to create legal relations.

An employment contract need not be in writing, though it ishighly recommended.

A written employment contract ought to address a rangeof issues which will vary depending on a range of factors,including but not limited to the:

nature of the employment relationship

employees role and seniority

manner which the relationship can be terminated

employers requirements, including confidentiality,intellectual property and restraints on the activities ofthe employee both during and after employment.

If used effectively, a written employment contract providesa mechanism by which the parties relationship may beeffectively set down, governed and measured.

The importance of having a written and up-to-dateemployment contract has become more significant over thepast few years, following several recent developments in theway courts approach cases concerning disputes over partiesobligations, rights and entitlements in an employment context.

The statutory andregulatory framework

Australia has a two-tiered Federal and State industrialrelations framework. There are many Federal and Statelaws which affect the terms of an employees employment.

On 27 March 2006, the Australian statutory frameworkchanged dramatically, with the commencement of the FederalGovernments Workplace Relations Amendment (WorkChoices) Act 2005 (Cth), known commonly as WorkChoices.WorkChoices greatly extended the coverage of the Federalindustrial relations system.

On 1 July 2009, the statutory framework again changed whenit was replaced by the new "Fair Work" system, with thecommencement of the Labor Federal Governments Fair WorkAct 2009 (Cth) (FW Act). Most of the legislative changescommenced on that date, while the remainder (including10 National Employment Standards and a system of modernawards) commenced on 1 January 2010.

An employer will be subject to predominantly either theFederal or State industrial relations system, depending onwhether they fall within the coverage provisions of theFederal or relevant State legislation. Importantly, mostemployers will be covered by the Federal system.

The following employees (and their employers) are coveredby the Federal system:

employees employed by a trading, financial or foreigncorporation operating in Australia

employees employed in the Northern Territory and theAustralian Capital Territory

following the referral of powers by all Australian States(other than Western Australia), employees in thosereferring States employed by most other employers(including sole traders, partnerships, charities, communityservice organisations and other non-profit organisations).

Those employers covered by the Federal system are callednational system employers.

Australian State legislation continues to regulate employerswho are not national system employers this includespartnerships or sole traders in Western Australia, and certainemployers in referring States who are specifically excludedfrom coverage under the Federal system, such as judicialofficers and senior public servants.

Certain State legislation in Australia continues to apply to allemployers in relation to specific areas of their employeesemployment, including occupational health and safety andworkers compensation.


The Federal statutory framework

Fair Work Act

From 1 July 2009, the FW Act regulates "national system"employers and employees.

Some of the key features of the new industrial relationssystem introduced by the FW Act are:

10 new National Employment Standards (NES) which arestatutory minimum terms and conditions of employment(effective from 1 January 2010).

A new system of modern awards (effective from 1 January2010) which are quasi statutory instruments designed toconsolidate and replace the previous complex system ofmultiple Federal Pre-reform awards and NotionalAgreements Preserving State Awards (NAPSAs). Theseprovide additional minimum terms and conditions for thoseemployees covered by the modern awards.

A new institutional framework for the administration of thenational workplace relations system and new bodies toadminister the system Fair Work Australia (FWA) andthe Fair Work Ombudsman.

New good faith bargaining requirements for employers,employees and unions to follow when negotiating newenterprise agreements, new types of enterpriseagreements, and new requirements for enterpriseagreement content and approval.

A new test which requires that each employee covered byan enterprise agreement must be better off overall incomparison to the minimum entitlement provided under anapplicable modern award (the BOOT test).

Broader rights for unions to enter workplaces, and accessinformation pertaining to employees, including the right toenter a workplace and hold discussions with employeeswho are employed under individual agreements orcovered by non-union agreements, and rights to apply toFWA for access to non-union member employee records.

New business transfer rules, which cover a broader scopeof activities than previously applied including outsourcing,insourcing and transfer of employment to an associatedentity of the employer within 3 months of termination ofemployment. Industrial instruments applicable totransferring employees (including modern awards andenterprise agreements) will transmit to the new employerand will now apply until they are replaced by anotherindustrial instrument (rather than the maximum 12 monthtransmission period under WorkChoices). Additionally,transmitted instruments will apply to the new employersemployees who are hired after the transfer of businessand performing the same work alongside thetransferring employees.

New and expanded General Workplace Protectionscovering not only freedom of association rules butalso discriminatory or wrongful treatment, coercion,misrepresentation, unlawful termination and shamcontracting arrangements.

Broader unfair dismissal coverage and a more informalunfair dismissal process with an emphasis on re-instatement. A new small business fair dismissal codefor Small Business em

Documents

Guide Business 2011