As in the UK, a limited company is a separate taxable entity from its shareholders. This means that the company's taxable income is computed for each accounting period (typically ending on 30 June), with the company then paying corporation tax on its income (including capital gains).

Rates of Corporation Tax
Tax is payable at a flat rate on all taxable income, as follows:

• Income Year 1999/2000 - 36%
• Income Year 2000/01 - 34%
• Income Year 2001/02 - 30%

There is thus a downward trend in the rate of tax applicable to the profit of companies in Australia, in common with the trend found in most of the developed world.

Australian Business Numbers
One issue you must not overlook if you are setting up business in Australia through a limited company incorporated in Australia (or an Australian branch of a company incorporated elsewhere) is registering for an Australian Business Number (an ABN). If you do not have an ABN and you carry out work for another organisation, that organisation must withhold 48.5% of the payment and pay this over to the Australian Taxation Office. The sum withheld can only be claimed as a credit on the tax return at the end of the year - clearly a significant tax cash flow disadvantage and a drain on valuable working capital.

The good news is that you can register for an ABN on-line by clicking here - or contact us and we will help you to register.

Goods and Services Tax
GST at the rate of 10% was introduced on the 1st of July 2000 as part of the process of tax reform in Australia, and replaced wholesale sales tax. There has been much debate about whether the introduction of GST has lead to a leap in inflation - the perception thus far is that it has been broadly neutral.

The law requires an entity (which includes a limited company) to register with the Australian Taxation Office for GST purposes if the "registration turnover threshold" is exceeded - which is presently an annual turnover of $50,000 (unless the enterprise is a non-profit body). Enterprises with an annual turnover of less than this may choose to register - in this circumstance the business should compare the benefit of being able to recover the input tax credit with the need to deal with added administration (a quarterly Business Activity Statement must be filed) and to add GST to supplies at the rate of 10%.

Other Taxes
Other taxes an employer has to consider include Fringe Benefits Tax and Pay-roll Tax. More details are in our factsheets, available on request.

To request further free factsheets please click here.

Setting Up a Business in Australia? - contact
Collett & Co Chartered Accountants
Or visit our sister site, gomatilda.co.uk