Australia and Singapore have an established and productive bilateral relationship; and have maintained a good relationship in terms of politics, friendly economic policies and defence.
In terms of facilities and infrastructure, both countries are also very developed nations, where most facilities and basic necessities are easily available.
That said, there are a few distinct differences that a potential investor would need to take into consideration when choosing which country to do business.
Economic Overview
Both countries offer strikingly different economies in terms of size, resources and key business sectors.
Generally speaking, Australia’s economy is largely dependent on the export of its domestic products, such as coal, iron ore, beef, grains, wine, and dairy. Professional services such as education services, personal travel, shipping, logistics and other business services also contribute significantly to Australia’s trade.
In contrast, given Singapore’s small size and lack of natural resources, the country has been forced to innovate and rely on the nation’s human capital for the majority of economic activities, creating a leading global economy for high-end manufacturing and engineering, bio technology, financial services and professional services.
These differing economies create a wide range of opportunities for investors and those with business interests in each respective country.
Tax Obligations
Singapore has one of the lowest corporate tax rates in the world, at a flat rate of 17%. In addition, newly incorporated companies can enjoy partial or full tax exemptions, provided they meet the criteria set out by the Inland Revenue Authority of Singapore (“IRAS”). In contrast, Australia’s corporate tax rate is significantly higher and is considered to be the eighth-highest corporate tax rate in the world, at 30%. However, similar to Singapore, there are certain tax exemptions that can be applied for.
With regards to individual tax, both Australia and Singapore utilize a progressive tax system, where the tax rate increases exponentially in tandem with an individuals’ annual chargeable income. The table below sets out the estimated tax payable for the same income earned in the two different countries:
| Annual Chargeable Income (US$) | Total Tax Payable in | |
|---|---|---|
| Singapore (US$) | Australia (US$) | |
| 10,000 | 0 | 0 |
| 20,000 | 158 | 843 |
| 40,000 | 985 | 6,240 |
| 80,000 | 4,455 | 19,477 |
| 120,000 | 9,817 | 33,629 |
| 160,000 | 16,361 | 49,474 |
*the table above assumes the following exchange rates obtained on 13 September 2020; and figures have been rounded up to the nearest dollar:
US$1.00: SGD$1.37 = US$1.00: AUD$1.37
Evidently, the individual tax rates in Singapore are also far lower than that of Australia. Both countries also have tax reliefs that individuals can apply for. Hence, it may be wise to approach a professional tax consultant to assist you with your taxes if you are unfamiliar with the tax system.
Do note as well that the above taxes have been computed based on the assumption that one is a tax resident. In both countries, one need not necessarily be a citizen in order to be a tax resident.
Instead, factors such as duration of stay and the source of income generated are usually the determining criteria for an individual’s tax residency. For example, if one is visiting Australia for more than six months and mainly works in the same job at the same location, you will be treated as a tax resident.
Business Structures and Legal System
The business structures that a potential investor may choose from when deciding to incorporate a company in either Singapore or Australia are not much different, as both countries allow for the following commonly known business structures:
- Private company limited by shares
- Partnership / Joint Venture
- Public companies
- Branch Office
- Representative Office
As the legal system of both countries is largely influenced by English civil law, there is not much differentiation in terms of legal requirements – companies have to be governed by its constitution (Australia) or articles of association (Singapore) and most business structures would require that at least one director should be ordinarily resident and that the registered address of the company be located within the country.
Both countries have very reliable judicial systems that do not hide behind complex jargon, with a number of channels, some electronic, to assist businesses in settling their disputes quickly, in a cost effective manner. Legal support is also generally easily obtained in the city centres.
The business structure that is most commonly chosen by investors is typically the private company limited by shares. In addition, small private companies limited by shares may enjoy an exempt status in both countries, though the qualifying criteria differ, as follows:
| Qualifying conditions to be an Exempt Private Company | |
|---|---|
| Singapore | Australia |
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As a general rule, companies that are considered exempt will have fewer statutory obligations to comply with. For example, they may not be required to prepare and audit financial reports.
Workforce
The national language of both countries is English; and Singapore complements this with three other national languages to reflect its multicultural population, namely Malay, Tamil and Mandarin Chinese (otherwise known as “standard Chinese”). As such, while both countries are strategically located in South East Asia and are in close proximity to manufacturing centres such as Vietnam and China, as well as Islamic countries such as Malaysia and Indonesia, potential employers may find that it may be easier to reach out these countries when employing Singaporean employees, as most of the population is effectively bilingual.
However, the awareness of the economic and cultural benefits of taking up a second language has been gradually rising in Australia; and the Australian government had even launched a trial at 40 preschools around the country in 2014 to encourage children to take up a second language.
More importantly, the average cost of labour is significantly different in both countries, as Australia has a minimum wage system in place. With effect from 1 July 2014, the national minimum wage in Australia is AUD$640.90 per week (before tax), or AUD$16.87 per hour; and the disabled will get a certain percentage of the national minimum wage, in accordance with the National Minimum Wage Order. In addition, if employees are required to commute for long distances, it is often the market practice to pay workers additional allowances or provide for accommodation in Australia. In contrast, there is no minimum wage in Singapore. Hence, to a potential investor who is running on a relatively tight budget and foresees that several staff members will have to be employed, a key consideration may be the cost of labour that will be incurred in the long run.
Trading Relationship
Notably, Singapore is Australia’s largest trade and investment partner in South East Asia and both countries had entered into the Singapore-Australia Free Trade Agreement (“SAFTA”) with effect from 28 July 2003. Key aspects of the SAFTA include the elimination of tariffs for certain goods, open market access to a range of sectors, facilitation of paperless trading and e-commerce, etc.
Given the strong existing ties between both countries, an investor who wishes to set up business in either country will no doubt find it easy to access both markets. However, investors who wish to trade beyond the borders of Singapore or Australia, may wish to note that in the Open Markets Index, a global survey conducted by the International Chamber of Commerce, Singapore emerged as the second most open country to international trade, with a score of 5.5 (the maximum score being 6), while Australia ranked only 24th, with a score of 4.1 . Australia’s rank was mostly attributed to its weak result in trade openness, which critics say is due to the nation’s policies regarding customs and strict quarantine inspections, which are put in place to protect its native industries, such as agriculture.
Which Country is Best for Me?
In a nutshell, whether it is Singapore or Australia, there are various considerations that a potential investor would need to ponder. Alternatively, given the extremely close ties between the two nations and the fact that there are multiple flights between each country daily, an investor may even wish to consider using either country as a launch pad to expand the business’ regional operations from.
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