Australia recorded $1.07 trillion in inward foreign direct investment at the end of 2024, with thousands of foreign parents operating local subsidiaries across every state. For overseas businesses entering the market, the challenge is rarely choosing between a branch and a subsidiary, it is the underestimated weight of ongoing local compliance once the entity is live.
This guide walks through what foreign parent companies actually need to set up and run an Australian subsidiary, covering ASIC registration, tax obligations, payroll, GST, ongoing reporting, and the country-specific issues that catch parents from the UK, US, Germany, Singapore, New Zealand, Ireland, and Japan.
Published: April 2026
An Australian subsidiary is a locally incorporated proprietary limited company (Pty Ltd) that is owned, wholly or partially, by a foreign parent. It is a separate legal entity to the parent, with its own ABN, TFN, directors, and Australian Securities and Investments Commission (ASIC) registration.
The alternative is registering as a foreign branch (a registered foreign company under Part 5B.2 of the Corporations Act). Most foreign parents choose a Pty Ltd subsidiary because it ringfences liability, simplifies tax, and is the structure Australian customers, suppliers, and banks expect to deal with.
Once incorporated, an Australian subsidiary has the same compliance obligations as any locally owned business, plus a few additional requirements that flow from being foreign-controlled.
To incorporate a Pty Ltd company in Australia, the parent needs:
At least one director who is ordinarily resident in Australia. This is a hard rule under section 201A of the Corporations Act. Foreign-resident directors are permitted as additional directors, but the company must have at least one Australian-resident director. This single requirement is the most common reason foreign parents engage local advisors or directors at the outset.
A Director Identification Number (Director ID) for every director. Director IDs are issued by the Australian Business Registry Services and must be obtained before appointment. Foreign-resident directors can apply, but the process takes longer and requires identity verification with documents that may need apostille certification.
A registered office and principal place of business in Australia. A virtual office is acceptable for the registered office, but the principal place of business should reflect where the company actually operates.
A company secretary (optional for proprietary companies, but if appointed, must be ordinarily resident in Australia).
Share capital and shareholder details. The parent will typically be the sole or majority shareholder. There is no minimum share capital requirement in Australia, which is a notable difference from many European jurisdictions.
ASIC registration costs $597 for the standard incorporation fee as of 2026, plus the annual review fee of $321 for proprietary companies. Once registered, the company receives an Australian Company Number (ACN), which becomes the basis for the ABN and tax registrations that follow.
Once the company has an ACN, the next step is registering with the Australian Taxation Office (ATO):
Tax File Number (TFN): Required for every entity. Used for income tax lodgements and identifies the company to the ATO.
Australian Business Number (ABN): Required to invoice in Australia, claim GST credits, and deal with most suppliers. Without an ABN, customers must withhold 47% from payments under the no-ABN withholding rules.
Goods and Services Tax (GST): Registration is mandatory once turnover exceeds $75,000 per year. Foreign parents often register voluntarily from day one to claim input GST credits on setup costs, software, and professional fees.
Pay As You Go (PAYG) Withholding: Required as soon as the company employs anyone or makes payments to other businesses without an ABN.
Fringe Benefits Tax (FBT): Registration is required if the company provides any non-cash benefits to employees, including company cars, gym memberships, or housing allowances. The FBT year runs 1 April to 31 March, which does not align with the standard Australian financial year (1 July to 30 June) or with most foreign financial years.
For a deeper walkthrough of the BAS lodgement process and how GST flows through the monthly cycle, see our BAS due dates guide.
Opening an Australian business bank account from offshore is harder than it used to be. The major banks (CBA, Westpac, ANZ, NAB) require:
Most foreign parents budget 6 to 12 weeks to open an account, particularly where directors cannot attend in person. Neobanks like Wise Business and Airwallex are sometimes used as interim solutions for receivables and supplier payments, but they do not replace a major bank for payroll, tax payments, and large transfers.
Once banking is sorted, the operational stack typically includes:
Hiring employees in Australia triggers a stack of obligations that often surprise foreign parents.
Single Touch Payroll (STP): Every payrun must be reported to the ATO in real time. There is no exemption for small subsidiaries with one or two employees. STP Phase 2 also requires reporting of employment basis, tax treatment, and disaggregated gross earnings.
Superannuation: Employer super contributions are 12% of ordinary time earnings as of 2026, paid quarterly to the employee's chosen super fund. This is on top of the salary, not deducted from it. From 1 July 2026, the Payday Super reforms require super to be paid at the same time as salary, which significantly tightens cash flow timing for employers.
Payroll tax: This is a state-based tax with thresholds that vary by jurisdiction. NSW threshold is $1.2M of annual wages, Victoria is $900,000, Queensland is $1.3M, with rates between 4.75% and 6.85%. A subsidiary with employees in multiple states has to track wages by state and apply each state's rules.
Workers compensation: Mandatory in every state. Premiums vary by industry classification but typically sit at 0.5% to 5% of wages. NSW uses icare, Victoria uses WorkSafe, other states have their own schemes.
Annual leave, personal leave, public holidays: Full-time employees accrue 4 weeks of paid annual leave per year, 10 days of paid personal/carer's leave, and entitlement to the public holidays in their state. Casual employees receive a 25% loading instead of these entitlements.
Long service leave: A uniquely Australian entitlement. After 7 to 10 years of continuous service (depending on the state), employees become entitled to paid leave, typically 8.67 weeks per 10 years. This accrues on the balance sheet as a long-term liability.
To see what a single Australian hire actually costs once all of this is loaded, use our employee cost calculator.
The annual rhythm for an Australian subsidiary looks roughly like this:
Monthly or quarterly:
Quarterly:
Annually:
The Australian financial year ends 30 June, which rarely aligns with the parent's year-end. Most subsidiaries run a parallel reporting calendar: monthly numbers to the parent in the parent's format, and a separate Australian statutory close at 30 June.
For the full compliance calendar by month, see our Australian tax calendar.
The mechanics of Australian compliance are the same regardless of where the parent sits, but the friction points differ significantly by country.
UK parents tend to underestimate three things: superannuation as a real employment cost (there is no equivalent Workplace Pension at 12%), the difference between BAS GST and VAT (similar conceptually, but lodgement mechanics, GST-free supplies, and input credits work differently), and the absence of PAYE-style year-end reconciliations (STP handles this in real time).
UK parents are also caught by the audit threshold rules for large proprietary companies: revenue over $50M, gross assets over $25M, or 100+ employees triggers a mandatory audit, but foreign-controlled small proprietary companies can also be required to lodge audited financial statements with ASIC unless an exemption applies under ASIC Class Order 98/98 or Instrument 2017/204. UK parents often miss this because the equivalent UK exemption thresholds are higher.
US parents typically have the steepest learning curve. The differences include: no equivalent of state sales tax (GST is federal, single rate, broad-based), no W-2 or 1099 (STP handles wage reporting), employer super is mandatory and not optional, and Australian termination law is materially more protective than US at-will employment.
US parents also need to manage Subpart F and GILTI implications of holding an Australian sub, and the Australia-US tax treaty interactions on intercompany interest, royalties, and management fees. Transfer pricing documentation is mandatory under Australia's transfer pricing rules even for small subsidiaries with related-party dealings.
German parents (and broader EU parents) often expect HGB-equivalent reporting cadence and detail, but Australian Accounting Standards (AAS) follow IFRS and do not require the same level of statutory disclosure for proprietary companies. The reporting pack to Germany is usually a parallel set of numbers in the parent's chart of accounts, mapped from Xero each month.
GST mechanics are different from MwSt or VAT in three ways worth noting: the registration threshold is $75,000 (low compared to most EU thresholds), GST-free supplies are narrower than zero-rated supplies in the EU, and the input tax credit timing is broadly aligned but with different documentation requirements.
European parents often want a 15th of the month reporting deadline. This is achievable but requires the bookkeeping and bank rec to be tight, with month-end close completed by working day 7 to allow for review and consolidation mapping.
Asian parents usually move fastest because the regulatory style is similar (IRAS and ATO are recognisable cousins, GST is conceptually identical to GST in Singapore). The friction points are usually the resident director requirement (Singapore allows nominee directors more freely), payroll (Australian super and leave entitlements are richer than CPF and AL in Singapore), and the financial year mismatch (Australia ends 30 June, Singapore typically runs to 31 December).
The closest cousin. NZ parents understand the rhythm of GST, PAYE, KiwiSaver, and stat accounts, and the Trans-Tasman regulatory framework smooths a lot of the setup. The watch-points are payroll tax (no NZ equivalent), super at 12% (vs KiwiSaver typically 3-4% employer), and the stamp duty implications of share transfers in some states.
Irish parents and parents from other smaller jurisdictions often run the Australian sub from a regional hub (UK, Singapore, or US). The hub structure is fine but adds a layer of intercompany pricing and management fee documentation that needs to be in place from day one to avoid transfer pricing exposure.
The setup costs sit between $3,000 and $8,000 for a straightforward incorporation, covering ASIC fees, registered office, director ID applications, share register setup, and initial tax registrations.
The ongoing monthly cost depends on volume and complexity, but a typical low-volume subsidiary (under 50 transactions per month, 1 to 3 employees) runs at:
Subsidiaries with higher transaction volumes, multiple employees, or fractional CFO requirements scale from there. A mid-volume subsidiary at $5M to $10M revenue with 10 to 20 employees typically runs at $5,000 to $10,000 per month for the full finance and payroll function.
For a detailed breakdown of fractional CFO costs in Australia, see our fractional CFO pricing guide.
Underestimating employment cost. Salary is roughly 65% to 70% of true cost once super, leave accrual, payroll tax, workers comp, and FBT are loaded. Budgeting on salary alone causes serious miscalibration.
Treating Australia as a single jurisdiction for payroll. Each state has different payroll tax rules, workers comp schemes, public holidays, and long service leave provisions. A national workforce needs state-by-state tracking.
Missing the foreign-controlled small proprietary company audit obligation. Even a small Australian subsidiary can be required to lodge audited accounts with ASIC if it is foreign-controlled, unless an exemption applies. This is regularly missed in year one.
Skipping transfer pricing documentation. Any related-party transaction (management fees, intercompany loans, royalties, IP licences, services) requires contemporaneous transfer pricing documentation. The simplified record-keeping option helps for smaller subsidiaries, but it is not automatic.
Running monthly reports in the parent's format only. Australian statutory accounts, tax returns, and BAS need Australian-formatted numbers. A reporting pack to the parent is fine, but the local books need to reconcile to the local format.
Letting the resident director question drift. Section 201A is hard law. A subsidiary without a resident director is in breach of the Corporations Act and can be deregistered.
For most foreign parents, hiring a full-time finance person in Australia at the early stage is hard to justify. A loaded finance manager costs $130,000 to $160,000 per year once super, leave, and payroll tax are included, and a single hire creates key person risk for a function that needs to be reliable.
Outsourced finance functions sit between $1,500 and $10,000 per month depending on scope, cover bookkeeping through to fractional CFO, and scale with the business. For a low-volume subsidiary in year one, this is typically the right answer until volumes justify an internal hire (usually around $5M to $10M revenue).
To compare a full-time hire against an outsourced finance function for your specific situation, use our hire vs outsource calculator.
Do I need an Australian-resident director to register a Pty Ltd company?
Yes. Section 201A of the Corporations Act requires every Australian proprietary company to have at least one director who is ordinarily resident in Australia. Foreign-resident directors are permitted as additional appointments but cannot satisfy the resident director requirement on their own.
How long does it take to set up an Australian subsidiary?
Incorporation itself takes 1 to 3 business days. The full operational setup, including ASIC registration, tax registrations, banking, payroll setup, and accounting software configuration, typically takes 6 to 12 weeks, with banking the longest pole.
What is the minimum share capital for an Australian Pty Ltd?
There is no minimum share capital requirement. Many subsidiaries are incorporated with a single $1 share or 100 shares at $1 each. Capitalisation is funded through shareholder loans or further share issues as needed.
Does my Australian subsidiary need to be audited?
Not always. Audit is mandatory for large proprietary companies (meeting two of three thresholds: $50M revenue, $25M gross assets, 100 employees). Foreign-controlled small proprietary companies may also need to lodge audited accounts unless an ASIC exemption applies. Smaller subsidiaries that are not foreign-controlled and not large proprietary do not need a statutory audit.
Do I need to pay GST if my parent invoices customers from offshore?
Yes, if the supply is connected to Australia. The GST rules around connected supplies are complex, particularly for digital services and cross-border arrangements. A subsidiary that invoices Australian customers locally is clearly within the GST net; offshore parents that supply directly need to consider the destination-based tests.
How does the Australian financial year affect my parent's reporting?
The Australian financial year ends 30 June. Most foreign parents run a parallel reporting calendar: monthly numbers in the parent's format on the parent's calendar, and a separate Australian statutory close at 30 June for tax and ASIC purposes. Xero and similar systems handle dual reporting cleanly when set up correctly from day one.
Can my Australian subsidiary employ contractors instead of employees?
Some roles can legitimately be contractors, but the test is functional, not contractual. Australian law looks at the multi-factor test (control, integration, tools, ability to delegate, financial risk) rather than just what the contract says. Misclassifying employees as contractors triggers backdated super, leave, payroll tax, and potentially Fair Work penalties. The simplified contractor vs employee assessment is on our tools page.
What is Single Touch Payroll and why does it matter?
STP is real-time payroll reporting to the ATO. Every pay event (gross, tax, super) is reported to the ATO at the time of payment. There is no exemption for small subsidiaries. STP Phase 2 expanded the data set to include employment basis, tax treatment codes, and disaggregated earnings categories.
Do I need a Director ID if I am based offshore?
Yes, every director of an Australian company needs a Director ID, regardless of residency. The application process for foreign-resident directors involves identity verification with apostilled documents and typically takes 4 to 8 weeks.
How does superannuation work for foreign-resident employees?
Super is generally payable on Australian earnings regardless of where the employee is tax-resident. Some bilateral super agreements allow exemptions for short-term assignees from countries like the US, UK, Germany, and others, but the default position is that super applies to all Australian employment.
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We review and check this guide periodically. At the time of writing (April 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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