[ESTABLISHING A BUSINESS ENTITY IN AUSTRALIA]
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certain FTA partner nation, notification of the acquisition is mandatory where the acquired business is valued at more than AUD 339 million (sensitive businesses or AUD 1464 million (non- sensitive businesses). Monetary thresholds for FIRB notification are indexed annually on 1 January. A FIRB notification application involves the payment of a relevant fee, and the submission of all relevant details and documentation outlining the proposed transaction. The application must also justify why the proposed transaction is not contrary to Australian national interest. Importantly, there have been significant changes to Australia’s foreign investment framework as a result of and since the COVID-19 pandemic. These include the introduction of a new ‘Register of Foreign Ownership of Australian Assets’ and related reporting obligations on foreign persons in respect of their Australian assets. Any person or entity seeking to invest in Australian land or companies should seek legal advice regarding the relevant FIRB approvals which must be obtained. Capitalization Obligations In Australia, “thin capitalization” rules apply to: • “Outward investing entities” – being Australian entities with specified overseas investments; and • “Inward investing entities” – which are foreign entities with certain investments in Australia, regardless of whether they hold the investments directly or through Australian entities. One of the key objectives of the thin capitalization rules is to ensure that inward and outward investing entities fund their Australian operations with a sufficient amount of equity capital. This is achieved by limiting the debt deductions that inward and outward investing entities are able to claim in their annual tax
returns, which would otherwise have the effect of minimizing their Australian taxation liabilities. The thin capitalization rules can change from year to year and will only apply when an entity’s debt-to-equity ratio exceeds the allowable limits. Foreign entities which conduct business operations in Australia should seek taxation advice in respect of the thin capitalization rules. Business or Investment Visas Migration to Australia is primarily governed by the Migration Act 1994 (Cth) ( Migration Act ) and the Migration Regulations 1958 (Cth) ( Migration Regulations ). Non-Australian persons generally have a right to travel to, enter, and remain in Australia provided that they obtain an appropriate class of visa and complete the immigration clearance process. There are a broad range of visas that are available for foreign persons who wish to seek employment or commence business operations in Australia. These visa classes include: • Subclass 188 - Business Innovation and Investment (Provisional) visas A Subclass 188 Visa allows foreign persons to own, manage and conduct businesses and to conduct investment or entrepreneurial activities in Australia. A Subclass 188 Visa is generally valid for up to five years; however provisional visa holders may be able to apply for a permanent visa once certain requirements are met. The Investor stream of the provisional visa requires an investment of at least AUD2.5 million. • Subclass 400 - Temporary Work (Short Stay Specialist) visa A Subclass 400 Visa allows for foreign persons to enter and remain in Australia for the purposes of performing short-term, highly specialised work. In order to be eligible for a Subclass 400 Visa, the
ILN Corporate Group – Establishing a Business Entity Series
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