Simone Lawson
The phrase carrying on a business in Australia is a threshold requirement for a variety of Australian legislation, including the Corporations Act 2001, Privacy Act 1988, and the Competition and Consumer Act 2010. This topic is fundamental in determining a foreign entity's obligations. While the term may seem straightforward, there is a diverse range of legal definitions and nuances that determine if a business is operating within Australia and what its obligations are. This is especially true in the evolving landscape of digital business practices, where the grey area of whether certain Australian laws apply to foreign businesses is expanding.
| Characteristics | Values |
|---|---|
| Legal definition | Diverse range of legal definitions that determine if a business is operating within Australia |
| Foreign company registration requirement | Must be registered with the Australian Securities and Investments Commission (ASIC) |
| Corporations Act 2001 | A body corporate is deemed to be carrying on a business if it administers, manages, or otherwise deals with property in Australia |
| Single transactions | May amount to carrying on a business if they are intended to be repeated |
| Intention | When a company intends to make a profit, they are presumed to be carrying on a business |
| Repetition and regularity | The degree of repetition and regularity of a company's activities will be relevant when determining whether a company carries on a business |
| Purpose and prospect of profit | Critical in determining whether a company is carrying on a business |
| Nature of activities | The nature of a company's activities and whether they have a purpose for profit will be considered |
| System, repetition, and continuity | System, repetition, and continuity of activities in a particular jurisdiction may not be essential to constitute carrying on a business in Australia |
| One-off events | A one-off event in a jurisdiction has been held to be enough to constitute carrying on a business in that jurisdiction |
| Foreign entity considerations | Having a representative in Australia with authority to bind the entity, appointing a representative whose activities would be regarded as forming part of the entity's activities, exercising a significant degree of control over the activities of any agent or representative in Australia, contributing to the costs of running an office in Australia, employing staff in Australia, or paying or contributing to the salaries of staff employed in Australia by an agent or representative |
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What You'll Learn
Registration requirements for foreign companies
Foreign companies can establish a business presence in Australia in several ways, including as a proprietary company, registered foreign company, or representative office. Here are the registration requirements for each option:
Proprietary Company (Pty Ltd)
A Pty Ltd in Australia must meet the following requirements:
- Have at least one shareholder, but no more than 50 non-employee shareholders.
- Appoint at least one director who is an Australian resident. If a secretary is appointed, they must also be an Australian resident.
- Provide limited liability to shareholders, meaning they are liable for any unpaid amount on their shares if the company is wound up.
- Comply with restrictions on fundraising activities, such as not being able to raise funds from the public.
Registered Foreign Company
Foreign companies that wish to conduct business in Australia without creating a separate Australian entity can register directly with the Australian Securities and Investments Commission (ASIC) as a registered foreign company. This option allows the company to operate as an extension of the parent company rather than a separate legal entity. To register, companies must:
- Confirm the company name and verify its availability in Australia.
- Prepare supporting documents, including Form 402 - Application for Registration as a Foreign Company, a certificate from the company's home jurisdiction confirming its registration, and a certified copy of the company's constitution.
- Display the company's name and other relevant information outside every office and place of business that is open to the public.
- Lodge financial statements with ASIC annually.
- Comply with ongoing obligations, such as maintaining a registered office in Australia that is open during specified hours and is staffed by a company representative.
Representative Office
Foreign companies that want to explore the Australian market without conducting business activities may establish a representative office. This option allows companies to promote their products and identify potential customers without generating income. To set up a representative office, companies must:
- Secure a physical space to serve as the representative office in Australia.
- Register with the Australian Taxation Office (ATO) if employing staff in Australia.
Subsidiary or Branch Office
Foreign companies that are considered to be "carrying on a business" in Australia may need to establish a local subsidiary company or set up a branch office. A subsidiary company is a separate legal entity that is subject to local corporate laws and financial reporting requirements specific to its Australian operations. To establish a subsidiary, companies must:
- Incorporate locally by submitting an application with ASIC, including appointing an Australian resident director and registering to receive an Australian Company Number (ACN).
- File annual statements detailing shareholders, directors, and other pertinent information.
To set up a branch office, foreign companies must complete an application form with ASIC, providing certified copies of their incorporation documents. Branches are expected to comply with Australian regulations and tax obligations and maintain a local office during specified hours.
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The legislative context of the business
The legislative context of doing business in Australia is a complex and evolving topic, with a diverse range of legal definitions and considerations. The Corporations Act 2001 is a key piece of legislation that provides a clear framework for businesses operating in the country. According to the Act, a foreign company must not carry on business in Australia unless it is registered as a foreign company or has applied for registration. This Act defines "carrying on a business" as having a place of business in Australia, such as a permanent office, establishing a share transfer or registration office, or administering, managing, or dealing with property in Australia.
Additionally, the Privacy Act 1988 and the Competition and Consumer Act 2010 (including the Australian Consumer Law) are other pieces of legislation that use the term "carrying on a business in Australia" as a threshold requirement. The evolving digital business landscape has expanded the grey area of whether certain Australian laws apply to foreign businesses, as data and information can now easily cross borders.
Case law in Australia has also developed 'indicia' to indicate whether an entity is "carrying on a business". These include factors such as the nature and purpose of a company's activities, the prospect of profit, the degree of repetition and regularity, and the intention to carry on a business. A one-off event in a jurisdiction can also be considered carrying on a business if it is part of a larger business, there is an intention to engage in further activities, or it is of significant scale.
Furthermore, specific considerations apply to foreign entities conducting business in Australia. Foreign companies must register with the Australian Securities and Investments Commission (ASIC) to operate legally in the country. Failure to do so can result in legal offences. Foreign entities may be considered to be carrying on a business in Australia if they have a representative with the authority to bind the entity, appoint an agent whose activities are considered part of the entity's activities, or exercise control over the activities of any agent or representative in Australia.
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Intention to carry on a business
The term "carrying on a business" may appear straightforward, but there is a diverse range of legal definitions that determine if a business is operating within Australia and what its obligations are. The Corporations Act 2001 (“Corporations Act”) provides clear definitions of what constitutes “carrying on a business”.
A company intending to make a profit is presumed to be carrying on a business. The degree of repetition and regularity of a company’s activities will be relevant when determining whether a company carries on a business. Single acts or transactions may amount to carrying on a business if they are intended to be repeated.
A foreign company (i.e. a body corporate in an external Territory, or outside Australia) carrying on a business in Australia must be registered with the Australian Securities and Investment Commission (ASIC). If a foreign company fails to register with ASIC, they risk committing an offence under Australian law.
A body corporate carries on business in Australia under the Corporations Act 2001 (Cth) (Corporations Act) if it: has a place of business in Australia (such as a permanent office); establishes or uses a share transfer office or share registration office in Australia; or administers, manages or otherwise deals with property situated in Australia as an agent, legal personal representative or trustee, whether by employees or agents or otherwise.
With the ever-evolving landscape of digital business practices, the grey area of whether certain Australian laws apply to foreign businesses is expanding.
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Nature of company activities
The nature of a company's activities is a key factor in determining whether it is "carrying on a business" in Australia. The term "carrying on a business" may seem straightforward, but there is a diverse range of legal definitions that determine if a business is operating within Australia and, consequently, what its obligations are.
In general, when an entity 'carries on a business', it engages in regular business activities. The Corporations Act 2001 (Cth) provides clear definitions of what constitutes "carrying on a business" and what does not. According to the Act, a body corporate is deemed to be carrying on a business in Australia if it administers, manages, or otherwise deals with property situated in Australia, as an agent, legal personal representative, or trustee, whether by employees or agents. This includes establishing or using a share transfer or share registration office in Australia.
The degree of repetition and regularity of a company's activities is also relevant. Single acts or transactions may amount to carrying on a business if they are intended to be repeated. It has been held that carrying out an activity 5 or 6 times is enough to constitute carrying on a business. Other activities that may result in a foreign entity carrying on business in Australia include having a representative in Australia with the authority to bind the entity, appointing a representative whose activities would be regarded as forming part of the entity's activities, exercising significant control over the activities of any agent or representative in Australia, contributing to the costs of running an office in Australia, and employing staff in Australia.
The purpose and prospect of profit are also critical factors. The increased commercial nature of conduct increases the likelihood of a company carrying on a business. Additionally, a company with an intention to make a profit is presumed to be carrying on a business.
It is important to note that certain activities, on their own, are not sufficient to be deemed carrying on a business in Australia. These include maintaining a bank account and conducting isolated transactions completed within 31 days.
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Repetition and regularity of activities
The degree of repetition and regularity of a company's activities is a key factor in determining whether it is carrying on a business in Australia. While there is no one-size-fits-all definition, case law in Australia has developed 'indicia' that help clarify the concept. For instance, a company may be deemed to be carrying on a business in Australia if it engages in regular business activities, such as establishing a physical presence or conducting regular transactions.
The Corporations Act 2001 (Cth) provides some clarity on this matter. According to the Act, a body corporate is considered to be carrying on a business in Australia if it administers, manages, or deals with property situated in Australia, regardless of whether this is done through employees or agents. Additionally, the nature of a company's activities and their purpose for profit are also important factors. The more commercial the nature of the conduct, the more likely it is that the company is considered to be carrying on a business.
It is worth noting that a single act or transaction may also amount to carrying on a business if there is an intention to repeat it. For example, it has been held that carrying out an activity 5 or 6 times is sufficient to constitute carrying on a business. Furthermore, a company with an intention to make a profit is presumed to be carrying on a business.
Other activities that may indicate a foreign entity is carrying on a business in Australia include having a representative with the authority to bind the entity, appointing a representative whose activities are considered part of the entity's activities, and exercising control over the activities of any agent or representative in Australia.
The evolving landscape of digital business practices has blurred the lines between traditional and non-traditional business activities, making it increasingly important for businesses to seek tailored advice to understand their obligations when operating in Australia.
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Frequently asked questions
The definition depends on a variety of factors and the specific commercial and legislative context relative to the individual business. Generally, when an entity 'carries on a business', they engage in regular business activities.
The Corporations Act 2001, Privacy Act 1988, and the Competition and Consumer Act 2010 are some of the laws that use the term "carrying on a business in Australia" as a threshold requirement.
Some activities that may result in a foreign entity carrying on business in Australia include having a representative in Australia with the authority to bind the entity, appointing a representative or agent whose activities would be regarded as forming part of the activities of the foreign entity, or exercising a significant degree of control over the activities of any agent or representative in Australia.
Maintaining a bank account or conducting an isolated transaction that is completed within 31 days is not considered carrying on a business in Australia.
A foreign company must not carry on a business in Australia unless it is registered as a foreign company under the Corporations Act 2001. Failure to register with the Australian Securities and Investments Commission (ASIC) may result in committing an offence under Australian law.
