Setting Up a Company in Australia
Setting up a company in Australia involves registering the business with the Australian Securities and Investments Commission (ASIC) and adhering to corporate governance rules. Companies are a popular structure for businesses seeking limited liability, increased credibility, and opportunities for growth.
ABN vs. ACN
Aspect | ABN (Australian Business Number) | ACN (Australian Company Number) |
Purpose | Identifies a business entity for taxation and government purposes. | Unique identifier for companies registered with ASIC. |
Requirement | Required for all businesses operating in Australia. | Required only for companies registered with ASIC. |
Format | 11-digit number issued by the Australian Taxation Office (ATO). | 9-digit number issued by ASIC. |
Usage | Used for GST registration, invoicing, and dealing with government agencies. | Used for company registration, legal documentation, and contracts. |
Relationship | A company may have both an ABN and an ACN. | ACN is often included within the ABN for companies. |
Advantages of Using a Company Structure
Advantages | Details |
Limited Liability | Shareholders’ liability is limited to their investment in the company. |
Tax Benefits | Companies benefit from a flat corporate tax rate, often lower than individual tax rates. |
Professional Image | Companies are perceived as more credible and established than sole traders or partnerships. |
Ease of Ownership Transfer | Shares can be sold or transferred, allowing for smooth ownership transitions. |
Access to Capital | Companies can raise funds by issuing shares or securing loans more easily. |
Separate Legal Entity | The company can own assets, enter contracts, and sue or be sued independently of owners. |
Disadvantages of Using a Company Structure
Disadvantages | Details |
Setup Costs | Higher initial registration fees and ongoing compliance costs. |
Complex Administration | Companies must comply with strict legal and financial reporting obligations. |
Reduced Privacy | Company details are publicly accessible via the ASIC register. |
Tax Complexity | Losses cannot be offset against the owner’s personal income. |
Director Responsibilities | Directors have legal duties and can be held personally liable for breaches. |
Who Sets Up the Company?
A company is typically set up by:
- Directors: Individuals responsible for managing the company’s operations. At least one director must reside in Australia.
- Shareholders: Owners of the company who hold shares. Shareholders may also be directors.
- Secretary (Optional): A company may appoint a secretary to assist with compliance and administration.
- ASIC (Australian Securities and Investments Commission): The government body responsible for company registration and regulation.
Steps to Set Up a Company
- Choose a Company Name: Ensure the name is unique and complies with ASIC guidelines.
- Decide on Company Structure: Common types include private companies (Pty Ltd) and public companies (Ltd).
- Register with ASIC: Complete the registration process and obtain an ACN.
- Apply for an ABN: Register the company with the ATO for taxation purposes.
- Draft a Constitution or Use Replaceable Rules: Outline the company’s governance framework.
- Open a Company Bank Account: Use the company’s ABN and ACN to establish a separate account.
- Comply with Legal Obligations: Maintain records, lodge annual financial statements, and fulfill tax obligations.
Typical Costs to Set Up a Company in Australia
Expense | Cost (Approximate) |
ASIC Registration Fee | $538 for registering a proprietary limited (Pty Ltd) company. |
ABN Registration | Free (if done through the Australian Business Register). |
Constitution Drafting | $200 – $1,000 (depending on whether templates or legal professionals are used). |
Professional Fees | $500 – $2,000 for accountants or lawyers to assist with setup. |
Ongoing ASIC Fees | $301 annual review fee for proprietary companies. |
Corporate Tax Rate Based on Income Level
Income Level | Corporate Tax Rate |
Base Rate Entity (< $50M turnover and meets eligibility criteria) | 25% |
All Other Companies | 30% |
When is GST Application Required?
A company must register for GST (Goods and Services Tax) if:
- Annual Turnover: The business has a turnover of $75,000 or more ($150,000 for non-profit organizations).
- Taxi or Ride-Sourcing Services: Registration is mandatory regardless of turnover.
- Voluntary Registration: Businesses can register for GST voluntarily, even if turnover is below the threshold.
Setting up a company in Australia offers significant benefits, including limited liability, tax advantages, and enhanced credibility. However, it also involves higher costs, complex compliance, and legal responsibilities. Professional advice from accountants or legal experts can ensure a smooth and compliant company formation process.