Doing Business - Singapore vs Australia

Economic Overview

Due to an abundance of natural resources, the Australian economy enjoys a competitive advantage in producing primary products such as wine, meat and dairy. Aside from other key exports such as minerals and coal, professional services such as education, travel and logistics also contribute significantly to Australia’s economic growth. 

In contrast, owing to a small land area and a lack of natural resources, Singapore has driven itself to innovate and rely on human capital in the course of its development. This has ultimately resulted in a leading global economy for high-end manufacturing and engineering, bio-technology and financial services. Strategically located in the heart of key Asian trading routes, Singapore is Asia’s most competitive business country, tapping on demand from a market of 600 million in the economic region of ASEAN. 

Business Environment 

Arising from its strong performance in various aspects of its business regulatory environment, Singapore has been clinching the top spot in the World Bank's report on the easiest places to do business all decade long. Australia, on the other hand, ranked #15 in the world. Here are some key comparisons at a glance:

• 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

Singapore also remains the global leader on enabling trade (World Economic Forum’s Enabling Trade Index 2016), while Australia ranked #26. Singapore’s border clearance processes ranked the best in the world, which was led by top marks for efficiency, predictability and transparency. 

Both Singapore and Australia share a common legal heritage derived from the United Kingdom. Intellectual Property registration and protection in Singapore is similar to that in Australia, though filing and renewal fees were found to be somewhat less expensive in Singapore. 

Workforce 

Australia’s population of 24 million is about 4 times that of Singapore’s. While both labour forces are multicultural and multilingual, 40% of Australian workers on average hold a tertiary qualification, while 47% of Singapore’s workforce are degree or diploma holders. Hence, whether in Australia or Singapore, your business will benefit from the highly-educated workforces available locally. 

Under Australia’s federal legislation, employees are not allowed to work beyond a maximum of 38 hours per week. In Singapore, employees are not allowed to work more than 12 hours a day. 

In addition, Australia’s federal minimum wage is AUD 17.70 per hour. There is no prescribed minimum wage for workers in Singapore. 

Business Language

While Australia has no official language, English is spoken by the majority of the population. In addition, 2.1 million Australians speak an Asian language and 1.3 million speak an European language. 

English is the main language used for business in Singapore, and is also the main language spoken at home. In accordance to their ethnicities, most Singaporeans also receive formal education on their second languages, which include Malay, Mandarin and Tamil. 

Business Incorporation & Set Up

The two common most types of registration in Australia are in the Subsidiary Company and Registered Foreign Company (Branch Office) categories, while that in Singapore include Private Limited Company, Subsidiary Company, Representative Office and Sole Proprietorship. 

Setting up a business in Australia takes 3 steps, while incorporating in Singapore takes 2 steps. In both countries, these procedures can be completed within a day.  

Similarly, a company incorporating in both jurisdictions must have 1 director and 1 shareholder. The same person can fulfil both roles depending on their resident status.

Filing Requirements

Each year, companies operating in both Australia and Singapore are required to prepare and lodge financial reports with the respective authorities in each jurisdiction. Annual financial reports are required to be audited, and tax returns must be filed on an annual basis. 
Additionally, under Australia’s Pay-As-You-Go (PAYG) system of tax collection, most businesses make quarterly payments comprising company and personal income taxes withheld from employees’ wages. 

Immigration Requirements

If you are a worker with skills needed in Australia, you may apply for a skilled visa. Otherwise, individuals usually come to Australia on a subclass 457 working visa, which allows a stay in Australia of up to 4 years (or 12 months for newly-established Australian businesses). In addition, the individual is required to hold and maintain a minimum level of health insurance for the validity of their visa. 

In Singapore, an Employment Pass can be issued to foreign professionals, managers and executives, who are required to draw a minimum monthly salary of S$3,600. In addition, foreign entrepreneurs wanting to start and operate a new business in Singapore can apply for the EntrePass. 

Income Tax

Singapore offers the lowest effective tax rates in the world. While Australia’s personal income tax rate is progressive up to 45%, Singapore’s progressive tax rate ends at 22%. 
Using a one-tier corporate tax system, Singapore avoids double taxing its investors. Taxes paid by companies on their chargeable incomes are the last tax paid, since shareholders will not be taxed on dividends paid by a resident company. 

In Australia, when after-tax profits are distributed as dividends (for instance, $700 paid to a shareholder), these dividend statements come with a separate ‘franking credit’ (for instance, $300 worth of credit), which is the amount of tax the company has already paid. When declaring the dividends on their personal tax returns, shareholders have to declare the full amount (i.e. $1000). Assuming an income tax rate of 19%, a shareholder would normally pay $190 tax on the dividend. However, since the company has paid $300 in tax, the shareholder would get a credit, or refund, for the difference (i.e. $110). 

Corporate Tax 

Companies in Singapore enjoy a headline corporate tax rate of 17% on their chargeable income, while the corporate tax rate in Australia is 30%.  Tax Exemptions & Incentives 

Under Australia’s R&D tax incentive programme, companies with aggregated group turnover of less than AUD 20 million are entitled to a 43.5% refundable tax offset, while larger companies are entitled to a 38.5% non-refundable tax offset, up to an eligible expenditure cap of AUD 100 million. In addition, individual states also offer various tax incentives. 

For the first 3 years, newly incorporated companies in Singapore can enjoy full tax exemption on their first S$100,000 of chargeable income. Small business entities in Australia with turnovers of less than AUD 2 million are entitled to a corporate tax rate of 28.5%.  

Withholding Tax

Dividends and interests paid by Australian resident companies to non-residents are subjected to a 10 to 30% withholding tax. 

Singapore’s withholding tax ranges from 10 to 17%.

Foreign-Sourced Income

Chargeable income of resident companies in Singapore includes profits arising from both Singapore and foreign companies when remitted to Singapore. Profits earned and retained outside the country are not taxable. 

In Australia, however, resident companies pay corporate taxes on their worldwide profits, sourced within and outside of Australia. Hence, businesses with income derived from foreign sources must have them declared on their tax returns. 

TAX	SINGAPORE	AUSTRALIA
Corporate Tax	17% (Eligible new start-ups are given full exemption on their first $100,000 for the first 3 years)	30%
Branch Tax	17% (Partial exemption on first $300,000)	30%
Capital Gains Tax	-	30%
Income Tax	0% - 22%	0% - 45%
Withholding Tax - Dividends - Interests - Royalties	0% 15% 10%	30% 10% 30%
Double Taxation Relief	Yes	Yes
Foreign-Sourced Income Tax	May be taxable if received or deemed received in Singapore	Yes
GST	7%	10%

On a Final Note

Australia is the world’s 13^th largest economy, while Singapore has grown quickly to secure a place among the world’s top financial centers. On the downside, however, businesses and individuals in Australia pay more income tax than most other nations. Whether it’s Singapore’s business-friendly regime or excellent connectivity to the emerging markets of the world, it is clear that Singapore edges over Australia as a choice investment location.