Doing Business in Singapore vs Australia: A Comprehensive Guide
5 minute read
Are you considering expanding your business or starting a new venture, and wondering about doing business Singapore vs Australia? Both countries offer unique opportunities and challenges. This comprehensive guide will provide you with valuable insights and comparisons to help you make an informed decision.
- Economic Landscape
- Business Environment and Ease of Doing Business
- Company Formation and Registration
- Tax Systems and Incentives
- Workforce and Employment Laws
- Immigration Policies for Business Owners
- Trading Relationships and Agreements
- Government Support and Assistance Programs
- Infrastructure and Connectivity
- Intellectual Property Protection
- Quality of Life for Expats
Innovation and human capital drive Singapore’s economy, with an emphasis on high-end manufacturing, engineering, and financial services. The competitive Singapore corporate income tax rates have attracted various industries, making it a leading global economy despite its small size.
Contrastingly, Australia’s economy heavily relies on natural resources and exports including wine, meat, and coal. This has led to a different set of industries and opportunities for businesses, making the choice between Singapore and Australia dependent on your business goals and the industries you are targeting.
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Business Environment and Ease of Doing Business
Both Singapore and Australia boast business-friendly environments and are open to international trade. However, when it comes to doing business in Singapore, it holds a higher ranking in ease of doing business and investor protection compared to Australia. Singapore is ranked 1st by the World Bank’s Ease of Doing Business Index and the World Economic Forum’s competitiveness index, with Australia following at 15th and 16th place, respectively.
With English as the primary business language in both nations, international companies find communication and operations smooth and seamless. Furthermore, companies in both Singapore and Australia are required to submit annual financial reports to maintain compliance with local regulations.
Singapore outranks Australia in investor protection, securing the 3rd position globally as opposed to Australia’s 57th ranking. The Monetary Authority of Singapore (MAS), under the guidance of the Singapore government, works diligently to ensure the vibrancy, dynamism, and competitiveness of Singapore’s financial industry, implementing various measures to protect investors’ interests and promote confidence.
Although Australia’s investor protection ranks lower in comparison, it still provides a stable and secure investment environment. Both countries provide a strong foundation for foreign investments, with Singapore’s edge in investor protection being an added advantage.
The International Chamber of Commerce’s Open Market Index survey recognizes Singapore as the country most open to international trade. This trade openness has been a significant factor contributing to Singapore’s success as a global business hub.
When comparing Singapore vs Australia, it’s important to note that Australia ranks 19th in trade openness. While not as open as Singapore, Australia is still seen as a gateway between Asia and the West, providing businesses with access to various markets and opportunities. Both countries support international trade, with Singapore’s strategic location in Southeast Asia giving it a competitive advantage.
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Company Formation and Registration
The business registration processes in both Singapore and Australia are straightforward. In Australia, setting up a business requires three steps. On the other hand, in Singapore, it can be done with only two steps. The cost of business registration in Australia ranges from $422 to $512, and in Singapore, it starts at S$315.
The estimated timeframe for incorporating a business in both countries is about one to three days. At least one director and one shareholder are required in both countries, and depending on their resident status, the same individual may fulfill both roles. Various forms of business registration are available in both countries, catering to different business needs and structures.
Tax Systems and Incentives
Compared to Australia’s more complex, higher-rated tax system, Singapore’s is more favorable with:
Lower corporate and personal income tax rates
Tax exemptions and incentives for businesses
More sector-specific support initiatives compared to Australia
Singapore has a corporate tax rate of 17%, with full exemption for new companies on their first S$100,000 of chargeable income for the first three years, and an additional 50% exemption on the next S$200,000. This makes Singapore an attractive location for businesses to set up and thrive.
On the other hand, Australia has a corporate tax rate of 30%. While higher than Singapore’s rate, Australia offers research and development tax incentives and state-based tax incentives to support businesses. In addition to these incentives, companies should also be aware of the withholding tax regulations. Companies with less than AUD 20 million group turnover are eligible for a refundable tax offset of 43.5%. For companies with a larger turnover, a non-refundable tax offset of 38.5% is possible up to an expenditure cap of AUD 100 million.
Personal Income Tax
Singapore has lower effective personal income tax rates than Australia, with a progressive rate ranging from 0% to 22% for tax residents. This makes Singapore an attractive location for individuals looking to minimize their tax burden.
Australia has a progressive personal income tax rate up to 45%. Although higher than Singapore’s rate, the Australian tax system provides various deductions and credits to individuals to reduce their tax burden, including having their individual income taxes deducted. However, the complexity of the tax system, especially when it comes to paying taxes, can be a challenge for some taxpayers.
While both countries provide businesses with tax exemptions and incentives, Singapore offers greater sector-specific support initiatives. New companies in Singapore may be eligible for partial or full tax exemptions, subject to criteria established by the Inland Revenue Authority of Singapore (IRAS). Dividends paid by Singapore-resident companies are tax-exempt for shareholders, whereas Australia does not offer this type of benefit.
Australia offers various tax incentives for businesses, including the Research and Development Tax Incentive, the Entrepreneurs’ Infrastructure Program, and the Export Market Development Grant. Companies may also benefit from a range of tax deductions, including capital expenditure, depreciation, and research and development costs.
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Workforce and Employment Laws
Boasting of a highly educated and skilled workforce, Singapore does not impose a minimum wage. According to the 2019 Global Competitiveness Report, Singapore ranks first in labor market rankings and third for pay and productivity, demonstrating a high readiness of its talent pool.
Australia, however, has a larger workforce and operates under a regulated minimum wage system, with a federal minimum monthly salary equivalent to $772.60 per week (before tax) or $20.33 per hour. Australia’s workforce is also well-educated, with 40% of workers holding a tertiary qualification.
Both countries offer unique workforce characteristics to suit different business needs.
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Immigration Policies for Business Owners
Foreign workers intending to start businesses can apply for visas in both Singapore and Australia. In Singapore, foreign professionals can apply for an Employment Pass, while foreign entrepreneurs can apply for an EntrePass. Singapore’s immigration policies are renowned for being favorable to business owners, with various work pass categories available and no restrictions on foreign ownership.
Australia offers Skilled Independent Work Visas and Entrepreneur Visas for skilled workers and investors, respectively. While not as business-friendly as Singapore, Australia still provides opportunities for foreign business owners to enter the market and establish their ventures, including newly established Australian businesses.
Trading Relationships and Agreements
A strong trading relationship exists between Singapore and Australia, with the Singapore-Australia Free Trade Agreement (SAFTA) providing open market access and other benefits for businesses. Singapore has a comprehensive network of trading relationships and agreements, including over 30 FTAs with various trading partners.
Both Australia and the United States benefit from the Australia-United States Free Trade Agreement (AUSFTA). Additionally, Australia has numerous other bilateral and regional Free Trade Agreements (FTAs), such as the Trans-Pacific Partnership (TPP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Both countries support international trade and offer ample opportunities for businesses to expand and thrive in their respective markets, considering the business regulatory environment.
Government Support and Assistance Programs
Government assistance in the form of tax incentives, grants, and loans, is available for businesses in both countries. Australia has approximately 700 schemes, while Singapore has around 75 national sector-specific business support programs.
For example, Singapore’s Productivity and Innovation Credit program offers tax advantages on costs associated with the acquisition and in-licensing of IP rights, with up to 400% tax deductions or allowances for qualifying expenditures. In Australia, businesses can benefit from the Research and Development Tax Incentive, the Entrepreneurs’ Infrastructure Program, and the Export Market Development Grant.
Infrastructure and Connectivity
Making significant investments in infrastructure and digital connectivity, Singapore contributing to its competitive advantage over other economies. This investment has led to a highly efficient and technologically advanced environment, making Singapore an attractive location for businesses that rely on cutting-edge technology and seamless connectivity.
Australia, while not as advanced in infrastructure and connectivity as Singapore, still offers a stable environment for businesses. Moreover, Australia is viewed as a gateway between Asia and the Western world, providing businesses with access to various markets and opportunities.
Intellectual Property Protection
Strong intellectual property protection systems are upheld in both countries. Singapore has an efficient, transparent legal system and a specialist IP Court. The Singaporean government also provides support for companies involved in the acquisition of IP rights through the Productivity and Innovation Credit program, offering tax benefits on related costs.
Australia has a robust intellectual property protection system governed by federal and common law. While not as specialized as Singapore’s IP Court, Australia’s legal system still provides adequate protection for intellectual property rights, ensuring a secure environment for businesses to operate and innovate.
Quality of Life for Expats
Providing a safe environment, Singapore offers a high standard of living, including exceptional:
In the Mercer Quality of Living City Rankings 2019, Singapore was the highest-ranked city in Asia, positioned at 10th place globally.
Contrarily, Australia boasts a higher quality of life backed by abundant natural resources. and ranks higher in the Expat Explorer Report, being placed 2nd, while Singapore is placed 9th. Both countries offer a high quality of life for expats, making them attractive locations for foreign business owners and professionals.
In conclusion, both Singapore and Australia present unique opportunities and challenges for businesses. Singapore excels in ease of doing business, investor protection, tax system, and technological readiness, while Australia offers a larger labor pool, extensive natural resources, and acts as a gateway to other Asian markets. Ultimately, the choice between Singapore and Australia will depend on your business goals, target industries, and preferences for quality of life.
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Australia ranks 14th in the World’s Ease of Doing Business Report 2020 and 11th in IP protection laws.
Singapore is widely regarded as one of the best places in the world to do business, ranking 1st for ease of doing business according to the EIU and as one of the least complex jurisdictions in Asia by TMF Group. With a skilled workforce, efficient economy, and robust intellectual property rights, Singapore is an excellent choice for international businesses.
The corporate tax rate in Singapore is significantly lower than that in Australia, with the highest rate in Singapore at 22% compared to 45% in Australia.
Incorporating a business in Singapore and Australia usually takes up to three days.
The minimum wage in Australia is currently $20.33 per hour.