A guide to doing business in Australia v9 National

Transcription

1 A guide to doing business in Australia v9 National

2 Contents 1. Australia s Government system 4 2. Australia s legal system 5 3. Guidelines on foreign investment 7 4. Business organisation Regulation of companies Immigration Taxation Banking and financial services Employment laws Importing to Australia Government assistance for exporting Privacy Other legislation regulating business in Australia 43 For more information or advice, please contact: 45 About us v9 National

3 Executive Summary 1. Australia provides a diverse, dynamic, safe and low-risk environment in which to do business. 2. Businesses in Australia generally take the following forms: registered Australian company, registered foreign company (branch), partnership, joint venture, sole proprietorship and trust. The Australian Securities & Investments Commission is responsible for the regulation of companies in Australia. 3. Australia s foreign investment policy encourages foreign investment. The Foreign Investment Review Board advises the Treasurer on foreign investment proposals. 4. Taxes are imposed on businesses and individuals at the federal, state and local levels of government. This guide focusses on federal and state taxes. 5. Australia s dynamic economy encourages competition, efficiency and innovation. Competition in Australia is regulated by the Australian Competition and Consumer Commission. Federal legislation provides for the recognition, registration, protection and enforcement of intellectual property rights v9 National Commercial in confidence 3

4 1. Australia s Government system General The Commonwealth of Australia was formed on 1 January 1901 by an Act of British Parliament that created a federal system of government, under which powers are distributed between the federal government (Commonwealth Government) and the states. Australia is a federation of six states (New South Wales, Queensland, Victoria, South Australia, Tasmania and Western Australia) and two territories (the Northern Territory and Australian Capital Territory (ACT)). Each of the state and territory governments is empowered to govern and pass laws within their own borders, whilst the Commonwealth Government presides at a national level. The Commonwealth of Australia is a constitutional monarchy, established by a written constitution and with HRM Queen Elizabeth II as the head of state. The Governor-General, appointed by the Prime Minister of Australia, is the Queen s representative in Australia. Federal government and parliament Australia s federal government is based on a popularly elected parliament with two chambers: the House of Representatives and the Senate. Ministers appointed from these chambers form the Cabinet, an executive group which drives government policy decisions. The federal parliament has power under Australia s constitution (Constitution) to pass legislation in relation to areas of law concerning national affairs. These include defence, taxation, immigration, customs, banking, foreign affairs, and interstate and overseas trade and commerce. The federal government is formed from the political party or coalition of parties which holds a majority of seats in the House of Representatives. The Prime Minister is the leader of the majority party and the Cabinet ministry is drawn from the majority party or coalition. The federal parliament sits in Canberra, the capital city of Australia located within the ACT. Under the Constitution, the elected federal government serves a maximum term of three years after which time the government is dissolved and a new election held. Voting in federal and state elections is compulsory for all Australians aged 18 years and over. State government With the exception of Queensland, the state parliaments, like the federal parliament, consist of two chambers. Queensland, along with the Northern Territory and ACT, each has a parliament consisting of one chamber. As with the federal parliament, the party or coalition elected to hold a majority of the seats in the lower house forms the government of the state or territory. The Premier is the leader of the majority party in government. Subject to federal laws, the states and territories have power to govern and pass laws within their own borders in relation to areas such as health, education, energy, mineral resources and agriculture. Local government Local governments are responsible for regulating local community matters such as town planning, construction and maintenance of secondary roads and bridges and the development and maintenance of facilities such as community parks, recreation grounds and public libraries. Revenue is raised from rates and charges levied on local land owners or businesses operating in the locality. Local governments do not have power to pass legislation directly. They derive their authority from legislation passed by the state parliaments v9 National Commercial in confidence 4

5 2. Australia s legal system Sources of law When doing business in Australia, you must consider relevant commonwealth, state and territory and local government laws and regulations. It may also be necessary to take into account the general law developed by the courts, known as common law. Australian law comprises of: statutes passed by the commonwealth and state parliaments regulations, ordinances and other types of delegated legislation passed pursuant to power given in the statutes to authorities such as the relevant minister or some statutory authorities such as local councils the "common law" which is the body of case law originally inherited from the English courts and adopted and developed by the Australian courts. Statutes passed by the commonwealth parliament take precedence over state and territory legislation, while statute law also prevails over the common law. Federal courts Courts of law in Australia fall into the category of either federal courts or state courts. The federal court system is headed by the High Court of Australia which decides constitutional matters and is the nation's ultimate court of appeal. It decides cases of special federal significance, including challenges to the constitutional validity of laws. There are three other federal courts: the Federal Court of Australia s jurisdiction is broad, covering almost all civil matters arising under Australian federal law and some summary criminal matters, though it principally hears actions under the Australian consumer and competition and bankruptcy legislation, as well as the federal industrial laws the Family Court of Australia deals exclusively with matrimonial disputes relating to property, custody and maintenance under the family law legislation, as well as specialist cases relating to the Hague Convention on International Child Abductions and the international relocation of children by parents or guardians the Federal Circuit Court of Australia shares the functions of the Federal Court of Australia and the Family Court of Australia but deals with simpler and shorter matters. It provides a more accessible alternative to litigation in the superior courts, with jurisdiction to preside over matters of family law, bankruptcy, unlawful discrimination, consumer protection and competition, privacy, migration, copyright and industrial law. State courts and territories The highest court in each state is the Supreme Court of that state. Supreme courts have jurisdiction to decide all matters of state law (both civil and criminal). In addition, they often exercise a federal jurisdiction to deal with matters involving federal law. The supreme courts also exercise appellate jurisdiction, hearing appeals from decisions of single judges of that court. Courts known as district courts hear the more serious cases, with a judge presiding over the court to interpret and determine the law. Below the district courts are the local courts, which again hear matters of state law involving sums of money up to a prescribed limit. Local courts also hear minor criminal cases (eg traffic offences) and conduct preliminary hearings in more serious criminal matters to determine if accused persons should stand trial for the offence charged v9 National Commercial in confidence 5

6 In addition to the federal and state courts, there are a number of judicial bodies and tribunals which are strictly outside the court system but nevertheless exercise judicial or quasi-judicial powers. Generally these bodies are created or set up under state or federal statutes. The Family Court is an example of a body set up under a federal statute. At state level, using New South Wales as an example, bodies set up under that state's statutes would include the: Land and Environment Court which deals with planning and environment laws Industrial Relations Commission which handles that state's industrial matters Workers Compensation Commission which hears workers' compensation claims New South Wales Civil & Administrative Tribunal which deals with building and tenancy disputes and consumer claims Anti-Discrimination Board. Other states have similar bodies and courts v9 National Commercial in confidence 6

7 3. Guidelines on foreign investment Foreign investment policy Australia's foreign investment policy seeks to encourage foreign investment consistent with the needs of the Australian community. Inflow of capital from offshore supplements domestic savings and provides the economic stimulus for increased economic activity and employment. In addition, foreign capital provides access to new technology, management skills and overseas markets. Australia s policy towards foreign investment aims to ensure that investment from overseas is consistent with Australia s needs and will enhance the country s economic development. Government support and information The federal government and the states and territories support foreign investment in Australia. In particular, the federal government maintains a trade and investment development agency, the Australian Trade Commission (Austrade), which promotes productive foreign investment in Australia. Austrade assists foreign investors to establish and build their businesses in Australia by providing a single point of contact for all trade and investment inquiries from various locations in over 50 countries around the world. Foreign companies which engage in research and development (R&D) activities may also be eligible for certain tax incentives which are designed to encourage R&D growth and innovation in Australia. The federal government s R&D tax incentive, provides eligible companies including certain foreign companies. The tax offset for expenditure on authorised R&D activities, consists of: a 43.5% refundable tax offset for eligible R&D entities with a turnover of less than $20 million per annum, or a 38.5% non-refundable tax offset for all other eligible R&D entities, though unused offset amounts can be carried forward for use in future income years. While the offsets primarily apply to R&D activities carried out in Australia, activities conducted overseas may also be eligible for these offsets in certain circumstances. Eligible entities include: Australian companies corporations that are Australian residents for income purposes foreign companies resident in a country with which Australia has a double tax agreement and that carry on R&D activities through a permanent establishment in Australia public trading trusts with a corporation acting as trustee. The tax offset applies in relation to expenditure on core R&D activities which are experimental activities: whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that: - is based on principles of established science - proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions - that are conducted for the purpose of acquiring new knowledge (including knowledge or information concerning the creation of new or improved materials, products, devices, processes or services). We can assist you should you require more information on eligibility requirements and the R&D tax incentives generally v9 National Commercial in confidence 7

8 Regulation of foreign investment The Commonwealth Government s foreign investment framework is implemented through the Foreign Acquisitions and Takeovers Act 1975 (FATA) and the Government s foreign investment policy. The Federal Treasurer is responsible for the foreign investment framework and, under FATA reviews investment proposals, to decide if they are contrary to Australia s national interest. There is a presumption that foreign investment proposals are generally in the national interest and should occur, however, a proposal may be rejected because it is inconsistent with existing government law and policy for example, environmental regulation or competition policy, national security interests or economic development. The Treasurer can block proposals that are contrary to the national interest or apply conditions to the way proposals are implemented. When making such decisions, the Treasurer relies on advice from the Foreign Investment Review Board (FIRB). FIRB published its most recent version of the Australian Foreign Investment Policy in In accordance with this policy, FIRB will consider national security, competition, tax revenues and other Australian Government policies, the impact of the proposed investment on the general economy and the community, and the character of the investor. In particular, FIRB will consider the transparency and commerciality of the investor s operations and the investor s corporate governance practices. When should FIRB be notified? A "foreign person" (as defined in the FATA) must notify FIRB of its proposed investment in Australia. FIRB encourages prospective investors to discuss proposals with it to identify and resolve any issues before any proposal is formally submitted for approval. Sometimes proposals which do not fully comply with the policy guidelines may nevertheless be allowed to proceed subject to certain conditions. A foreign person may be either: a natural person who does not ordinarily reside in Australia any corporation, business or trustee of a trust where a non-resident individual or foreign corporation (and any associates) has 15% or more of the voting power or ownership any corporation, business or trustee of a trust where two or more non-resident individuals or foreign corporations (and any associates) have 40% or more in aggregate of the voting power or ownership. US and New Zealand entities may take advantage of higher thresholds under FATA, provided that the proposed investment is not in a sensitive sector, as defined by the FATA. Sensitive sectors include: media telecommunications transport (including airports, port facilities, rail infrastructure, international and domestic aviation and shipping services provided within, or to or from, Australia) the supply of training or human resources, or the manufacture or supply of military goods or equipment or technology to the Australian Defence Force or other defence forces the manufacture or supply of goods, equipment or technology able to be used for a military purpose the development, manufacture or supply of, or the provision of services relating to encryption and security technologies and communications systems the extraction of (or the holding of rights to extract) uranium or plutonium or the operation of nuclear facilities v9 National Commercial in confidence 8

9 The table below sets out the circumstances in which FIRB must be notified FIRB of proposed investments in Australia: Proposed investment Non-US and Non New Zealand Investors US and New Zealand investors Purchase of residential real estate, accommodation facilities or vacant urban real estate, irrespective of size or value (subject to certain exemptions, such as a purchase of a residential property by an intending migrant with final approval from the immigration authorities for permanent residence) Purchase of all vacant non-residential land, irrespective of size or value Acquisition of an interest in an existing Australian business Take-over of an offshore company with Australian subsidiaries or assets Yes Yes Yes, if the target business has assets valued at more than $248 million Yes, where Australian subsidiaries or assets exceed $248 million Acquisition of shares or units in Australian urban land corporations Yes or trust estates Investments in the media sector of 5% or more Yes Yes Purchase of heritage listed, developed non-residential commercial Yes No real estate valued at $5 million or more Purchase of developed non-residential commercial real estate Yes, if valued at $54 million or more and where the property is not heritage listed The relevant monetary thresholds are indexed annually on 1 January. Yes Yes Yes, if the target business has assets valued at more than $1.078 billion, or $248 million if in a sensitive sector Yes, where Australian subsidiaries or assets exceed $1.078 billion, or $248 million if in a sensitive sector Yes Yes, if valued at $1.078 billion or more Temporary residents Temporary residents must seek FIRB approval before acquiring residential real estate in Australia. Temporary residents may apply to buy vacant land on which to build (subject to development conditions) new dwellings and/or an established (second hand) dwelling to be used as their residence in Australia. Where the government provides approval to buy an established dwelling, it will be subject to a condition that the temporary resident sells the property when it ceases to be their residence. Applications to buy established dwellings for investment purposes will not be approved. Direct investment by foreign governments Direct investments by foreign governments which represent an interest of 10% or more must be submitted for FIRB approval regardless of the value of the investment. In addition, interests below 10% must also be notified where the investment can be used by the acquiring foreign government or related entity to influence or control the business, for instance: acquisitions of shares with preferential, special or veto voting rights v9 National Commercial in confidence 9

10 the ability to appoint directors or asset managers contractual agreements including agreements with respect to loans and the provision of services investments in preparation for a takeover bid building or maintaining a strategic or long-term relationship with a target entity enforcement of a security interest over a business assets or shares. FIRB will consider whether the investment is of a commercial nature or may be undertaken for broader political or strategic reasons which are contrary to Australia s national interest. FIRB will assess whether the proposed investor s governance arrangements could enable actual or potential control by a foreign government, including through funding arrangements. Timing for approval A statutory 30-day examination period and additional 10-day notification period applies to FIRB proposals once formally lodged. If the government does not meet this timeframe, it will lose the ability to block the proposed investment, or to place any conditions on it. However, the examination period can be extended by up to 90 days for complex cases through the government issuing an interim order. Other restrictions on foreign investment Some states have also introduced measures to regulate foreign investment within the particular state, particularly in relation to investment in the mining, gambling, insurance and liquor industries. Before making a decision to invest, an intending investor should consult us to find out the requirements of the relevant state s authority v9 National Commercial in confidence 10

11 4. Business organisation Business structures Businesses in Australia generally take the following forms: registered Australian company registered foreign company (branch) partnership joint venture sole proprietorship trust. Of these six types of business structure, the most popular types used by foreign companies entering the Australian market are the establishment of a registered Australian company (ie a subsidiary of the foreign company) or the registration of the foreign company to carry on business in Australia (ie a branch of the foreign company). Most foreign companies choose to form a local subsidiary company to operate their Australian business. This is primarily because a subsidiary company is a separate legal entity from its parent company and, accordingly, the parent company will not normally be liable for the subsidiary's debts or obligations unless the parent company has agreed to guarantee the subsidiary's debts in some form. Types of company In Australia, companies are classified according to whether they are public or proprietary (private) companies. The following types of companies can be registered with Australia s corporate regulator, the Australian Securities & Investments Commission (ASIC): Proprietary companies: - limited by shares - unlimited with share capital. Public companies: - limited by shares - limited by guarantee - unlimited with share capital - no liability companies. The most common type of company in Australia is a company limited by shares, which limits a shareholder s liability to the face value of the shares. A limited liability company will usually be required to use the word Limited or abbreviation Ltd in its name. A proprietary company must also include the word Proprietary or abbreviation Pty in its name. ASIC will assign an Australian Company Number (ACN) to Australian companies, and an Australian Registered Body Number (ARBN) to a foreign company registered to carry on business in Australia. A company s ACN or ARBN must be displayed on all of the company s public documents and negotiable instruments v9 National Commercial in confidence 11

12 Before establishing an Australian company it is necessary to decide whether the company will be a public company or a proprietary company. Proprietary company A "proprietary company" is one whose constituent document (known as the "constitution"): restricts the rights to transfer its shares limits the number of its non-employee shareholders to 50 or less prohibits any fundraising activity that would require the company to lodge a prospectus with the ASIC (ie the company may not offer shares to, or borrow money from, the public). A proprietary company must have at least one director who must be ordinarily resident in Australia and may have a company secretary, but is not obliged to do so. If it does have one or more company secretaries, at least one of them must ordinarily reside in Australia. Large or small proprietary companies Proprietary companies are also defined under the Corporations Act 2001 (Cth) (Corporations Act) as being large or small. A proprietary company is defined as large for a financial year if it satisfies at least two of the following: the consolidated revenue for the financial year of the company and any entities it controls is $25 million or more the value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $12.5 million or more the company and any entities it controls have 50 or more employees at the end of the financial year. A proprietary company that does not meet at least two of the above criteria is considered small. Public company A "public company", on the other hand, is not restrained from offering shares to, or borrowing money from, the public. If the public company has its shares listed on the Australian Securities Exchange (ASX), its shareholders can freely transfer their shares on the stock market provided it complies with the ASX listing rules. The public company must also comply with the prospectus provisions in the Corporations Act when offering shares or raising finance from the public. Public companies must prepare and lodge a financial report and a directors report with ASIC for each financial year, unless the company is listed on the ASX, and it has lodged its financial reports with the ASX. The accounts must be audited unless ASIC grants relief. The choice between a proprietary company and a public company usually depends on whether the company intends to offer shares or debentures to the public. If this were the intention, a public company structure must be used. Generally, a proprietary company will be the more appropriate structure for a new business; however, it is a relatively simple procedure to convert a proprietary company into a public company at any time. Establishing a company Registration of a new company with ASIC, once the details of the company have been decided and the officers have signed their consents to act, can be completed in less than 24 hours. To incorporate a subsidiary company in Australia, a foreign company must: decide on the type of company decide on a name for the company appoint officers (ie directors and a company secretary (if required) v9 National Commercial in confidence 12

13 decide how many shares will be initially issued in the new company and for what value advise ASIC of the new company s registered office, to which official correspondence will be posted advise ASIC of the new company s principal place of business advise ASIC who the new company s shareholder(s) will be. An Australian company must have at least one shareholder. However, there are no minimum share capital requirements in Australia, and a company can be established with as little as one share with a value of $1. Timing Once the above information is collected, an application to establish a company can be made immediately with ASIC. Ongoing reporting requirements and costs Small foreign-owned proprietary companies that are not part of a large group are generally exempt from auditing and lodging financial statements with ASIC. Consequently, ongoing reporting requirements for such a company would be generally restricted to keeping ASIC informed of any changes to the company and the only ongoing cost of maintaining the company is ASIC s annual review fee. Administration Depending on the size of the company, an Australian company may have only one director, or it may have a board of two or more directors. The head of the board of directors is called the Chairperson or Chair. The Chairperson will provide leadership for the board of directors and will chair at general meetings of the company. The day-to-day running of the company will generally fall to a general manager or chief executive officer. For tax purposes, the company must appoint a public officer within three months of the company commencing to carry on business or first earning income in Australia. The public officer is answerable for everything that is required to be done by the company for tax-related purposes and, if in default, is liable for the same penalties. The public officer is not, however, personally liable for payment of tax due by the company. Employees When incorporating a new Australian company (subsidiary) to carry on its business in Australia, a foreign company will generally require that the Australian employees be employed by the subsidiary and not by the foreign parent company. Consequently, the subsidiary would be responsible for complying with Australian industrial relations laws. Legal responsibility The subsidiary is a separate legal entity to the parent company with legal responsibility for its own actions, which offers the parent company some protection against legal risk. If the parent company establishes the subsidiary as a company limited by shares, the parent company s liability as shareholder of that company would be limited to the face value of those shares. However, under the Corporations Act, the parent company will be liable for the debts of the subsidiary if the subsidiary were to trade while insolvent, and if it can be shown that the parent company should have known that the subsidiary was insolvent. Goods and services tax The subsidiary will need to register for goods and services tax (GST) and pay GST in relation to supplies it makes in Australia v9 National Commercial in confidence 13

14 Establishing a branch A foreign company can establish a branch in Australia by registering with ASIC as a foreign company carrying on business in Australia. It must appoint a local agent for its Australian branch office who will be responsible for ensuring the foreign company s compliance with the Corporations Act. The foreign company must determine that the business name it wishes to use in Australia is available, reserve that name with ASIC and assemble supporting documentation about the foreign company (translated into English, if necessary), such as: a current certificate of registration or a document of similar effect a certified copy of the foreign company s constitution or equivalent a memorandum of appointment or a power of attorney that is executed on behalf of the foreign company, stating the name and address of an agent who is an individual or a company, resident in Australia and authorised to accept service of process and notices on behalf of the foreign company if the foreign company s directors include directors who are resident in Australia and members of an Australian board of directors of the foreign company, a memorandum executed on behalf of the foreign company stating the powers of those directors. This will involve re-stating the directors' powers under the foreign company s constitution (if any). Registered office In addition to appointing a local agent, the foreign company must maintain a registered office in Australia. Timing Preparing the supporting documentation for this registration can be a time-consuming process. Once the documentation is assembled and the application is lodged, processing may take up to 28 days. Ongoing reporting requirements and costs Once the foreign company is registered it is required to lodge with ASIC, at least once every calendar year and at intervals of not more than 15 months: a copy of its balance sheet, profit and loss statement and cash flow statement any other documents it is required by law to lodge in its country of origin and pay ASIC the prescribed lodgement fee. In addition, the foreign company must notify ASIC when certain company details change. Employees Australian employees will be employed by the foreign company, and the foreign company will be responsible for complying with Australian industrial relation laws. Legal responsibility The foreign company has full legal responsibility for the actions of the Australian branch and can sue and be sued in Australia. Goods and services tax As the foreign company is carrying on an enterprise in Australia, it will be required to register for GST, which is currently charged at 10% on supplies made by an enterprise carried on in Australia v9 National Commercial in confidence 14

15 Joint ventures If a foreign investor wishes to carry on a specific project in Australia with one or more parties, it may be appropriate to enter into a joint venture arrangement. This may take the form of an incorporated joint venture or an unincorporated joint venture. An incorporated joint venture is one in which venture participants are shareholders of a separate corporate entity formed for the purpose of the joint venture. That is, each party subscribes for shares in a joint venture company. There will usually be shareholder agreements in place between the participants to govern their rights and obligations in relation to each other. The main benefit of parties using an incorporated joint venture structure, instead of an unincorporated structure, is the limited liability enjoyed by the parties as shareholders of the joint venture company. In the case of an unincorporated joint venture, as the name implies, the joint venture is conducted not by a corporate entity but by the participants directly in accordance with the contractual arrangements made between them. A joint venture is generally used as a business structure where the parties come together for a specific project, such as a mining venture or a property development. There are important taxation considerations for the participants of a joint venture arrangement. The individual participants of a joint venture are entitled to lodge separate tax returns and to adopt differing taxation strategies in relation to the income and expenses of the joint venture business to suit their individual circumstances. Partnerships Another way parties may come together to do business in Australia is by forming a partnership. A partnership is not a separate entity but rather an association of two or more individuals or companies which decide to carry on business together with a view to sharing profits. The parties will usually prepare and sign a partnership agreement to govern their relationship with each other. However, it is not necessary to sign a written agreement in order to form a partnership. The partnership agreement will contain the essential terms of the agreement between the partners. The partnership will also be governed by the partnership acts (of the relevant states) and by common law. Partnerships are (generally) limited to 20 partners. Professional firms are exempt from this limitation. Each partner is jointly and separately liable for the debts of the partnership. Except in the case of what are called "limited partnerships", each partner s liability for the debts of the partnership is unlimited. Limited partnerships Alternatively, parties can form a limited partnership where the liability of some (but not all) of the partners is limited. These partnerships recognise two different classes of partner, "limited partners" who are like shareholders of a company in the sense that their liability for the debts of the partnership is limited to a specified sum contributed by them to the partnership, and "general partners" whose liability is unlimited and whose role is to manage the business. The legislation does not permit limited partners to take an active part in the management of the business. If they do so, they jeopardise their privileged position of limited liability. These types of partnerships are not as common as ordinary partnerships. Trusts Where a business is conducted by means of a trust, a trustee (which is usually a limited liability company) conducts the business and carries on the trading activities for the benefit of the beneficiaries of the trust. The trustee has certain duties in relation to the beneficiaries imposed on it by state legislation, the common law and the terms of the trust deed itself. Certain types of trusts (known as "discretionary trusts") are widely used by individuals as a legitimate means of minimising income taxation. By distributing the income amongst the beneficiaries of a discretionary trust (usually members of a single family) it is possible to take advantage of tax-free thresholds or lower marginal tax rates to achieve a lower net income tax liability than would otherwise be the case v9 National Commercial in confidence 15

16 Trusts are also used in relation to certain asset protection schemes to reduce the powers of a trustee in bankruptcy or a liquidator. Another common form of trust used as an investment vehicle is the "unit trust" where unit holders can invest capital by subscribing for "units" issued by the trustee. The units confer on the holder a proportionate entitlement to share in the overall assets of the trust. Some unit trusts can be listed on a stock exchange and the units traded like shares in a publicly listed company v9 National Commercial in confidence 16

17 5. Regulation of companies The Corporations Act and ASIC In Australia, ASIC is responsible for the regulation of companies. Companies each have a place of registration (ie the Australian state or territory within which they are originally registered). The administration of companies is regulated by ASIC nationally under uniform federal legislation, including the Corporations Act. ASIC s role is to ensure that companies and their directors comply with the rules and laws set out in the Corporations Act and other related legislation as well as the common law. ASIC has significant investigative powers to assist in performing its functions. For instance, it can conduct special investigations into the affairs and dealings of a company and it can recommend criminal charges against company officers where its investigations have revealed serious breaches of the law. The Corporations Act contains a set of rules for the internal management of a company (for example, rules relating to the conduct of meetings). Some of these rules are mandatory for all companies. Other rules in the Corporations Act are replaceable rules. These replaceable rules do not apply to: a single shareholder/single director company if the member/director is the same person a company that had a constitution before the introduction of the replaceable rules regime (1 July 1998) and has not repealed it. A company does not need a separate constitution of its own but can simply rely on the rules contained in the Corporations Act. Many companies, however, adopt constitutions to displace, modify or add to the replaceable rules. Company Identification Under the Corporations Act, all Australian companies and other registered bodies (including registered foreign corporations) are issued with identifying numbers (see page 15) which must be displayed on all public documents and negotiable instruments where the company's name first appears. Disclosure Requirements The Corporations Act requires both local subsidiaries and branch offices of foreign companies to provide ASIC with information on a continuous and regular basis. Any changes in the company's details including changes in its directors, secretaries, principal officers, registered office, branch office, shareholding or when the company issues or creates certain kinds of charges must be notified. Changes to company details A company must notify ASIC within the prescribed period of any changes to its details. The prescribed period for notification differs based on the changes made. Generally, however, the prescribed period is 28 days from the date of the change. Any delay in notifying ASIC within the relevant prescribed period may attract late fees from ASIC. The Corporations Act also provides an annual company review procedure. ASIC sends each company an annual statement and invoice within 14 days of the company s review date (which is the anniversary of the company s incorporation date). This statement sets out the company s details as recorded by ASIC. If the company s details are different to those in ASIC s statement, then the company must notify ASIC of the correct details within 28 days of the issue of the statement. This does not diminish the company s obligation to notify ASIC of changes within the prescribed period of the change actually being made. If the statement is correct, no further action is required other than payment of ASIC s annual review fee v9 National Commercial in confidence 17

18 Financial information The level of financial reporting required by the company will depend on whether it is large or small. Large proprietary companies must prepare and lodge a financial report and a directors report for each financial year. Additionally, the company s accounts must be audited unless ASIC grants the company relief. In contrast, small proprietary companies are generally not required to prepare and lodge financial reports unless they are controlled by a foreign company. Public and large proprietary companies must have their financial reports audited and lodged with ASIC within four months after the end of the company s financial year. Financial Services Reform Amendments to the Corporations Act by the Financial Services Reform Act 2001 (Cth) have introduced a new framework for the regulation of the financial services industry. The reforms create a uniform licensing and disclosure regime for financial service providers. Company Directors and Officers Who can act as director? Only an individual who is at least 18 years old can be appointed as a director of an Australian company. If a company has only one director they must ordinarily reside in Australia. If a company has more than one director, at least one of the directors must ordinarily reside in Australia. An individual must provide written consent to the company to be appointed as a director. The company must keep the consent in its register and notify ASIC of the appointment. A person will need the court s permission to be a director if the person has been convicted of certain offences or is otherwise disqualified from acting as a company director. Duties of directors The directors of a company are responsible for managing the company s business. The Corporations Act provides that, as a replaceable rule, directors may exercise all the powers of the company except a power that the Corporations Act or the company s constitution (if any) requires the company to exercise in a general meeting. Under both the Corporations Act and the common law, directors owe fiduciary duties to their company. Broadly speaking, directors have a duty to act honestly, in good faith and in the best interests of the company as a whole. Such duty includes the obligation to act in the best interests of the company itself, its shareholders as a whole and in some instances its present and future creditors. Directors also have a duty to use their powers for proper purposes. Directors have a duty to prevent the company trading while it is unable to pay its debts. If the company is being wound up, directors have a duty to report to the liquidator on the affairs of the company and to help the liquidator (by giving the liquidator any records that the director has). Directors are required to show standards of skill, care and diligence of a "reasonable" director who possesses similar qualifications and experience to them. Breach of these duties may result in personal liability for the directors, not only through penalties under the Corporations Act but also by way of compensation to the company and (possibly) others for losses or damages suffered as a result of the breach of duty. In some instances, these duties may extend beyond just directors to other company officers. If the case warrants, the courts may go behind the corporate structure or "veil" to give redress to the company's shareholders and creditors by making those involved in the management of the company personally responsible. This may occur, for example, when the company incurs debts while insolvent and at that time the officers (or those who do not officially hold the office of director but act as shadow directors) knew or ought reasonably to have known that the company would be unable to repay those debts when they fell due v9 National Commercial in confidence 18

19 Other obligations There are numerous other obligations on directors and senior officers under the Corporations Act. These include the obligations to refrain from improperly using one s position as a director or any information obtained through their position as a director for the purpose of making a gain for anyone other than the company, or to cause detriment to the company. Breach of such obligations may result in the directors and officers having to pay substantial fines. Besides the existing civil penalties, criminal offences will arise where a director has acted dishonestly or recklessly which may result in imprisonment. However, in some circumstances, the business judgment rule will provide relief from personal liability where it can be established that the director has made their decision in good faith for a proposed purpose and they reasonably believe that their judgment is in the best interests of the corporation. In addition, directors and senior officers may be personally liable for the company's contravention of laws in a number of different areas. Laws for the protection of the environment, occupational health and safety laws, competition and consumer and fair trading laws are just some examples. Shares and shareholders The shareholders of a company own the company. However, the company has a separate legal identity and the company s assets belong to the company. Shareholders of a company are not liable (in their capacity as shareholders) for the company s debts. As shareholders, their only obligation is to pay the company any amount unpaid on their shares if the company calls upon them to do so. However if the shareholder is also a director, this limitation of liability is affected by the laws relating to directors liability for the company s debts. An individual may become a shareholder of a company in various ways. These include the individual being listed as a shareholder of the company in the initial application for registration lodged at ASIC, the company issuing shares to the individual or the individual buying shares in the company from other existing members. A shareholder may cease to be a shareholder in circumstances where they sell all of their shares in the company to another person, the company buys back all of its shares or ASIC cancels the company s registration. A company may have different classes of shares. These different classes may have varying rights and restrictions attached to the shares in the class including, for example, voting rights, dividend rights, redemption rights and rights to receive assets of the company on winding up. Signing company documents Subject to the terms of the company s constitution, a company may execute a document by having it signed by: two directors of the company a director and the company secretary for a company with a sole director who is also the sole secretary, that director. Companies are not required to have a common seal. If the company does have a seal, it may be used to execute a document. Normally, two directors or a director and a secretary of the company must witness affixation of the common seal. Companies in financial trouble If a company experiences financial problems, the board of directors may consider appointing an administrator to take over the operations of the company. An administrator will determine if the company s creditors and the company can work out a solution to its problems. If no agreement can be reached, the company may be wound up. A receiver may be appointed by a court or under an agreement with a secured creditor to receive some or all of the assets of a company. This may arise in circumstances where an amount owing to a secured creditor is overdue v9 National Commercial in confidence 19

20 A company may be wound up by an order of the court or by a special resolution of the members of the company. A liquidator administers the winding up of the company and its main functions include: taking possession of the company s assets determining debts owed by the company and paying creditors distributing any assets of the company left over (after paying creditors) to members having the company deregistered v9 National Commercial in confidence 20

21 6. Immigration General Australia s federal Department of Immigration and Border Protection administers migration to, and temporary entry into, Australia. The Government considers that Australian business must have access to overseas skills, contacts and technology, while there are also advantages in overseas companies gaining access to Australia s skilled labour, market and natural resources. The migration policy is non-discriminatory on grounds of race, colour, sex, religion and national or ethnic origin. The policy has been formulated with regard to national economic and social interests. Multiculturalism is actively encouraged. The laws relating to immigration and entry of non-citizens into Australia are to be found in the Migration Act 1958 (Cth) and in the Migration Regulations 1994 (Cth). Immigration policy allows entry for permanent residence of people with close family ties in Australia, people with capital and business expertise or those with other skills or qualifications or qualities beneficial to Australia. The skill and business categories comprise around two thirds of the program numbers and family categories around one third. The immigration policy also assists others who qualify under refugee or special humanitarian programs. There are a number of visa and migration options available for: professionals and other skilled workers seeking work or business in Australia employer sponsored workers current or former Australian permanent residents, or former Australian citizens people with close family ties in Australia tourists, working holiday, people transiting, visiting family or friends, or visiting for business or an event students or those seeking study, training, or skills development in Australia refugees. Immigration law is complex and changes frequently. Anyone considering migrating to Australia or arranging migration for its employees is advised to engage a registered migration agent v9 National Commercial in confidence 21

22 7. Taxation Federal and state taxes Australian taxes are imposed at the federal, state and local levels of government. These guidelines focus on federal and state taxes. Federal taxes come in direct and indirect forms. Income tax is a direct tax and is currently administered under the Income Tax Assessment Act 1936 (Cth) and the Income Tax Assessment Act 1997 (Cth) (Tax Acts) and associated legislation, rulings and regulations. Income tax is payable on an annual basis on ordinary and on statutory income, including capital gains. Ordinary income includes salary or wages, business profits, dividends and interest. Capital gains tax (CGT) is income tax imposed on capital gains. A resident of Australia is generally subject to income tax on assessable income from all sources, that is, worldwide income. A non-resident is subject to income tax on income earned from Australian sources and on capital gains from the disposal of direct or indirect interests in Australian land (including mining rights) and the disposal of assets used in carrying on a business in Australia through a permanent establishment. Certain types of income paid to non-residents are subject to the withholding tax rules. The source of income is mainly a matter of fact to be determined according to principles developed by the courts. Tax is imposed at varying rates (see tables 1, 2 and 3 below) on taxable income and is calculated as follows: Gross Income $ Less: Exempt Income and non-assessable non-exempt income $ Assessable Income $ Less: Allowable Deductions $ Taxable Income $ Tax on taxable income at rates depending on the type and residence of taxpayer Less: Tax offsets (rebates) $ Tax credits $ Income tax payable $ v9 National Commercial in confidence 22

23 Income tax - individuals Table 1 Resident individuals Rates of income tax payable for the 2013/14 year (as at July 2014) Taxable Income (Column 1) Tax on Column 1 % on excess (marginal rate) $18,200 Nil 19 $37,000 $3, $80,000 $17, $180,000 $54, Notes: a Medicare levy at the rate of 2% of taxable income is also payable by most resident taxpayers special rules and rates apply to the following types of taxpayers/persons: - trustees liable to tax in lieu of their beneficiaries - primary producers (for example, farmers) - sports people, authors, artists and similar taxpayers with fluctuating income - individuals who are resident for only part of a year, or ceasing a course of full-time education, for who the amount on which no tax is payable may be apportioned. Table 2 Non-resident individuals Rates of income tax for the 2013/14 year (as at July 2014) Taxable Income (Column 1) Tax on Column 1 % on excess (marginal rate) Nil Nil 32.5 $80,000 $26, $180,000 $63, Notes: the rates in Table 2 apply to non-residents of Australia for income tax purposes the rates are subject to the terms of relevant agreements with other countries for the prevention of double taxation v9 National Commercial in confidence 23

24 Companies Table 3 Company Rate of income tax: Item % Current primary tax rate 30 Australian resident companies may pay to their shareholders either franked or unfranked dividends. A franked dividend is broadly paid out of profits upon which the company has paid tax. The payment of franked dividends essentially allows companies to pass on to its shareholders the benefit of tax paid by the company. Losses incurred by a company can be deducted only from future income of the company. They are not distributed to shareholders. There are rules preventing companies from trafficking in losses. Consolidation 100% owned groups of companies can elect to consolidate and be treated as a single entity for tax purposes. The main features of the consolidation regime are: the head entity will prepare and lodge a single income tax return for the group all transactions between members of the group (including distribution of income) will be ignored for income tax purposes all assets of the subsidiary entities will be deemed to be acquired and held by the head entity all losses, franking credits and foreign tax credits will be pooled and remain with the head entity if a group member leaves the group. To consolidate, a group must generally consist of an Australian resident head company and all its resident wholly-owned subsidiaries. A subsidiary may be a partnership, a fixed trust or non-fixed trust, but the head must always be a company. There are special rules allowing for consolidation of the wholly-owned subsidiaries of foreign holding companies. In this instance, one of the subsidiary companies will act as the head company. Partnerships A partnership (other than a limited partnership in which the liabilities of any of the partners for debts of the partnership are limited) does not pay income tax on its income but the partners pay tax on their individual share of the taxable income of the partnership and the partners of such a partnership will be entitled to claim their share of any partnership loss. A partnership in which the liabilities of any of the partners for debts of the partnership are limited, is subject to income tax as if the partnership was a company. Trusts A trust is not a separate legal entity; rather, it is a relationship between a person who holds property, being the trustee, and the persons in whose benefit the trust property is held, being the beneficiaries. Under trust law, the trustee holds any income earned from the trust property on behalf of one or more of the beneficiaries in accordance with the terms of the trust deed. The income is taxed once in the hands of either the trustee or the beneficiaries. Like companies, losses remain in the trust for deduction against future income of the trust. There are rules restricting the utilisation of losses in a trust v9 National Commercial in confidence 24

25 An Australian resident who is a beneficiary of a trust not resident in Australia is liable to Australian income tax on income or property distributed or applied to, or dealt with for the benefit of that beneficiary. There are certain types of trusts that are taxed like companies. Capital gains tax (CGT) Capital gains from certain events, (mainly disposals) (CGT Events), occurring in respect of assets acquired by resident taxpayers after 19 September 1985 attract CGT. Non-residents are liable for CGT on capital gains from CGT Events occurring in respect of taxable Australian property. Taxable Australian property is confined to: real property situated in Australia Australian mining, quarrying or prospecting rights indirect ownership interests in entities owning Australian real property assets used at any time in carrying on a business through a permanent establishment in Australia. The amount of capital gain subject to income tax is the excess, if any, of the consideration received or deemed to have been received in respect of the CGT Event over the cost or deemed cost of the asset. For an asset acquired before 21 September 1999 by a company, the cost is indexed for inflation. Indexation does not apply if the consideration for the sale is less than cost (unindexed). If an individual, trust or retirement fund has held an asset for at least 12 months only a proportion of the capital gains derived by them in respect of that asset is subject to CGT. The proportion liable to CGT is 50% for individuals and trusts, and 67% for retirement funds. These concessions are not available to a company. Further CGT concessions for business assets are available to small businesses with yearly business turnovers of less than $2 million or a net asset value of not more than $6 million, provided they satisfy certain other requirements. These further concessions are available to individuals, companies, trusts and partnerships. Capital losses may only be offset against future or current year capital gains. However, ordinary losses can be offset against capital gains and income. There are rules restricting the utilisation of capital losses. Thin capitalisation Thin capitalisation rules apply to both inbound and outbound investors. The rules apply to all debts of the investor instead of only related party interest-bearing debts. The level of debt is measured against assets rather than equity of the enterprise. For non-financial institutions, the acceptable level of debt will be 75% of assets (Safe Harbour Test). If the Safe Harbour Test is not met, the alternative test (Arm s Length Debt Amount) may be used. The Arm s Length Debt Amount is the notional amount which, having regard to certain facts and assumptions: would be the amount representing the maximum amount of debt the enterprise would reasonably be expected to have throughout the year represents the debt interests in respect of unrelated commercial lenders would reasonably be expected to enter into arrangements with the enterprise. The concept of control for inbound investors will also be changed to adopt a 40% control by non-residents, with alternative control tests also applying. The Thin Capitalisation maximum debt limit is 3:1 or 75% (on a debt-to-equity basis). The substance rather than the form of a transaction will determine whether it is to be treated as a debt or an equity interest for the purposes of applying the thin capitalisation rules. Broadly, the returns on equity interests will be frankable dividends and will not be able to be deducted from gross income in arriving at the taxable income for a tax period. Conversely, the returns on debt interests will be deductible but not frankable v9 National Commercial in confidence 25

26 Transfer pricing The Tax Acts contain provisions imposing arm s length standards to transactions under international agreements between separate legal entities, and between members of multinational entities. These provisions have anti-tax avoidance purposes and operate to prevent enterprises from shifting profits out of Australia by over-pricing or underpricing goods or services supplied or acquired by resident entities, or by non-resident entities deriving income from Australian sources. Double taxation treaties Australia has entered into a number of tax treaties for the prevention of double taxation and fiscal evasion. If these treaties conflict with the Tax Acts, the treaties prevail. These treaties apply to various types of income derived by residents of one country from sources in that country. The thrust of these treaties is to give the country in which an entity is resident the right to impose tax on the income of the resident regardless of the country of source. Alternatively, a treaty allows the country of source to tax the income and, to the extent that the country of residence also taxes the income, the treaties require the country of residence to give a credit for the tax paid in the country of source. Employee share schemes Where employers offer and employees are eligible and receive shares or options under an employee share scheme, employees will generally be taxed on the value of any shares or options they receive at the time the shares or options are granted to them. The liability of the employee for income tax may be deferred if the share plan satisfies certain conditions. Taxation of financial treaties Australia has a separate tax regime for the taxation of gains and losses on financial arrangements. A financial arrangement includes loans, hedging contracts, and certain foreign exchange transactions. The intention of the TOFA regime is to align the taxation recognition of gains and losses on financial arrangements with commercial recognition of those gains and losses and to reduce the influence of taxation considerations on the way in which financial arrangements are structured. The TOFA rules will generally apply to the exclusion of other applicable rules. Withholding tax Australian sourced income from dividends, interest and royalties derived by non-residents is subject to withholding tax at the following rates: Dividends Withholding tax rate Category 0% Franked dividends except for a few countries and under certain conditions 15% Unfranked treaty countries except for certain countries which have negotiated different rates 30% Unfranked non-treaty countries v9 National Commercial in confidence 26

27 Interest Withholding tax rate Category/Country 10% All unless otherwise stated and with or without tax treaties 10% or 25% Thailand 12% Argentina 15% Philippines, Malaysia, Korea, Malta and India Royalty Withholding tax rate Country 10% All unless otherwise stated 12.5% Taipei 15% Fiji, Kiribati, Korea, Malaysia and Thailand 10 / 15% India and Argentina The rate of withholding tax paid to US and UK resident entities as set out in the table below: Rate Income category 0% Unfranked dividends where recipient holds at least 80% 5% Unfranked dividends where recipient holds less than 80% but more than 10% (UK only) 15% Unfranked dividends where recipient holds less than 10% (UK only) 5% Royalties Other taxes Fringe benefits tax The fringe benefits tax (FBT) is a federal tax administered under the Fringe Benefits Tax Assessment Act 1986 (Cth). FBT is payable by employers on the value of non-cash benefits provided to either their employees or associates of their employees. Fringe benefits may also be provided by associates of employers, or any other person under an arrangement with the employer or an associate of the employer. For a benefit to be a fringe benefit, it must be provided to an employee (or associate) in respect of employment. The value of the fringe benefit is not taxable to the employee. The most common types of fringe benefits are: cars made available to employees for their private use interest-free or low-interest loans to employees discounted or free goods and other property provided to employees residential accommodation provided to employees. The FBT year is a 12-month period commencing on 1 April and ending on 31 March. The FBT rate for the year ending 31 March 2015 is 47%, being the highest marginal tax rate for individuals. FBT is calculated on the grossed-up value of the fringe benefit resulting in an effective FBT rate of approximately 88% of the value of the fringe benefit. The gross-up method treats the employee as receiving both the value of the benefit and the value of the FBT paid by the employer. The real after-tax cost of providing fringe benefits is reduced by the tax deductions which may be claimed by the employer for: v9 National Commercial in confidence 27

28 the cost of providing the fringe benefit the fringe benefits tax paid by the employer. There are significant concessions available to employers for fringe benefits provided to expatriates and employees of certain charitable, religious and public benevolent institutions. Goods and services tax A 10% goods and services tax (GST) is imposed and administered under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act). Liability for GST arises when a business makes a taxable supply to its customers. There are some supplies that are GSTfree (zero-rated) or input taxed (exempt). In Australia the supplier does not have statutory rights to recoup the GST from its customer, however, the supplier may, by contract, recover the GST from its customer. Except in certain circumstances including where the recipient of the supply is not registered for GST or the supplier acquires the goods or services for making an input taxed supply, the recipient of a supply is generally eligible to obtain a tax credit (Input Tax Credit) for any GST included in its cost of acquiring goods or services for its business. The Input Tax Credit is usually offset against any GST liability on goods or services that the recipient supplies to its own customers. The entitlement to an Input Tax Credit is intended to exclude the GST paid on acquisitions from the costs of carrying on a business. It is intended that the tax is borne by the ultimate consumer who consumes the goods or services for private purposes and who is not entitled to an Input Tax Credit. Input taxed supplies are specifically identified in regulations to the GST Act and are not liable for GST when made. The GST included in the costs of acquiring goods and services for making input taxed supplies is not eligible for an Input Tax Credit. The main types of input taxed supplies are financial services, residential property and residential rent. Some supplies of financial services are eligible for a partial Input Tax Credit. There is a range of supplies that are specified in the GST Act as GST-free. The main types of GST-free supplies are exports of goods or services, food, health, education, international travel and certain charitable activities. A supplier of GST-free supplies can claim Input Tax Credits for the GST included in the costs of its acquisitions for making GST-free supplies. Suppliers pay their GST liability to the Australian Taxation Office (ATO) either quarterly or monthly depending on the size of the turnover of the supplier. There are registration requirements under the GST Act. Registration is compulsory if the entity s annual turnover is more than $75,000, or $150,000 in the case of a non-profit body. The registration requirement applies to all types of enterprises carrying on business, including individuals, companies, trusts, partnerships or unincorporated associations. Other important state and territory taxes Stamp Duties (Duty) Each state and territory imposes duty on different transactions. Each state and territory imposes Duty on transfers of land and interests in land and on transfers of shares in corporations which have significant landholdings ($1 million in Victoria and $2 million in New South Wales and Queensland). Some states impose Duty on transfers of some items of personal property, and sales of business assets. The rates of Duty vary between the states and territories, and also vary depending on the nature of the transaction. Payroll tax Employers are liable to pay payroll tax at a fixed percentage of their total annual payroll. Payroll tax rates and the thresholds above which payroll tax becomes payable vary from state to state and from year to year. The rates range from 4.75% to 6.85% with some states having graduated rates. The thresholds vary from $550,000 to $1,500, v9 National Commercial in confidence 28

29 Land tax Land tax is levied by each state and is paid on the value of lands situated within that state and owned by an entity. There are certain types of land and types of taxpayers that are exempt from land tax, for example, the principal place of residence of an individual is generally exempt from land tax. Other obligations by businesses Businesses and, in particular, employers are liable to pay imposts in relation to their employees. Compulsory workers compensation insurance Each state has legislation requiring employers to provide insurance cover for their employees. As the arrangements vary from state to state, employers obtain workers compensation insurance from various insurance providers. Superannuation Employers must make contributions to Australian resident regulated funds of a prescribed minimum amount for their employees. The minimum rate of contribution is 9.5%. Employers failing to provide the minimum superannuation support are liable to pay a superannuation guarantee charge (in effect a tax) to the ATO to meet the requirements. This failure also results in penalties and interest charges being payable. The superannuation guarantee charge is not an allowable deduction for income tax purposes. Employers of some temporary resident employees are not required to contribute superannuation. Regional headquarters Regional headquarters of multinational corporations enjoy certain concessions. These concessions include: exemption from dividend withholding tax for certain foreign source dividends passed through a resident regional headquarter to a non-resident shareholder of the regional headquarter a deduction for capital and revenue costs incurred in setting up facilities in Australia that are mainly for the provision of regional headquarters support a deduction for reimbursement of capital and revenue costs of the regional headquarters which were previously incurred by a non-resident associated company. Costs in relation to feasibility studies, acquiring tangible assets, or relocation of a regional headquarter between locations within Australia are excluded from the concessions v9 National Commercial in confidence 29

30 8. Banking and financial services The Australian banking system Australia enjoys a sophisticated and relatively deregulated banking system comprising of a number of local and foreign banks and financial institutions offering a comprehensive range of financial services. The Australian banking system underwent a significant transformation in the 1980s as a result of the Australian government's deregulation of the financial markets. During this period, the exchange rate was floated, exchange controls were largely abolished and most borrowing, lending and interest rate controls on banks were removed. The 1980s also saw at least 15 foreign banks being granted licences by the Australian government to operate in Australia. Since then "full" licences and "branch" licences have also been granted. Foreign banks from many countries (such as the United States, Japan, Canada, Switzerland, Britain, France, Germany, the Netherlands, Spain, China, Taiwan, Hong Kong, Singapore, India and South Korea now operate in Australia. The banking market Four major banks operate in Australia: Australia and New Zealand Banking Group, National Australia Bank, Commonwealth Bank of Australia and Westpac Banking Corporation. Collectively, these banks have the majority of banking business in Australia. The remaining business is shared by smaller regional banks, foreign banks, merchant banks and other financial intermediaries. Most of the global banks are present in Australia as are many well-known investment banks. Prior to the Global Financial Crisis (GFC), there was an emergence of non-bank lenders in the home loan market. However, due to the impact of the GFC on world securitisation markets, these lenders have lost substantial market share to the major banks. Regulation of banks and other financial institutions The Australian Prudential Regulation Authority (APRA) is the regulator responsible for prudential supervision of individual financial institutions and for promoting financial system stability in Australia. APRA licenses and prudentially supervises authorised deposit-taking entities (banks, building societies and credit unions), life and general insurance and reinsurance companies, friendly societies and superannuation funds (excluding self-managed funds). Financial institutions regulated by APRA must comply with prudential requirements covering areas such as capital adequacy, liquidity management, large credit exposures, asset quality, foreign exchange exposure, off-balance sheet business, association with non-banks, ownership and control, internal systems checks and procedures, and consultation with and reporting to APRA. These controls are generally based on international standards. The Reserve Bank of Australia (RBA) is Australia s central bank. The RBA is responsible for monetary policy, stability of the financial system and the safety and efficiency of the payments system. ASIC is the regulator responsible for financial market integrity, business conduct and disclosure, and consumer protection in the financial system. As well as monitoring the code of practice for the banking industry, ASIC licenses and regulates businesses engaging in consumer credit activities (including banks, credit unions, finance companies, and mortgage and finance brokers) and ensures that licensees meet standards (including those in the National Consumer Credit Protection Act 2009 (Cth)). ASIC assesses compliance of authorised financial markets with their legal obligations, advises the government about authorising new markets, and supervises trading on Australia s domestic licensed equity, derivatives and futures markets. ASIC also licenses and monitors financial services businesses (eg businesses dealing in superannuation, managed funds, shares and company securities, derivatives, and insurance), and supervises business conduct and disclosure (including fundraising provisions of the Corporations Act) v9 National Commercial in confidence 30

31 Operations by foreign banks Foreign banks may be permitted access to the Australian market in one of three ways. Firstly, a foreign bank that does not wish to conduct banking business in Australia but would like to have an Australian presence may operate through a representative office in Australia with APRA consent. Such a foreign bank will usually be required to meet minimum entry standards and comply with certain operating conditions set by APRA. APRA will need to be satisfied that the applicant is recognised as a bank under the laws of its home country, that it is of good substance and repute, that it is subject to adequate standards of prudential regulation in its home country, and that it has approval from its home country supervisor to establish a representative office in Australia. It will also be required by APRA to register with ASIC as carrying on a business in Australia. Secondly, a foreign bank may also operate in Australia through establishing an authorised branch which will be subject to APRA s licensing and prudential supervision. Foreign bank branches are prohibited from engaging in retail banking (ie taking deposits of less than $250,000 from individuals or non-corporate institutions). However, branches of foreign banks are not required to maintain "endowed capital" (ie paid-up capital) in Australia and are not subject to any capital-based large exposure limits. Thirdly, a foreign bank that wishes to conduct banking business in Australia may open a locally-incorporated subsidiary which will be subject to APRA s licensing and prudential supervision. Authorised foreign bank subsidiaries can engage in the full range of banking business in Australia and will be subject to all conditions that ordinarily apply to an Australian bank under the Banking Act 1959 (Cth). Common issues for financial institutions operating in Australia Below are some common issues for financial institutions operating in Australia. Australian financial services licences (AFSLs) All persons who carry on a financial services business in Australia are required to have an AFSL, to be appointed as an authorised representative, or to have the benefit of an exemption from this requirement. AFSLs are issued by ASIC on satisfaction of the relevant licensing application criteria. Licence holders are subject to an extensive range of obligations. Lenders are, generally speaking, not covered by this licensing regime, but most other types of financial services are covered. Australian credit licenses (ACLs) An ACL must be held by any person who engages in a credit activity unless they are appointed as a credit representative of a person who has an ACL, or a licensing exemption applies to them. ACLs are issued by ASIC on satisfaction of the relevant licensing application criteria. Licence holders are subject to an extensive range of obligations, including in relation to conduct, disclosure and responsible lending. Financial Sector (Collection of Data) Act 2001 (Cth) This act can apply to a corporation if its sole or principal business is borrowing money and providing finance, more than half of its assets result from a business of providing finance or it sells goods by retail and provides finance in the course of selling goods by retail. Such a corporation may be required to register with and/or provide certain information to APRA. Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) This act establishes Australia s anti-money laundering regime and regulates designated services (eg deposit taking, lending and allowing loan transactions) carried on through a permanent establishment in Australia. A permanent establishment in Australia includes a place in Australia where the entity carries on business through an agent. The Australian Transaction Reports and Analysis Centre is the relevant regulator v9 National Commercial in confidence 31

32 Business conduct The Australian Securities Commission Act 1989 (Cth) sets out prohibitions on misleading and deceptive conduct in respect of a broad range of financial services and unconscionable conduct in respect of business transactions. There is also specific legislation in each state and territory which deals with the review of unjust contracts. Further, in respect of lending to consumers. Australia has a national consumer law known as the Australian Consumer Law (ACL). The ACL includes: protections against unconscionable conduct and misleading and deceptive conduct protections against unfair practices, including false and misleading representations an unfair contracts regime covering standard form contracts laws relating to consumer guarantees product safety laws laws regulating unsolicited consumer agreements (ie door-to-door sales and other direct marketing). Taking of security In relation to real property, there are a number of specific state and territory legislation. The taking of a security over land will require registration of the security with the relevant state or territory land registry. In relation to personal property, the Personal Property Securities Act 2009 (Cth) establishes a national system for the registration of security interests in personal property, together with rules for the creation, priority and enforcement of the security interests. The taking of a security over personal property will require registration of the security on the personal property securities register. There are also certain state and territory duties which may be payable on the granting or transfer of a security. For example, mortgage duty will need to be considered in New South Wales and transfer or conveyance duty will need to be considered in each relevant state or territory. Interest withholding tax Withholding tax of 10% is imposed on payments of interest that, generally speaking, are paid from Australia to another jurisdiction. If interest is paid by an Australian company or the Australian branch of a foreign company to a non-resident taxpayer, this amount will be subject to withholding tax. However, interest withholding tax is not imposed on interest paid on debentures/ certain debt instruments or on larger scale syndicated facilities that are issued or offered by way of a public offer which meets certain conditions. Further, under certain double tax agreements, Australia does not impose withholding tax on interest payments made to banks and financial institutions in certain circumstances v9 National Commercial in confidence 32

33 9. Employment laws General Over the last 8 years or so, Australian employment and industrial relations law has experienced tumultuous change. In 2006, the Federal Government introduced the work choices amendments to the existing industrial relations laws, which were intended to consolidate the patchwork of state and federal employment laws and to create a simpler national system. The work choices amendments also removed a number of protections for employees. The process of rolling back many some of the work choices changes commenced in 2007 following a change of government at the federal level. The main instrument of that process, the Fair Work Act 2009 (Cth) (FW Act) commenced operation on 1 July 2009, although certain important provisions did not commence until 1 January The bedrock of the current Australian industrial relations system is collective "awards", which are binding agreements made by a Commonwealth government body called the Fair Work Commission (FWC). Awards prescribe minimum terms and conditions of employment such as pay, ordinary weekly hours of work, sick leave and annual leave entitlements, and other employment-related matters. The number and complexity of awards has been a bugbear for employers over previous years and as a result the FWC has taken steps to create a smaller number of simpler modern awards. Awards, together with the National Employment Standards and the national minimum wage, are intended to operate as a safety net, with any additional improvements in terms and conditions required to be made in the form of agreements at an enterprise level. Enterprise agreements are collective agreements which are usually made between an employer and a group of employees. Although enterprise agreements can be made with employees directly, employers must recognise unions as part of the bargaining process when an employee wishes to involve a union to bargain on the employee s behalf. In Australia, approximately 18% of all employees belong to a union. Apart from industrial instruments (that is, awards and enterprise agreements), all employees are bound by a contract of employment, the terms of which may be either written or oral. Where an employee is covered by an industrial instrument, the contract of employment may provide additional benefits to those prescribed by the relevant industrial instrument. The contract of employment can never exclude the minimum entitlements of an employee under any relevant industrial instrument or under legislation. Professional and executive employees' entitlements are rarely covered by an industrial instrument and are generally covered solely by their contract of employment. Even in such cases, these contracts of employment are subject to legislation or common law doctrines governing such matters as termination of contracts, annual and personal leave and long service leave entitlements. Employers and employees are always free to agree that a contract may confer a benefit in excess of what is prescribed as a minimum by legislation. Annual leave and long service leave Each state and territory in Australia has legislation regulating the long service entitlements of its employees. Annual leave is governed by the new National Employment Standards (NES), which commenced operation on 1 January 2010 as part of the FW Act changes. The usual annual leave entitlement for permanent employees is four weeks per year although certain occupations and industries (eg seven day shift workers) are entitled to more than four weeks. If no award or enterprise agreement applies to an employee, annual leave can be cashed out where the employer and employee agree in writing to do so subject to certain limits. Many employees are also entitled, as a term of the award or agreement that applies to them, to receive a "loading" equivalent to 17.5% of ordinary pay at the time annual leave is taken. Employees that are not covered by an industrial instrument which makes provision for this "loading" may nevertheless be entitled to it under the terms of their contract of employment v9 National Commercial in confidence 33

34 Long service leave is paid leave which accrues to an employee after a period of continuous employment (usually 10 years) with an employer. In New South Wales, the Long Service Leave Act 1955 (NSW) requires employers to grant paid long service leave of two months for 10 years continuous service and a further one month for each five years of service after that. In Victoria, Queensland, Western Australia and Tasmania, employees are entitled to approximately two months (8.67 weeks) leave after 10 years of service, and in South Australia and the Northern Territory, an employee accrues approximately three months (13 weeks) leave after 10 years of service. Generally speaking, except on death or termination of employment, an employer cannot pay an employee for accrued long service leave in lieu of granting the leave. Where the employee's employment is terminated other than for reasons of misconduct after a certain period of service (usually five or seven years) he or she may also be entitled to receive payment of accrued long service leave on a pro-rata basis. Personal / carer s leave (also called sick leave) Employees of corporations are entitled to 10 days per year of personal/carer s leave, which accumulates from year to year and which is not capped. Like annual leave, personal/carer s leave is governed by the NES. Personal/carer s leave is paid leave which is most often used by an employee who is too ill to attend for work. However, the leave can also be used by employees who have a responsibility to care for a member of their immediate family, or household, if the person who is being cared for is ill or injured, or suffers a sudden emergency. In general, there is no right on termination of employment to be paid for any accrued but untaken personal/carer s leave, although in some cases the industrial instrument or employment agreement may provide for the employee to be paid for unused accrued sick leave. A modern award or enterprise agreement may make provision for an employee to cash out a portion of their personal/carer s leave, although such arrangements are uncommon. Parental leave Under the NES, all employees are eligible to take 12 months of unpaid parental leave, with potentially an option to extend for a further 12 months, if they have completed at least 12 months of continuous service with their employer. An employer cannot dismiss or terminate an employee because they are on parental leave and generally must allow an employee to return to their pre-parental leave position when they return from parental leave. A commonwealth funded parental pay scheme is in place and provides eligible primary carers of newborns or adopted children, with up to 18 weeks pay at the national minimum wage. Fathers and partners caring for a child are eligible for up to two weeks of government funded pay at the national minimum wage. Workers Compensation All states have legislation that requires an employer to maintain insurance for the benefit of workers who suffer injury or disease during the course of their employment. In all states a two-tiered system exists. Firstly, a no-fault insurance scheme provides immediate assistance in the form of weekly wages, medical expenses and rehabilitation services. Secondly, the injured worker can sue in the courts alleging negligence to recover a lump sum damages award if the injury is serious. The benefits payable to the employee during the period of incapacity for work varies according to whether the incapacity is total or partial. The maximum weekly level of benefits varies from state to state, and is subject to assessments of the medical fitness of the person (in some states the total available is capped to a maximum usually around $100,000). Where the employer s fault or negligence caused the injury or disease, the employee may be entitled to common law damages. Common law actions may be initiated at the same time as workers compensation actions v9 National Commercial in confidence 34

35 Due to massive blow-outs in workers compensation costs recently, many states have enacted new legislation to reduce the maximum benefits payable to injured workers or to limit their access to common law damages, or both. The purpose of this trend is to reduce or keep steady the premium costs payable by businesses to insurance companies v9 National Commercial in confidence 35

36 10. Importing to Australia Tariff protection Customs Duties and Tariffs Many goods imported into Australia are liable to import duty (ie tariff), generally based on the value of the goods. The rates of duty vary according to the tariff classification of the goods. The general tariff rates are presently about 5% plus GST at 10% of the value of the taxable importation. However, as explained below, the effective rate of GST on goods imported for business purposes will in many cases be zero. The actual rates and classifications are to be found in the schedules to the Customs Tariff Act 1995 (Cth). The principal tariffs classify goods in accordance with Australia s international obligations under the World Trade Organisation rules. As the rates vary significantly between the classifications, it will be important to ensure the correct classification of goods. Indeed, many imported goods may not be dutiable at all as they are already produced in Australia, or are capable of being produced in Australia in the normal course of business. Australia has signed bilateral free trade agreements with a number of countries including the US, Japan and South Korea. Under certain circumstances, importers may obtain relief from the customs duty payable on imported goods. This will depend on whether the grant of a tariff concession in respect of those goods will have a substantially adverse effect on the market availability of goods produced in Australia. An overriding criterion will be whether a tariff concession in relation to those goods would be against Australia's national interests. Many goods are already the subject of tariff concession orders. Importers of other goods may apply for a tariff concession order if the above criteria are satisfied. GST GST is payable on all taxable importations of goods into Australia, regardless of whether the importer is registered for GST. Practically all goods imported for use or consumption in Australia are deemed to be taxable importations. However, if the entity is a GST-registered business or organisation that is importing goods as part of its activities, it may be able to claim a GST credit for any GST paid on those goods. Importers are liable for payment of GST, which must be paid at the same time as any customs duties. The person liable for customs duty and GST is the party that clears the goods through Australian Customs. While that may be the actual supplier of the goods from outside Australia, many offshore suppliers find it convenient to appoint a local agent or to set up a local subsidiary to act as the person clearing the goods into Australia, as the registration process for GST is quite onerous for foreign registered companies. Many importers are able to register under the GST deferral scheme so that their goods are able to be released by Australian Customs without payment of GST at that time, but instead the amount of GST payable on the imported goods is added by the ATO directly into the GST return for the importer who will usually have a matching GST credit because it is using the goods for a business purpose. The importer, therefore, will only pay GST once when the goods are finally onsold to a third party. The amount of GST is calculated at 10% of the value of the taxable importation, which is the total of: the customs value of the imported goods any customs duty payable international transport and insurance cost any other indirect tax which may apply to the specific good imported. Under Australian GST law, a company must register for GST if it is the importer of goods with an import value of $75, v9 National Commercial in confidence 36

37 Anti-dumping duties Dumping occurs when the export price of products of one country falls below the price at which the same goods are sold in the domestic market of the exporter (ie where the export price falls below what is referred to as its "normal value"). Under the Australian anti-dumping legislation, the dumped imported goods are subject to additional duties to those which otherwise apply where they cause or threaten substantial damage to the Australian domestic industry. The objective of these anti-dumping duties is to afford protection to domestic industries in circumstances where imported goods have an unfair competitive advantage over locally produced goods (eg because of cheaper labour costs). Dumping is considered to be unfair trading if material injury to an industry is caused or threatened by the dumping, or if the establishment of an industry in Australia is hindered in a material way by the dumping of goods in Australia. Australian Customs will collect any anti-dumping duties at the time of importation. The amount of duty levied by Australian Customs will be the difference between the export price and the normal value of the goods in question or such part of that difference as is considered necessary to remove the injury caused by the unfair trading. There are 24 anti-dumping measures in place against 18 products and 12 countries. Countervailing duties Where imported goods sold in an exporter's domestic market have enjoyed a subsidy, bounty, reduction, remission of freight or other financial assistance resulting in an export price less than their normal value in the exporter's domestic market, Australian Customs may impose a countervailing duty on the goods in question. The amount of duty will be equal to the amount of the subsidy (or other assistance) received by the exporter or such part of the subsidy (or other assistance) as is considered necessary to remedy the injury caused to the Australian domestic market. As in the case of anti-dumping duties, countervailing duties will only be imposed if it can be established that the subsidised imports threaten the relevant Australian industry in a material way v9 National Commercial in confidence 37

38 11. Government assistance for exporting Austrade The Australian Trade Commission Austrade was established by the Australian government to facilitate and encourage trade between Australia and foreign countries. It represents Australia's trading and commercial interest in foreign countries and assists Australian organisations with information and advice relating to export opportunities, advising in trade negotiations and the development of export markets, promoting the staging of exhibitions and trade fairs overseas, and by providing insurance, marketing and other financial services to persons involved in Australian trade. Export market development grants scheme The Export Market Development Grants Act 1997 (Cth) provides for the grant of financial assistance by Austrade to small and medium enterprises to develop export markets. Under the export market development grants scheme, Austrade may provide direct financial assistance to Australian exporters who incur "eligible" expenditure in seeking and developing overseas markets for goods, services, know-how and intellectual property rights which are substantially of Australian origin. The grant is a partial reimbursement of the expenses incurred. For expenditure to be eligible it must be substantially of Australian origin. There are various tests to satisfy in respect of the eligibility of expenditure. For example, goods made in Australia that have at least 50% Australian content and knowhow resulting from substantial research or work performed in Australia may be eligible. Typical eligible expenditure includes overseas market research, advertising for overseas distribution, overseas promotion costs such as trade fairs and exhibitions, the provision of free samples, airfares, overseas representation costs, costs incurred in preparing tenders or quotations, costs of registering property rights abroad and so on. Among other amendments, the Export Market Development Grants Amendment Act 2010 (Cth) amended the export market development grants scheme extending the scheme so that it applies to all grant years from 2010/11 to 2015/16 inclusive. The financial assistance under the scheme is in the form of grants based on the level of eligible expenditure. The exporter is entitled to claim a grant of 50% of all eligible expenditure incurred in excess of $20,000 provided that annual income does not exceed $50,000,000 in the grant year. To access the scheme for the first time, the business must have spent $20,000 over two years on eligible expenses. The exporter is entitled to up to seven grants, but the level of the grant is subject to an export performance test which may reduce the grant entitlement. The maximum grant for a single entity is $150,000 (subject to funds available in the scheme and timing of payments) while the collective grants to members of a group of companies (who may apply individually) cannot exceed $250,000 per annum. Export insurance The Export Finance Insurance Corporation (EFIC) is a body separate from, but related to, Austrade. EFIC provides finance and insurance solutions to help Australian exporters overcome the financial barriers they face when growing their business overseas. EFIC also provides Australian exporters with access to insurance against commercial and political risks not usually underwritten by commercial insurers, as well as other risks such as bankruptcy of the buyer v9 National Commercial in confidence 38

39 12. Privacy Privacy laws Privacy in Australia involves concepts of: Information privacy, which involves rules governing the collection and handling of personal data. It is also known as data protection Bodily privacy, which involves the protection of people s physical selves Privacy of communications, which covers the security and privacy of mail, telephones, and other forms of communication Territorial privacy, which concerns the limits on intrusion into domestic and other environments such as workplace and public space. The regulation of information privacy is explored in this section. Under the Constitution, there is no right of individuals to protection of their privacy. There is also no common law right of protection from invasion of privacy in Australia. Federal Act and private sector The Privacy Act 1988 (Cth) is Australia s key information privacy law. This is a federal Act administered by the Attorney- General. The Privacy Commissioner is integrated within the Office of the Australian Information Commissioner (OAIC) ( It provides 13 Australian Privacy Principles (APPs) that set out the requirements for the collection, use, disclosure and handling of personal information. Personal information is defined in the Privacy Act as information or opinion about an identified individual, or an individual who is reasonably identifiable, whether or not it is true and whether or not it is in material form. Health information is recognized as sensitive information under the Privacy Act. Sensitive information is given greater protection under the APPs than other personal information. Who is bound? The APPs bind APP entities. APP entities are primarily Australian government agencies and large private sector organisations with a turnover of more than $3 million. Some small businesses are also bound by the APPs, for example, if they provide health services, and if they disclose personal information to anyone else for a benefit, service or advantage. Generally, individuals are not bound by the APPs. Australian link The APPs apply to an act done or practice engaged in, outside Australia, by an organisation that has an Australian link. An organisation has an Australian link where it is, for example, a body corporate incorporated in Australia. An organisation will also have an Australian link where it carries on business in Australia and it collects or holds personal information in Australia. An entity may carry on business in Australia if there is some activity in Australia that forms part of the organisation s business, for example, if it collects personal information from individuals who are physically present in Australia (regardless of where the organisation is located or incorporated), or if it has a website that offers goods and services to countries including Australia. An act or practice that takes place outside Australia will not breach the APPs if the act or practice is required by an applicable foreign law v9 National Commercial in confidence 39

40 Cross-border disclosure of personal information It is also important to note that APP 8 (noted below) deals with the cross-border disclosure of personal information from Australia to outside of Australia. APP 8 and section 16C of the Privacy Act create a framework for the cross-border disclosure of personal information, which generally requires an APP entity to ensure that an overseas recipient will handle an individual s personal information in accordance with the APPs, and makes the APP entity accountable if the overseas recipient mishandles the information. In summary, a foreign company: will need to determine whether it has an Australian link and is therefore subject to the APPs when entering into a transaction with an APP entity which involves the transfer of personal information from Australia to the foreign company, may be required to enter into contractual obligations requiring it to uphold the APPs and to accept liability for failing to do so. Australian privacy principles Many of the APPs apply to all APP entities, but some only apply to government agencies, and some only to private sector organisations. A summary of the APPs is below: APP 1: Open and transparent management of personal information APP entities must manage personal information in an open and transparent way. This includes having a clearly expressed and up to date APP privacy policy and compliance program. APP 2: Anonymity and pseudonymity APP entities must give individuals the option of not identifying themselves, or of using a pseudonym. Limited exceptions apply. APP 3: Collection of solicited personal information Outlines when an APP entity can collect personal information that is solicited by the entity. It applies higher standards to the collection of sensitive information. APP 4: Dealing with unsolicited personal information Outlines how government agencies must deal with unsolicited personal information. APP 5: Notification of the collection of personal information Outlines when and in what circumstances an APP entity that collects personal information must notify an individual of certain matters, and sets out specific details that need to be notified to an individual in relation to any collection of personal information about that individual. APP 6: Use or disclosure of personal information Outlines the circumstances in which an APP entity may use or disclose personal information that it holds. APP 7: Direct marketing APP 7 does not generally apply to agencies. Private sector organisations may only use or disclose personal information for direct marketing purposes if certain conditions are met. Direct marketing: is use or disclosure of personal information to communicate directly with an individual to promote goods and services may only be undertaken where an individual would reasonably expect it, such as with informed consent must provide a prominent statement about a simple means to opt out v9 National Commercial in confidence 40

41 must be stopped when an individual opts out. The Do Not Call Register Act 2006 and the Spam Act 2003 also apply to direct marketing in Australia. Where an act or practice of an APP entity is subject to these Acts, APP 7 does not apply to the extent that these Acts apply. APP 8: Cross-border disclosure of personal information Outlines the steps an APP entity must take to protect personal information before it is disclosed to any other entity (including related entities) overseas. APP 9: Adoption, use or disclosure of government related identifiers APP 9 does not apply to government agencies, only to private sector organisations. It outlines the limited circumstances when an organisation may adopt a government related identifier of an individual as its own identifier, or use or disclose a government related identifier of an individual. Examples of government related identifiers include drivers licence numbers, Medicare numbers, Australian passport numbers and Centrelink reference numbers. APP 10: Quality of personal information An APP entity must take reasonable steps to ensure the personal information it collects is accurate, up to date and complete. An entity must also take reasonable steps to ensure the personal information it uses or discloses is accurate, up to date, complete and relevant, having regard to the purpose of the use or disclosure. APP 11: Security of personal information An APP entity must take reasonable steps to protect personal information it holds from misuse, interference and loss, and from unauthorised access, modification or disclosure. An entity has obligations to destroy or de-identify personal information in certain circumstances. APP 12: Access to personal information An APP entity must provide access when an individual requests to be given access to personal information held about them by the entity. This includes a requirement to provide access unless a specific exception applies. APP 13: Correction of personal information An APP entity must correct personal information held by it about an individual in response to a reasonable request by an individual. Commissioner s powers A breach of an APP in respect of personal information is an interference with the privacy of an individual. The Privacy Act grants a range of powers to the Australian Information Commissioner, including the power to investigate complaints made by individuals or on the Commissioner s own motion about APP entities; to conduct performance assessments of APP entities; to accept enforceable undertakings from entities that have breached APPs; and to apply to the Federal Court of Australia for orders for civil penalties for serious or repeated breaches of the APPs. Civil penalty orders may require a body corporate to pay up to $1.7 million and an individual to pay up to $340,000. State and territory As the Privacy Act does not regulate the handling of personal information by Australian state or territory governments and their agencies, state and territory legislation creates information privacy requirements similar to those under the Privacy Act, with application to state and territory government agencies, as well as local councils and state or territory government-owned corporations: Privacy and Personal Information Protection Act 1998 (NSW); Information Privacy Act 2009 (Qld); v9 National Commercial in confidence 41

42 Premier and Cabinet Circular No 12 (SA); Personal Information Protection Act 2004 (Tas); Information Privacy Act 2000 (Vic). The Privacy Act applies to government agencies in the ACT. In addition, several state and territory laws provide protections for particular categories of sensitive information, being health information, held by state and territory public and private sector organisations: Health Records and Information Privacy Act 2002 (NSW); Information Privacy Act 2009 (Qld); Health Records Act 2001 (Vic); Health Records (Privacy and Access) Act 1997 (ACT); Information Act (NT) v9 National Commercial in confidence 42

43 13. Other legislation regulating business in Australia Restrictive trade practices and consumer protection The principal statute regulating trade practices and anti-trust arrangements in Australia is the Competition and Consumer Act 2010 (Cth) (CCA), which replaced the Trade Practices Act 1974 (Cth) on 1 January The legislation is aimed at regulating certain types of conduct that have an adverse effect on competition. The aim is to ensure greater competition and efficiency in the marketplace for the benefit of consumers and business generally. Certain conduct is deemed to be undesirable regardless of its effect on competition and is accordingly outlawed altogether. In other cases, conduct is prohibited only if it has the purpose or the likely effect of substantially lessening competition. Examples of the types of conduct which are prohibited regardless of competitive effect include re-sale price maintenance, certain secondary boycotts, misuse of market power, cartel conduct (including price fixing, market sharing and bid rigging arrangements) and some kinds of exclusive dealing. On the other hand, examples of the types of conduct which are prohibited only where such conduct would result in a substantial lessening of competition include certain exclusive dealing arrangements, contracts, arrangements or understandings, secondary boycotts and mergers or acquisitions. In some cases (eg where the benefit to the public would outweigh the anti-competitive effect of the conduct), the Australian Competition and Consumer Commission which administers the CCA, will sanction (or "authorise") a proposed activity which would otherwise contravene the legislation. There can be significant penalties imposed on businesses and individuals that breach the CCA, including multi-million dollar fines, disqualification from managing corporations and, in the case of cartel conduct, imprisonment. The CCA also contains the Australian Consumer Law (ACL). The ACL prohibits businesses and individuals from engaging in misleading and deceptive conduct, making false and misleading representations, or engaging in unconscionable conduct when supplying goods and services in trade or commerce. The ACL introduced certain statutory guarantees (known as consumer guarantees ) into contracts for the supply of goods or services to consumers. Consumers can, in some circumstances, be businesses, not just individual endpurchasers. The consumer guarantees cannot be contracted out of. When considering liability to consumers, the ACL also requires Australian-specific wording to be included in warranty documents. In addition, as part of its broad scope, the ACL also deals with consumer safety and the requirements around the conduct of product recalls and safety reporting. Intellectual property legislation Federal legislation provides for the recognition, registration, protection and enforcement of intellectual property rights. Trade marks The Trade Marks Act 1995 (Cth) allows for the registration of trade marks in multiple classes, for an initial period of 10 years. A trade mark registration is able to be renewed indefinitely every 10 years. A registered trade mark should be used in relation to the goods or services in respect of which it has obtained registration, to avoid potential cancellation by a third party for non-use v9 National Commercial in confidence 43

44 The basic requirements for registrability of trade marks in Australia are that the mark be distinctive (capable of distinguishing the goods or services of one trader from those of another) and different (not be identical or deceptively similar to any prior trade mark which is registered or in the process of registration for similar or closely related goods or services). The current legislation allows for the protection of words, names, signatures, phrases, letters, numbers, sounds, smells, shapes, logos, pictures, and aspects of packaging, or a combination of these signs. Patents Patented inventions are protected under the Patents Act 1990 (Cth) which confers on the patentee the exclusive right to commercially exploit the invention, by making, hiring, selling or importing the invention if it is a product, or using the invention if it is a method or process. A standard patent lasts for a period of up to 20 years (or up to 25 years for pharmaceutical substances), and an innovation patent lasts for a period of up to 8 years. An applicant for a standard patent must demonstrate that their "invention" is novel, inventive and useful before a patent is granted. A different standard applies for innovation patents, which require demonstration of an innovative step (rather than an inventive step) in order to be granted. Design Design features of products may qualify for protection under the Designs Act 2003 (Cth) allowing the registered proprietor of the design exclusive rights to make, use or sell articles to which the design has been applied, for a period of up to 10 years. The person seeking registration of the design will need to demonstrate that the design is new and distinctive. Copyright Copyright works are protected automatically under the Copyright Act 1968 (Cth). Registration is not required for the owner of the copyright to be afforded the protections, rights and remedies under the Copyright Act. Copyright in literary, dramatic, musical and artistic works lasts for a period of 70 years after the author s death, and for films and sound recordings, 70 years from publication v9 National Commercial in confidence 44

45 For more information or advice, please contact: Business Organisation Paul Schmidt-Uili Partner D M E paul.schmidt-uili@dibbsbarker.com Peter Surgeon Partner D M E peter.surgeon@dibbsbarker.com Lis Boyce Partner D M E lis.boyce@dibbsbarker.com Foreign Investment Geoff Cairns Partner D M E geoff.cairns@dibbsbarker.com Peter Luke Partner D M E peter.luke@dibbsbarker.com v9 National Commercial in confidence 45

46 Banking and Financial Services David Carter Partner D M E david.carter@dibbsbarker.com Peter Luke Partner D M E peter.luke@dibbsbarker.com Michael Goss Partner D M E michael.goss@dibbsbarker.com Intellectual Property, Technology and Competition Melissa McGrath Partner D M E melissa.mcgrath@dibbsbarker.com Scott Sloan Partner D M E scott.sloan@dibbsbarker.com Stuart Green Partner D M E stuart.green@dibbsbarker.com Rob McInnes Partner D M E rob.mcinnes@dibbsbarker.com v9 National Commercial in confidence 46

47 Employment Law Leonard Lozina Partner D M E leonard.lozina@dibbsbarker.com Maree Skinner Partner D M E maree.skinner@dibbsbarker.com v9 National Commercial in confidence 47

48 About us DibbsBarker is a commercially focused law firm with more than 200 partners and staff located in offices in Brisbane and Sydney. We are a leading legal advisor focusing on six core industry areas: Agribusiness, Energy & Infrastructure, Financial Services, Insurance, Life Sciences & Healthcare and Property. To help you achieve your business objectives, we believe our lawyers need to understand your strategy and goals. Our knowledge of the challenges and developments occurring in your industry enables us to balance the legal issues with the broader factors that may influence your outcomes. DibbsBarker is a leader in terms of quality of work, its people and clients. We combine these with a personal service, flexibility, responsiveness and a deep industry understanding, to offer a unique service to our clients and help them achieve their business goals. Industry focus Agribusiness Energy & Infrastructure Financial Services Insurance Life Sciences & Healthcare Property Services provided Competition & Consumer Law Corporate & Commercial Dispute Resolution & Litigation Financial Services Insurance Intellectual Property & Technology People & Workplace Property & Projects Restructuring & Insolvency v9 National Commercial in confidence 48