Doing Business in Singapore vs. Australia

Singapore vs. Australia has a legal history that originates in the United Kingdom. Both nations are generally known for being among the top locations in the world for conducting business. 

Both nations have powerful defense systems, pro-business economic policies, and a climate that is politically stable. With various agreements already in place to increase cooperation and assistance in order to jointly promote innovation and entrepreneurship, 

Singapore and Australia have had a long history of mutual trade and economic partnerships. 

Australia’s fifth-largest trading partner is Singapore.

Australia is a large, culturally diverse nation with a wealth of business opportunities for organizations wishing to grow. The nation is among the richest in the world and enjoys good trade ties with several Asia-Pacific nations. 

Due to Australia’s remote location and intricate legal and tax structures, there are considerable difficulties in conducting business there. While lacking in natural resources, Singapore is a small country with an innovation-driven economy that depends on human capital for its success. 

By fostering a climate that is pro-business and enacting an advantageous tax structure to entice foreign investors, businesspeople, and a qualified foreign workforce, Singapore has pushed itself to the top of the world rankings.

DOING BUSINESS IN SINGAPORE VS. AUSTRALIA – DIFFERENCES

Business Environment

Singapore has held the top spot in the World Bank’s ranking of the easiest nations to do business for the past ten years as a result of its exceptional performance in a number of areas of its business regulatory environment. Australia, on the other hand, came in at position 15. Here are a few quick differences between the two:

• Protecting minority investors (Singapore) #4; Protecting minority investors (Australia) #57 
• Enforcing contracts (Singapore) #2; Enforcing contracts (Australia) #3
• Starting a business (Singapore) #6; Starting a business (Australia) #7

According to the 2021 World Economic Forum, Singapore continues to dominate the world in this area, with Australia coming in at number 16 as the most competitive country. 

The world’s top-rated border clearance procedures in Singapore received high scores for efficiency, predictability, and transparency.

Singapore’s laws on intellectual property protection and registration are comparable to those in Australia, despite Singapore’s slightly lower filing and renewal fees.

Taxes

Singapore boasts one of the most alluring tax structures in the entire world. The tax filing process in Singapore is easier than it is in many other nations, and the system has several advantages for taxpayers, including a 0% tax rate on dividend income, capital gains, and inheritance. 

The government keeps improving its tax system by enacting new incentive plans designed to further reduce the tax burden and encourage the expansion of new firms. 

The Start-up Tax Exemption program is open to new startups and grants a 75% tax exemption on the first $100,000 of taxable income and a 50% exemption on the next $100,000 during the first three years of operation.

Singapore also benefits from a vast network of bilateral double taxation agreements, which prevents businesses and individuals who receive income from abroad from being taxed more than once.

A firm must directly control and manage its operations from Singapore in order to be regarded as a Singapore tax resident. In contrast, a company will be regarded as an Australian tax resident if it is either established in Australia or conducts its central management and control in Australia. Companies based in Australia who are resident are subject to tax on their worldwide income, while non-resident corporations are only subject to tax on their income from Australia. 

Singapore uses a single-tier tax system, so businesses there won’t have to pay any additional taxes on income they make outside. If income was previously subject to taxation elsewhere, Singapore will not levy any additional taxes.

Australia, on the other hand, has one of the most complex tax systems in the world; one that demands careful attention from prospective foreign investors. 

Dividend income sent to non-residents may occasionally be excluded from withholding tax, and some capital gains may also be excused from paying taxes. Yet, when it comes to figuring out the effective tax rate for the company’s profits, the tax structure can be challenging to comprehend and confusing for international business owners.

Some of the variations in tax rates between the two nations are shown in the table:

Government Assistance

Due to their respective governments’ efforts to promote a friendly business environment, Australia and Singapore are regarded as top locations for corporate expansion. Both nations provide several tax incentives for both freshly founded startups and well-established firms, as well as a variety of government aid programs for businesses.

Australia’s federal and state governments assist a number of businesses to encourage economic growth. To do this, several strategies are employed, including direct grants or loans, tax incentives, administrative, research, and educational aid, competitive constraints, and others. Early-stage investors can take advantage of tax perks. 

In essence, incentives offer an exemption from taxes on capital gains on the sale of shares as well as a tax offset for the initial investment cost. The research and development tax incentive is one of Australia’s government aid programs that tries to promote innovation there. The program offers a refundable tax of 43.5% for eligible firms with an aggregated annual turnover of less than A$20 million and a non-refundable tax of 38.5% for other entities.

More than 700 programs are available in Australia to promote regional businesses in various ways. The government’s selective strategy is relatively limited because some economic support programs are only offered to certain regions and industries. Singapore has more national sector-specific business support initiatives than Australia does, and this number is steadily increasing. All businesses with Singaporean incorporation are eligible for these programs, and some of them also apply to businesses with foreign incorporation.

The development of specific sectors in particular parts of the nation is the primary goal of Australia’s state and territory governments due to the country’s unique political structure. The development of markets and infrastructure, facilitation of commerce, and the growth of the agricultural and renewable energy sectors are the main objectives of the government’s support for development assistance. Singapore has a unique stance.

Due to its small population and limited natural resources, Singapore’s path to economic growth has been centered on embracing cutting-edge technologies and creating a technology-driven economy.

Workforce

The population of Australia, at 24 million, is roughly four times that of Singapore. Despite the fact that both labor forces are multicultural and multilingual, 47% of Singapore’s workforce has a degree or diploma, compared to 43% of Australian workers. As a result, whether your company is in Australia or Singapore, the local highly-educated labor will be advantageous.

Employees in Australia are only permitted to work a maximum of 38 hours a week under federal law. Employees are not permitted to work more than 12 hours per day in Singapore.

Moreover, the federal minimum wage in Australia is AUD 17.70 per hour. In Singapore, there is no set minimum salary for employees.

Business Language

Although there is no official language in Australia, the majority of people speak English. Furthermore, 1.3 million Australians speak a European language, and 2.1 million Australians speak an Asian language.

In Singapore, both business and domestic communication are primarily conducted in English. Most Singaporeans also obtain official education in their second languages, like Malay, Mandarin, and Tamil, in accordance with their ethnic backgrounds.

Business Incorporation & Set Up

In Australia, the two categories with the most registrations are subsidiary companies and registered foreign companies (branch offices), but in Singapore, the categories with the most registrations are private limited companies, subsidiaries, representative offices, and sole proprietorships. Accounting and Corporate Regulatory Authority in Singapore is the regulator of business registration, financial reporting, etc. 

Refer to Singapore company registration for more information. 

Australia requires three steps for business setup, while Singapore just needs two for incorporation. These processes can be finished in a day in both nations.

A firm that incorporates both jurisdictions is also required to have one shareholder and one director. Depending on their residency status, the same person may fill both positions.

Filing Requirements

Companies with operations in Australia and Singapore must produce and file annual financial reports with the appropriate authorities in each country. Yearly tax returns must be submitted, and annual financial reports must be audited.

Also, most firms make quarterly payments made up of company and individual income taxes deducted from employee earnings via Australia’s Pay-As-You-Go (PAYG) tax collection system.

Immigration Requirements

The applicant can apply for a skilled visa if he is a worker whose abilities are required in Australia. If not, people typically enter Australia on a subclass 457 working visa, which permits a stay of up to 4 years (or 12 months for newly established Australian businesses).

In addition, for the duration of the visa’s validity, the person must possess and maintain a minimum level of health insurance. Foreign professionals, managers, and executives who earn a minimum monthly salary of S$3,600 in Singapore may be granted an Employment Permit. Also, foreign business owners who intend to launch and run a new enterprise in Singapore can apply for the EntrePass.

Infrastructure

Singapore continually invests in infrastructure and digital connection, which is necessary for the growth of a vibrant business ecosystem, in order to preserve its competitive advantage over other countries. The majority of the largest markets in the world are well connected to Singapore. Geographically, Australia is a little bit removed from the majority of international markets, which could make logistics more challenging for some enterprises.

Yet, because it is sometimes seen as a gateway between Asian and Pacific economies and the West, Australia may in some ways be the ideal choice for businesses looking to get into a worldwide market.

Overall, Southeast Asia and significant manufacturing hubs like China, Malaysia, Vietnam, and Indonesia are strategically close to Singapore and Australia. This could be seen as advantageous by aspiring businesspeople as well as a fantastic opportunity to penetrate other Asian markets.

Intellectual Property Protection

Both federal law and common law in Australia safeguard intellectual property (IP) rights. Australia is a member of international agreements governed by the International Intellectual Property Organization and takes part in the Agreement on Trade-Related Aspects of Intellectual Property Rights. These agreements establish the very minimum requirements for IP enforcement and protection.

The Intellectual Property Office of Singapore promotes efficient and straightforward IP protection that enables businesses to make use of and profit from IP economically. With an effective and transparent legal system and a specialist IP Court to handle IP issues that are getting more and more complicated, Singapore is renowned as the best country for protecting intellectual property rights.

The Singaporean government additionally supports businesses engaged in Intellectual rights acquisition. The Productivity and Innovation Credit program offers tax benefits on expenses related to the purchase and in-licensing of intellectual property rights. Singaporean businesses participating in this program are eligible to receive 400% tax deductions or allowances for certain expenses. Also, with a 60% conversion rate, qualified business expenses up to $100,000 annually can be converted into cash.

Quality of Life

Due to its excellent level of life, Singapore is frequently ranked as the most popular relocation option in Asia for foreigners. Because of its clean, green atmosphere and high peace index, it is a top draw for elite talent. According to the Safe Cities Index 2021, Melbourne is ranked eighth globally, Sydney is fourth, and Singapore is ranked third when it comes to safety.

Nonetheless, due to its vast territory, abundant natural resources, and accessibility to entertainment, housing, and consumer goods, Australia can offer a greater quality of life for expats. Australia received a high ranking after a review of the nation’s economic standing, educational landscape, life expectancy, and general satisfaction of its residents with their lives. 

Reach out to us at Relin Consultants for more information.