AUSTRALIA GUIDE

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Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Expanding to countries such as Australia – which is characterized by a productive and skilled workforce, uniform employment and tax laws, a strong infrastructure network and leading sectors in financial services, construction, manufacturing, healthcare and social assistance, mining, and scientific and technical services – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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Australia – The Economy

Australia is a highly developed country with a market economy. As of 2021, Australia was the 13th-largest national economy by nominal GDP (Gross Domestic Product), the 18th-largest by PPP-adjusted GDP, and was the 25th-largest goods exporter and 20th-largest goods importer.

The Australian economy is set to become the world’s 13th largest economy in 2022, according to the International Monetary Fund. Australia’s nominal GDP will be around A$2.1 trillion (US$1.7 trillion). Australia is home to just 0.3% of the world’s population, but accounts for 1.6% of the global economy.

Australia took the record for the longest run of uninterrupted GDP growth in the developed world with the March 2017 financial quarter. It was the 103rd quarter and the 26th year since the country had a technical recession (two consecutive quarters of negative growth). As of June 2021, the country’s GDP was estimated at A$1.98 trillion.

The Australian economy is dominated by its service sector, which in 2017 comprised 62.7% of the GDP and employed 78.8% of the labor force. Australia has the tenth-highest total estimated value of natural resources, valued at US$9.8 trillion in 2017. At the height of the mining boom in 2009–10, the total value-added of the mining industry was 8.4% of GDP. Despite the recent decline in the mining sector, the Australian economy had remained resilient and stable and did not experience a recession from 1991 until 2020.

Australia’s economy is strongly intertwined with the countries of East and Southeast Asia, also known as ASEAN Plus Three (APT), accounting for about 64% of exports in 2016. China in particular is Australia’s main export and import partner by a wide margin.

Australia is a member of the APEC, G20, OECD and WTO. The country has also entered into free trade agreements with ASEAN, Canada, Chile, China, South Korea, Malaysia, New Zealand, Peru, Japan, Singapore, Thailand, and the United States. The ANZCERTA agreement with New Zealand has greatly increased integration with the economy of New Zealand.

Australia is well positioned to grow its resources, energy, agriculture, and education and tourism services exports to Asia’s rising 2.2 billion middle-class consumers expected by 2032.

Small and Medium-Sized Companies

Small and Medium Enterprises (SMEs) are the driving force behind the economic growth of Australia – out of 2.4 million businesses in Australia, the majority (2.35 million or 98 per cent) are small and/or medium businesses.

Nearly two-thirds of businesses are sole traders and more than a third employ 1-19 staff. Micro businesses, which employ 1 to 4 employees, account for an additional 25.7 per cent of all businesses. The remainder in the small business category (with 5 to 19 people) account for 8.9 per cent of all businesses. 

Small and medium-sized enterprises (SMEs), contribute around 55 per cent to Australian GDP, and employ about two-thirds of the business workforce in Australia.

The Australian Tax Office define SMEs based on annual turnover and categorises small businesses as those with an annual turnover of $10 million or less. By their definition, medium businesses have a turnover of between $10 million and $250 million, and large companies have an annual turnover of more than $250 million.

Due to the size of their economies and other factors, the definition of SMEs is different in the United States and the European Union.

CountryAustralia
CapitalCanberra
No. of States/Provinces6 states
Principal CitiesSydney, Melbourne, Brisbane, Perth, Adelaide, Gold Coast, Canberra, Newcastle, Wollongong, Logan City
Language(s)Australian English, Australian Aboriginal languages, Tasmanian languages, Torres Strait Island languages
Local CurrencyAustralian Dollar (AUD$)
Major ReligionChristianity
Date Formatdd/mm/yyyy
Time ZoneAustralian Eastern Standard Time (GMT+10)
Country Dial Code+61
Population26,068,792
Border CountriesMaritime borders with East Timor, Indonesia, New Zealand, Papua New Guinea, Solomon Islands, and New Caledonia (France).
Tax Year1 July to 30 June
VAT %10% (Known as Goods & Services Tax)
Minimum Wage$20.33 per hour
Taxpayer Identification NumbersTax File Number (TFN)
Australian Business Number (ABN)
GST Registration Number
Leading Sectorsfinancial services, construction, manufacturing, healthcare and social assistance, mining, and scientific and technical services
Main importsmachinery; vehicles; electrical machinery and equipment; mineral fuels including oil; and pharmaceuticals
Main exportsiron ore, coal briquettes, petroleum gas, gold, and frozen bovine meat
Main trading partnersChina, Japan, South Korea, United States, India, Thailand, and Germany
Government TypeFederal parliamentary constitutional monarchy
Current Prime MinisterElizabeth II (monarch); Scott Morrison (Prime Minister)

The Main Sectors of the Australian Economy

The country focuses on the following key sectors, which all have a significant influence on the country’s economy:

  1. Services – Service industry comprises over 70% of the GDP. It dominates the economy, which employs over 79% of the labor force. An indicator of this sector’s diversity employment ranges from high pay to low pay; the part time full time and little skill, semi-skill and low skill and also hold one of the most educated, multi-lingual, and multi-cultural workforces globally.

    The industry also engages tourism, media and entertainment, healthcare, logistics, education, and finance sectors.

  2. Tourism – Australia is one of the most desirable travel destinations because of its beautiful natural landscape, coastal areas, red deserts, and rainforests. The country draws in millions of visitors per year, attracted by beautiful sandy beaches, unique flora and fauna, the hospitality of the people and world-class food and wine. All this adds 38 billion AUD to the economy, employing approximately one million people. The highest number of tourists comes from China, Singapore, Japan, Great Britain, and the United States.

  3. Agriculture – The agricultural sector accounts for three percent of Australian GDP at the farm and twelve percent if value addition through processing is done beyond the farm. In 2017, agriculture contributed to 0.5% increase of the total 1.9% increase in the GDP. It has employed over 300,000 people and covered 60% of the land mass. Generally, over $50 billion, and about 60% of the farms’ produce is exported annually making 14% of the total export. The products exported by this nation include horticultural products such as fruits, nuts, and vegetables. Viticulture and wine production is also a boost to the agricultural industry as it is 30% of the sector and 7000 winegrower’s vineyard covers 40,000 hackers. In 2017, 1.98 million tons of wine grapes were crushed in approximately 2500 wineries that employ 173,000 full time and part-time employees, known for its aquaculture is also the largest producer of poultry, eggs, and pigs.

  4. Manufacturing – The manufacturing industry currently contributes to 6 percent of the GDP, exports 96 billion AUD worth of goods, and employs 860,000 people. Big companies like Boeing and General Electric are significant investors in this crucial industry. Although from 2008 to 2014, the industries output had declined by 13%, the sector stabilized and remained most significant. In the past year, data from Bureau of Statistics indicate that 40,000 new manufacturing jobs have been created. The manufactured goods sold to international markets have also grown dramatically.

  5. Healthcare – Healthcare is Australia’s fourth most significant contributor to the GDP and was ranked the second-best healthcare system in the world, according to commonwealth fund’s 2017 report. Currently, 13 percent of the workforce is employed in the industry and is projected to increase to 15 percent by the year 2020.

    Furthermore, 160,000 other full-time jobs will be added with the launching of the National Disability Insurance Scheme (NDIS). With the world-class medical research and healthcare infrastructure, Australia is regarded as one of the best places to conduct clinical trials and medical investigations.

  6. Media And Entertainment – Media and entertainment industry accounts for $29.1 billion that is comprised of $17 billion in direct output. Seven percent of it is generated online, and $25.1 by offline media, which captures value added created by capital inputs and labor of about 45,000 full-time equivalent workers, are employed directly in the industry. Advertising is estimated to contribute $40 billion to the economy.

  7. Finance – With a sophisticated modern financial sector, Australia’s strong economic performance and experience makes Australia a preferred place to do business and a global commercial hub. The World Bank has consistently ranked Australia as one of the best and fastest places to start a business. This business service sector is worth 1.7 trillion AUD and adds up to 11 percent of the national GDP equivalent to 118 billion AUD, which has attracted investors from within the country, Asia, and from all over the world.

  8. Mining – Mining is a driving force for the exploration of remote Australian lands and industrial advancement with more than 120 billion AUD currently invested in new projects. The sector is maximizing on the plentiful of natural resources that are in exploration, extraction, and processing like coal, mineral sand, gold, copper, uranium, bauxite, iron ore, nickel, lead, zinc, diamonds, and natural gas. Australia is the world’s largest miners of bauxite, iron ore, lead, and zinc, which generates earnings of about 245 billion AUD in exports earnings. The mining industry has over six hundred publicly traded companies.

Compliance Highlights

  • Australian Taxation Office – The Australian Taxation Office (ATO) is the principal revenue collection agency of the Australian Government. Their role is to effectively manage and shape the tax and superannuation systems that support and fund services for Australians, including:
    • collecting revenue
    • administering the goods and services tax (GST) on behalf of the Australian states and territories
    • administering a range of programs that provide transfers and benefits to the community
    • administering the major aspects of Australia’s superannuation system
    • being custodian of the Australian Business Register.
  • The Fair Work Ombudsman – Their purpose is to promote harmonious, productive, cooperative, and compliant workplace relations in Australia. Their functions outline the responsibilities we have as set by the Fair Work Act 2009 to achieve their purpose:
  • provide education, assistance, advice and guidance to employers, employees, outworkers, outworker entities and organizations
    • promote and monitor compliance with workplace laws
    • inquire into and investigate breaches of the Fair Work Act
    • take appropriate enforcement action
    • perform our statutory functions efficiently, effectively, economically, and ethically

Labor Contracts Law

Companies hiring employees in Australia must operate within an employment framework based on federal and state legislation. The Fair Work Act (2009) and National Employment Standards (NES) are the main legal factors governing employment law in Australia.

‘Modern Award’ and Enterprise Agreements can apply to individual workplaces and companies and are industry- and legislation-based agreements that set minimum pay and conditions. Australia’s Human Rights Act also enforces other regulations in association with a number of specific acts prohibiting discrimination at all stages of employment.

Under common law, all employees in Australia should have a contract, whether verbal or in writing (which is preferable). Contracts come under Australian Government laws but can also be subject to state and territory legislation.

Workplace (or Enterprise) Agreements set out the rights and obligations between an employer and group of workers. Terms and conditions supplant basic minimums in the National Employment Standards (NES).

Similarly, Awards apply terms and conditions to a particular industry or occupation, and they are also in addition to NES provisions.

These considerations come into play during the first stages of hiring and onboarding – drawing up a contract with your new employee. General requirements apply to all contracts. These include:

  • New employees must receive a Fair Work Information Statement setting out the essential terms of their role, as soon as possible after beginning work
  • Oral agreements are permitted under common law, although written contracts are strongly recommended and should detail essential terms and conditions of employment
  • Where work comes under Modern Awards or Enterprise (collective) Agreements, employees should have written confirmation in their contract or job offer specifying the award or enterprise agreement that covers their role
  • Workplace agreements, which should exceed minimum limits under National Employment Standards
  • Providing copies of company policies on conduct, confidentiality, social media, role and responsibilities, health, and safety, for example
  • Contracts are subject to government laws and, in some cases, state legislation

Under National Employment Standards (NES) requirements, every employee must receive a copy of the Fair Work Information Statement or a copy of the Casual Employment Information Statement. A contract of employment should cover:

  • Full names and addresses of employer and employee
  • Start date
  • Contract type – indefinite or fixed term for example
  • Remuneration and payment schedule
  • Place of work
  • Outline of employees’ duties
  • Maximum hours per week
  • Paid vacation entitlement
  • Termination, severance, and notice period information
  • Which Modern Award or Enterprise Agreements apply (if any)
  • Company’s policies and procedures

The main contract types/agreements that affect employment in Australia include:

  1. Indefinite, Open-ended Employment Contracts: Typically for full-time, permanent employees usually working between 38 and 40 hours each week, on average. They are entitled to written notice or payment in lieu. Terms and conditions can be set by the contract, or by an award or registered agreement. Entitlements include annual, illness and carers’ leave among others.
  2. Fixed-term Employment Contracts: These apply to a definite time period, say three or six months, or a specific task. Employees can be full- or part-time and are entitled to the same wages and benefits as full-time employees, which may be improved by awards or agreements.
  3. Part-time Employment Contracts: Generally, for fewer than 38 hours a week but on a regular work schedule, with the same minimum entitlements as full-time employees but adjusted on a pro rata basis.
  4. Casual Employment Contracts: Tend to work as required without the employer’s commitment to offering future work. To compensate for not having minimum benefits, such as paid illness leave and vacations, their hourly rate is ‘casual loaded’ to a higher hourly rate.
    Note: If a full- or part-time contract is mutually changed to casual the same regulations apply as to ending employment. Employees must be given notice of the change and any leave, pay or entitlements must be fulfilled.
  5. Probation Periods: Trial periods typically last between three and six months, during which the individual has the same rights as other employees. If probation is towards full- or part-time work, they accrue rights to paid leave and sickness benefit. If the trial period is unsuccessful, the individual must be given notice and paid for any unused leave.
  6. Apprentice and Trainee Agreements: Individuals enrolled with a Registered Training Organization (RTO) can enter a training agreement with an employer, under guidance of a trained person on a fixed-term basis.
  7. Collective Bargaining Agreements, or equivalent: Australia’s Workplace (or Enterprise) Agreements are the general equivalent of the more commonly known Collective Bargaining Agreements (CBAs) from other employment markets. The agreements set out the rights and obligations between employer(s) and groups of workers or individual workers, by which the employer can organize conditions suited to their business.

    Terms and conditions will supplant basic minimums in the National Employment Standards (NES). The Fair Work Act (2009) codifies the rules and regulations that apply to such agreements.

    Similarly, Modern Awards lay down terms and conditions applying to a particular industry or occupation that are also in addition to NES provisions.

Payroll – Tax Contributions and Benefits

Income Tax:

Australian citizens and residents are taxed on their worldwide income; non-residents and those living there only temporarily are generally liable for tax only on income earned in Australia. Individuals living in Australia for more than six months in a year are considered residents for tax purposes.

A temporary resident can be an individual on a specific visa, while non-residents are individuals in Australia fewer than six months in a year.

Health and Social Insurance:  Australia’s social security income support system is entirely funded by central government, without contributions from either employer or employees. The system is restricted to Australian residents, as defined by the Social Security Act 1991. Migrants generally have no access to social security payments for four years after their arrival.

Australia’s universal public healthcare system comes under Medicare, providing a wide range of services for Australian citizens, permanent residents, and some overseas visitors. The private healthcare system includes private hospitals and specialized clinics funded by premiums from individuals, corporations, or government incentives. Some employers may offer private healthcare as an employee benefit.

Neither employers nor employees contribute to social insurance taxes, with employees paying 2% on income towards the Medicare Levy.

Sick Leave: National Employment Standards regulations decree that all full-time employees are entitled to paid sick leave. Employees can take paid leave to support a member of their immediate family who is sick, injured or if they face a family emergency. The annual entitlement is 10 days (pro rata for part-timers) with unused days carried forward to the following year. Casual workers do not qualify for sick leave but are paid ‘casual loading’ above their basic pay to compensate. Medical certificates may be required by the employer.

Paid Vacations: Under National Employment Standards (NES), full-time employees are entitled to four weeks’ annual leave each year. Employees classified as shift workers receive five weeks annual leave.

Casual workers are not entitled to annual leave, but their salary is ‘casual loaded’ above their basic rate as compensation. Employees covered by award or enterprise agreements may receive additional leave; employees not covered by such agreements may ‘buy’ extra vacation by giving up equivalent pay.

Public Holidays: On a day or part-day that is a public holiday, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work on the day or part-day.

If employees have to work on a public holiday, they must get paid at least their base pay rate for all hours worked on public holidays. Awards, enterprise agreements and other registered agreements can provide entitlements for working public holidays, including extra pay (e.g., public holiday rates), an extra day off or extra annual leave, minimum shift lengths on public holidays, agreeing to substitute a public holiday for another day.

Public Holidays in Australia include:

  • New Year’s Day – January 1
  • Australia Day – January 26
  • Good Friday – March / April
  • Easter Monday – March / April
  • Anzac Day – April 25
  • Christmas Day – December 25
  • Boxing Day – December 26
  • Any other days, or part-day, declared or prescribed by or under a law of a State or Territory to be observed generally within the State or Territory, or a region of the State or Territory, as a public holiday.

Maternity Benefit:  Parental Leave Pay (PLP) is AU$772.55 (€498.68, US$567.75) per week, AU$154.51 (€99.75, US$113.55) per day, before tax. The award is for 90 ‘payable days’ over 18 weeks, comprising 60 payable days and 30 Flexible Paid Parental Leave days.

Fathers and partners may also be eligible for 10 payable days over two weeks, meaning families could be eligible for a total of 100 payable days over 20 weeks. Calculations are based on the national minimum wage weekly rate.

Maternity / Paternity / Parental Leave:  Paid maternity leave is for a total of 18 weeks; fathers and partners may receive 10 days paid leave.  On the birth or adoption of a child, parents are entitled to parental leave.

Leave applies when an employee, their spouse or de facto partner gives birth, or when they adopt a child under 16 years of age. Employees are eligible if they have worked for their employer at least 12 months before the expected date of the birth or before the adoption date.

Employees do not have to work another 12 months to take another period of parental leave if they are with the same employer – but, they will have to work for one year before taking parental leave with a new employer. 

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