Australia has long presented investment incentives for businesses from overseas, and in particular businesses from the Asia-Pacific, which has seen inter-nation trade flourish under FTAs. Recent infrastructure projects released by the Australian government renew these opportunities.

Infrastructure spending attracts interest from overseas companies

The Australian Government is investing $100 billion over 10 years from 2019-20 in transport infrastructure across Australia. This is part of a rolling infrastructure plan, sparked by an infrastructure audit that showed a dire need for new projects in light of population pressures. The Infrastructure Australia report warns that in order for Australia to cope with a forecast population of 31.4 million people in 15 years’ time spending on infrastructure will need to remain at about $40 billion a year, and perhaps increase.

As a result, Infrastructure Australia released its 2019 Infrastructure Priority List. This targets 121 nationally significant projects and proposes a record $58 billion pipeline to address congestion, liveability and economic growth. This list includes 8 High Priority Projects, 10 Priority Projects, 29 High Priority Initiatives and 74 Priority Initiatives. In the past 12 months alone the Infrastructure Australia Board has positively assessed seven of these, including the following three new High Priority Projects: Monash Freeway Upgrade Stage 2 (Vic), and North East Link (Vic), and the METRONET: Yanchep Rail Extension (WA).

This should be welcome news to contractors, in particular companies from overseas. There has been a spate of interest over recent years from foreign companies keen to bid for lucrative infrastructure contracts. For example, Spain's Acciona and Ferrovial, France's Bouygues, Italy's Salini Impregilo, Britain's Laing O'Rourke and Korea's Samsung C&T have picked up infrastructure projects alongside local companies. Indeed, Australia's biggest contractor, CIMIC (which was formerly known as Leighton Holdings and owns CPB Contractors and Thiess) is owned by Spanish construction group ACS.

Infrastructure Australia’s Assessment Framework requires project proponents to show that they have clearly identified the infrastructure problem they are seeking to solve, have undertaken detailed options analysis where a full range of innovative, deliverable solutions are developed, and can show a robust business case with adequate calculation of all appropriate costs and benefits for each solution. Yet to do so, any business (in particular overseas companies) must have a solid business and tax strategy to demonstrate that they can navigate the particularities of the Australian compliance and business environment.

A smart tax and business strategy is key to success in infrastructure

Setting up infrastructure operations in a new country requires a precise understanding of both a new compliance system and the way your business needs to best adapt its structure within this system. You will also need to assuage the difference in the business culture and workforce management. The details involved in this set up process can be considerable regardless of your company's home jurisdiction. From your Australian Business Number, Tax File Number, and GST requirements, to staff contracts, Pay As You Go Withholding ("PAYGW"), Fair Work labour rulings, payroll and fringe benefits tax, and superannuation contributions, it covers numerous actions.

You will also need to accurately document and report your operations according to Australia's accounting requirements and audit requirements, including possible financial statement lodgements with Australian Securities and Investments Commission. Going above and beyond in managing these issues ensures that you are in the best position to manage a long-term infrastructure contract.

Likewise, in order to make your venture profitable you will need to engage tax specialists and create a detailed tax plan. Navigating potential double taxation, tax credits, government rebates, a smart profit repatriation strategy: all of these need to worked out on a case by case basis as you prepare to bid for an infrastructure contract. Moreover, the Australian tax system is not static; you need to stay on top of changes.

For example, a fairly recent court decision has shifted the landscape for determining whether or not a company is to be considered a resident in Australia for tax purposes. This case, and a recent ATO Guideline, indicates that if the CM&C and voting power of a company is located in Australia then this appears to be enough for a multinational to be taxed in Australia as a resident company even when a large amount of its operations occur overseas. Similarly, changes to workplace and industrial law can impact your business here, as has been the case with new rulings regarding the status of casual and contract employees.

Calibre Business Advisory is ideally positioned to provide advice on these matters. Not only do we have experience in managing infrastructure projects with clients, but our offices in Sydney and across Asia give our clients access to advisors with a genuine understanding of the tax and compliance challenges facing overseas businesses entering Australia. Moreoever, unlike many larger firms, our dedicated and personal approach means our advisors and accountants invest greater time and energy into finding specific and creative solutions.

Explore our investment checklist, and consider how well your business is prepared to not only secure infrastructure contracts but also manage the profits, tax, and business structuring required as you develop the project.

Calibre Business Advisory invests more time than most firms into finding solutions for our clients. Contact our business advisors and tax accountants below to discover new options for your business in Australia and beyond.

Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.

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