Company tax obligations for a foreign-owned Australian company

A company incorporated in Australia is an Australian tax resident, whoever owns it. It is taxed on its worldwide income at 30%, or 25% if it is a base rate entity. For foreign-owned subsidiaries, the parent group's turnover often decides which rate applies. On top of income tax, the company has to deal with withholding on payments to the parent, possibly an international dealings schedule, and, once it trades or hires, GST and payroll obligations. This page maps those obligations. Use it to brief your tax agent, not in place of one.

Residency comes from incorporation

The ATO's residency rules treat a company as an Australian resident if it is incorporated in Australia. A company incorporated elsewhere can also be resident if it carries on business here and has its central management and control in Australia, or its voting power is controlled by Australian-resident shareholders.

Two consequences follow for a Pty Ltd owned from overseas:

• Worldwide income. Australian resident entities are generally taxed on their worldwide income, not just Australian-source income.
• The parent's own residency can be affected too. If the overseas parent's board decisions are actually made in Australia, the parent itself could become an Australian resident. The ATO's view is in TR 2018/5. This is one reason board decisions for the parent should be made, and minuted, where the parent's board sits.

Which rate: 25% or 30%

The ATO's company tax rate table sets a 25% rate for base rate entities from 2021–22 onwards, with an aggregated turnover threshold of $50 million. All other companies pay 30%. The 2025–26 rate table, the latest the ATO has published, shows the same two rates.

A company is a base rate entity for an income year if both of these are true:

1. its aggregated turnover for that year is less than $50 million
2. no more than 80% of its assessable income is base rate entity passive income: dividends and franking credits, royalties and rent, most interest, gains on qualifying securities, net capital gains, and passive amounts flowing through partnerships or trusts.

The foreign parent problem

Aggregated turnover is not just the subsidiary's own sales. It includes the annual turnover of every entity connected with it or affiliated with it, even if they are foreign residents, ignoring dealings between them. Broadly, an entity is connected if it controls 40% or more of the other entity, the other way round, or both are controlled by a common third entity.

The ATO's own example: an Australian company turns over $20 million and is wholly owned by a US company with $150 million of sales made entirely outside Australia. Aggregated turnover is $170 million, so the Australian company is not a base rate entity and pays 30%. Groups that model their Australian entry at 25% because "the local company is small" are often wrong for this reason.

Two smaller traps:

• Holding companies. An Australian holding company earning only dividends and interest fails the passive income test and pays 30%, whatever its turnover.
• Franking rate. The rate used to frank dividends is based on the previous year's aggregated turnover and passive income, so it can differ from the rate the company pays in the current year.

Large multinational groups may also be within the global and domestic minimum tax rules, which can impose top-up tax where the group's effective rate in a jurisdiction is below 15%. Whether your group is in scope is for your group tax team.

The company tax return

Every company lodges a company tax return. The ATO says a business must lodge even if it earned no income, and there is no income threshold. Key mechanics from the ATO's income tax return page:

• How it's lodged: through standard business reporting (SBR) enabled software, through a registered tax agent, or on paper. A company can't lodge it directly in Online services for business.
• When: for small companies lodging themselves, generally 28 February after the income year ends, or 31 October if earlier returns are outstanding. A tax agent's lodgement program can give different dates.
• Assessment: the ATO doesn't issue a separate notice of assessment for a company. The return itself is treated as the notice of assessment, so check it carefully before it goes in.
• Closing down: a company must lodge its final return before ASIC deregisters it. After deregistration the ATO can't process the return without reinstatement. See closing a company.

In practice it is usual for a foreign-owned subsidiary to use an Australian registered tax agent. The return asks questions most overseas finance teams haven't met before.

International dealings schedule

If the company has more than $2 million of international related-party dealings in the year, it must complete an international dealings schedule (IDS) and lodge it with the return. It covers transaction types and amounts, financial dealings, restructures, the arm's length methods used and how well those methods are documented. The ATO uses it to identify transfer pricing risk, and failing to lodge one when required can attract penalties.

For a subsidiary that buys stock, software licences or management services from its parent, $2 million arrives quickly. Intercompany pricing should be agreed and documented before the first invoice, not reconstructed at year end.

Paying money back to the parent

Dividends

The unfranked part of a dividend paid to a foreign resident is subject to final withholding tax. The ATO's dividend withholding rules say:

• no withholding is needed on fully franked dividends or on conduit foreign income
• on the unfranked part, the rate is 30% if there is no tax treaty, or the treaty rate if there is one
• the treaty rate applies only if the parent is resident in the treaty country and beneficially entitled to the dividend
• the company must be registered for PAYG withholding before it withholds, must pay the amount to the ATO, and must lodge the annual report for interest, dividend and royalty payments to non-residents (NAT 7187), unless the payments are correctly reported in an annual investment income report.

Treasury keeps the list of Australia's income tax treaties. Our country pages note each country's treaty status.

Interest and royalties

The default withholding rates are 10% on interest and 30% on royalties, again reduced where a treaty specifies a lower rate. Licence fees for the parent's software, brand or know-how can be royalties for tax purposes. Interest on loans from the parent raises separate questions about how much debt the subsidiary can deduct interest on. Both are worth settling with your adviser before the funding structure is fixed.

The rest of the lodgement map

Why the director cares

Company tax itself is the company's liability. But directors can become personally liable for unpaid PAYG withholding, GST and super guarantee charge under the director penalty regime, and the company's public officer is answerable for its tax compliance. A resident director needs to see that lodgements are being made, even though the accountant prepares them.

We don't give tax advice or prepare returns. Our resident director service runs the Corporations Act side of the calendar and asks to see tax lodgement status. Packages and what they include are on our pricing page.

Information on this page is general and current at 27 October 2026. It is not tax, legal or financial advice; get advice from a registered tax agent on your own facts.

General information about Australian law and practice, not legal or tax advice for your circumstances. Check the official sources, or ask your adviser, before you act.