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In Short
- New Zealand and Australia are closely linked, but they remain separate legal and tax systems, so structure matters.
- Your choice of subsidiary, branch, joint venture or dual structure affects liability, tax and compliance.
- Getting the structure wrong can lead to extra tax, risk and administrative burden.
Tips for Businesses
Map out your expansion goals before choosing a structure. Consider how much liability risk, tax complexity and administration you can manage. Check GST and tax registration thresholds early. Review permanent establishment risks and intellectual property protection. Coordinate legal and tax advice so your structure supports long-term growth.
Summary
This article explains cross-border business structures for business owners operating between New Zealand and Australia and outlines key legal and tax considerations. It is prepared by LegalVision's business lawyers, and LegalVision, a commercial law firm, specialises in advising clients on cross-border structuring and commercial law.
For many New Zealand and Australian businesses, expanding across the Tasman feels like a natural next step. The two countries enjoy one of the closest economic partnerships in the world under the Closer Economic Relations (CER) Agreement, which has steadily reduced barriers to trade and investment since the 1980s. Despite this integration, businesses cannot treat New Zealand and Australia as a single market. This article explains why choosing the right structure is critical, affecting liability, tax efficiency, compliance obligations, and long-term growth potential.
Subsidiary Companies
One of the most common options is to set up a subsidiary. This involves incorporating a new company in the country you are expanding into, while retaining ownership through. For instance, either a common parent entity or mimicking the shareholding of the original company.
For example, a New Zealand company might register an Australian subsidiary with the Australian Securities and Investments Commission (ASIC), while an Australian company would register in New Zealand under the Companies Act 1993.
Subsidiaries are separate legal entities, so liability for debts or disputes stays with the local company. They can also build local credibility, letting you open bank accounts and hire staff under local laws. However, they involve more compliance, including:
- filings;
- eligible directors; and
- managing transfer pricing for cross-border dealings.
Subsidiaries work best for businesses seeking long-term, stable growth and a strong local presence. They require more upfront commitment but provide a robust foundation for expansion.
Branch Offices
An alternative to a subsidiary is establishing a branch. Your original company remains the only incorporated entity, but you register it as an overseas company in another country. A New Zealand company can register with ASIC to operate in Australia, and an Australian company can register with the New Zealand Companies Office to operate in New Zealand.
Branches are simpler and cheaper to set up because you do not need a separate company. Profits and losses flow back to the main company, which can simplify accounting. However, branches may still have reporting obligations. They can be a practical way to test a new market before fully committing.
The downside is that the underlying registered company remains liable for all debts and obligations of the branch. This exposes the company to greater risk and may make the business appear less established in the eyes of local partners, clients, or regulators.
Joint Ventures and Partnerships
Not all businesses want to expand alone. Sometimes the best approach is to partner with a local business through a joint venture or partnership. This can be done by creating a jointly owned company with a robust shareholders' agreement or as separate entities working together through a contractual agreement that sets out how the parties will collaborate.
The key advantage here is shared risk and access to knowledge. A joint venture partner may bring something that can accelerate growth in a new market include:
- established distribution channels;
- industry expertise; or
- capital at the table
At the same time, the arrangement requires careful negotiation. Decision-making can be complex, profit-sharing reduces overall returns, and disputes may arise if the relationship is not clearly managed.
For businesses entering unfamiliar or highly regulated industries in New Zealand, joint ventures can provide a practical way to establish a local presence. However, they tend to be most effective when governance arrangements and exit strategies are clearly defined from the outset.
Dual Company Structures
A dual company structure is commonly used when a business operates in multiple countries. A parent company is set up in one jurisdiction and owns subsidiary operating companies in places like New Zealand and Australia. This structure helps centralise control, intellectual property and financing, making the group easier to manage.
A holding company structure is more complex to set up and needs careful tax planning. Issues like corporate residency and dividend credits in New Zealand and Australia must be managed to avoid double taxation. However, it can offer a flexible and scalable structure for businesses operating across multiple markets.
Tax Considerations
Tax is one of the most important factors in deciding on a cross-border structure. New Zealand has a flat corporate tax rate of 28%, while Australia applies 30% for most companies and 25% for small to medium 'base rate entities'. The Double Tax Agreement (DTA) between the two countries helps prevent double taxation by setting out where income should be taxed and reducing withholding tax rates on dividends, interest, and royalties.
Goods and Services Tax (GST) also needs to be managed. Both countries have GST, currently 15% in New Zealand and 10% in Australia, but the rules differ, especially for cross-border digital services and goods.
Businesses must also consider whether their activities create a permanent establishment (PE). This usually happens if they have a fixed place of business or a dependent agent in the other country, which can trigger local tax obligations.
Given the complexity, professional advice is essential. Structuring the business incorrectly could expose profits to double taxation or create unnecessary compliance costs.
Practical Steps to Get Started
Expanding across the Tasman generally involves a few key steps. First, decide whether you want to establish a subsidiary, branch, joint venture, or dual company structure. Once this is clear, you will need to register with the relevant regulator, either the New Zealand Companies Office or ASIC.
You should then register for tax in the relevant jurisdiction, obtain an IRD number in New Zealand or an ABN and Tax File Number in Australia.
If your turnover is expected to exceed NZD $60,000 in New Zealand or AUD $75,000 in Australia, you must also register for GST. Setting up local bank accounts, payroll systems, and insurance arrangements will make it easier to manage day-to-day operations.
Consider protecting your intellectual property by registering trademarks in both countries, since protection does not automatically extend across the Tasman.
Choosing the Right Structure
No single structure suits every business. A subsidiary suits businesses planning long-term growth, while a branch can help test a new market. Joint ventures are useful for strategic partnerships, and dual company structures may suit businesses with specific future and tax needs.
The decision ultimately comes down to what your business is prepared to take on, such as:
- control;
- liability protection; and
- administrative responsibility.
Key Takeaways
Doing business across New Zealand and Australia is made easier by their close economic ties, but structural decisions still carry significant consequences. Whether you choose a subsidiary, branch, joint venture, or dual company, your choice will affect tax, compliance, and growth opportunities.
Careful planning and professional advice are essential to get the structure right from the start. With the right foundation, businesses can take advantage of the best both countries have to offer:
- New Zealand's flexible, innovation-friendly environment; and
- Australia's larger, more diverse market.
LegalVision provides ongoing legal support for New Zealand businesses through our fixed-fee legal membership. Our experienced lawyers help businesses manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision's legal membership, call 0800 005 570 or visit our membership page.
Frequently Asked Questions
What is the difference between a subsidiary and a branch?
A subsidiary is a separate legal entity with limited liability, while a branch is part of the parent company, exposing it to full liability.
Do I need to register for GST or tax in both countries?
Yes. Register for GST if above the threshold (NZD $60,000 or AUD $75,000) and for local tax (IRD in NZ, ABN/TFN in Australia).
When should I consider a joint venture or dual company structure?
Use a joint venture to share risk and access local expertise. A dual company structure can suit businesses of various sizes with subsidiaries in both countries and broader expansion plans.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
