How we helped one multinational client establish a happy home in Australia

The Chinese company engaged Chiu & Chew to establish an Australian subsidiary to conduct its local business activities.

The terms of our engagement require regular communication with the Chinese parent company and its Australian subsidiary about the many services we provide.

Today, we provide business and taxation advice to both firms so that they meet all of their obligations to the Australian Taxation Office (ATO), other Australian regulatory authorities, and to each other.

Substituted accounting period

Apart from handling various types of registrations, such as taxation, a business name, and trademarks for the Australian subsidiary, we also applied to the ATO for a substituted accounting period.

Chinese corporations have financial years that end on 31 December. We applied for a substituted accounting period for the Australian subsidiary to end on 31 December each year in lieu of the default financial year-end of 30 June.

This alignment is important to consolidate accounts and tax compliances between the parent company and its Australian subsidiary.

Local director

Since the local subsidiary is an Australian incorporated company, it is required by law to have at least one local director.



As the Chinese parent is not comfortable appointing any of its Australian subsidiary's employees as a director, we recruit a local lawyer with whom we share an affiliation to take on the role of director.

Australian Securities and Investments Commission (ASIC)

We advise the Australian company on all statutory compliance matters and act as its ASIC agent.

GST

We advise the Australian subsidiary on how GST works in Australia and we assist with its compliances and reporting of GST.

Deferred GST scheme

The Australian subsidiary imports electronic products from its Chinese parent for wholesale distribution in Australia.

Australian Customs would normally charge and collect GST on behalf of the ATO at the initial point of importation.

However, to relieve the local subsidiary from having to outlay cash, we applied for the local subsidiary to join the ATO's deferred GST scheme.

The deferred GST (DGST) scheme effectively allows our client to waive payment of GST on all goods imported into Australia.

Payroll

As the local subsidiary and Chinese parent company are not familiar with Australian employment laws, we assist with such compliances as PAYG withholding tax, superannuation guarantees, payroll tax, workers compensation insurance cover, and Fair Work obligations. 



We help the Australian subsidiary to distinguish between employees and contractors, and we advise the local subsidiary about its obligation as an employer.

Trust account

The Chinese parent company wants to ensure that all payments by its Australian subsidiary – payroll, local suppliers, and other expenses – are properly monitored and authorised. 

The Australian subsidiary transfers a predetermined amount into a Chiu & Chew trust account. Subject to the Chinese parent's approval, we pay expenses to the right parties on behalf of its Australian subsidiary.

Monthly reporting

To monitor the business operations of its Australian subsidiary, the Chinese parent company requires a monthly accounting reporting package. 



The Chinese parent engages us to review the package by appraising the monthly management accounts of its Australian subsidiary.

Thin capitalisation

The Chinese parent company provides loans to its Australian subsidiary and had intended to charge interest on these loans. 

Due to thin capitalisation requirements in Australia, we advised the Chinese parent company to structure the ratio between loan and capital so that any interest payable by its Australian subsidiary is fully tax deductible.

Withholding tax

As interest payable to any overseas entity is subject to withholding tax in Australia, we help the Australian subsidiary to register and report withholding tax on overseas interest payments accordingly.

International related party transactions

The ATO requires all international related parties to deal with each other at arm's length on all transactions. 

We advise the Chinese parent company and its Australian subsidiary about pricing methodologies on various types of transactions between each other.

We also advise our clients on documentation and risk assessment, and explain the ATO's audit process so they both understand their obligations.

Annual audit

Our audit team attends to the audit of the annual financial statements of the Australian subsidiary in accordance with the Australian Auditing Standards.

The Chinese parent company engages one of the big-4 accounting firms as its auditor. As auditor for the Australian subsidiary, we prepare the audit reporting package provided by the big-4 firm.

Annual taxation

The Australian subsidiary engages us as its tax agent. This means we prepare all of the company's correspondence to the ATO, such as its annual tax return, Fringe Benefits Tax return, franking account, and international dealings schedule.

Litigation

When the Australian subsidiary had a legal dispute with one of its distributors, we referred the company to a lawyer who is an expert in the field.



We collaborated with the lawyer by compiling documents and summarised all the facts on the matter. As the evidence we gathered was comprehensive and compelling, the case was resolved in the favour of our client.