More Chinese founders are looking at Australia as a second home market: a manufacturer opening a sales office, a software or AI company signing its first Australian customers, or a family business following its children who have settled here. The commercial case is usually clear. The legal set-up is where avoidable problems start.
This article outlines, in general terms, the Australian legal issues a Chinese business may face when it establishes itself here, funds its operations and earns revenue from overseas customers.
Choosing a structure: subsidiary, branch or registered foreign company
A business generally has two main routes. It can incorporate an Australian subsidiary, a separate company registered with ASIC, or it can carry on business here through the overseas company itself. In the second case, the overseas company generally needs to register with ASIC as a foreign company, receive an Australian Registered Body Number and appoint a local agent who is resident in Australia and can accept documents on its behalf.
The choice can affect liability, tax, reporting, banking and any later investment or sale. ASIC notes that an overseas company which operates only through an Australian subsidiary, and does not itself carry on business here, does not have to register as a foreign company. Whether an activity amounts to “carrying on business” depends on the facts and needs advice.
The resident director requirement
The Corporations Act requires an Australian proprietary company to have at least one director who ordinarily resides in Australia, and a public company to have at least two. Every director also needs a director ID. For a founder based in China, finding a resident director is often the first practical hurdle.
A resident director is not a figurehead. They carry the same duties and potential liabilities as any other director, including for insolvent trading and some tax debts. Our separate article on setting up a company in Australia covers director duties in more detail.
Funding working capital: capital or intercompany loans
The Australian entity usually needs money before revenue arrives. The parent may subscribe for shares, lend money, or combine both. Each has different consequences, and Australia’s thin capitalisation and debt deduction rules may limit interest deductions on related-party debt.
Whichever route is chosen, documents matter. Share issues should be properly resolved and recorded with ASIC. Loans should be in a written agreement covering the amount, interest, repayment, ranking and what happens on default or sale. Undocumented transfers labelled later as “loans” or “capital” often cause tax and banking questions.
Intercompany agreements and transfer pricing
When the Australian entity buys products from the parent, licenses its software, shares staff or pays management fees, those dealings should be in written intercompany agreements. Australia’s transfer pricing rules generally expect related-party dealings to be priced on arm’s length terms, and the ATO may review them. This is an area for the group’s tax advisers in both countries, with the lawyer documenting what they settle.
PRC outbound investment approvals
Money leaving China to set up or fund an overseas business is generally subject to PRC outbound direct investment (ODI) rules, which may require filings or approvals and bank registration before funds can be remitted. The investment must comply with the laws of China as well as Australia. We do not advise on PRC law; we work with the client’s PRC counsel, who handles the outbound process, and we coordinate the Australian side so the documents match. Australian banks may ask to see evidence that the outbound steps were completed.
Opening an Australian bank account
Banks are subject to the AML/CTF Act and must identify the company, its directors and its beneficial owners. For an overseas-owned company, the bank may ask for the parent’s corporate documents, a chart of ownership up to the ultimate individuals, and evidence of the source of the funds being deposited. Account opening delays are a common cause of a slow start.
Employment and hiring
Australian employment law is detailed. The Fair Work Act, the National Employment Standards and any applicable modern award may set minimum pay and conditions, and superannuation must be paid for eligible employees, now in line with each pay cycle under the payday super changes from 1 July 2026. Written contracts and correctly classifying contractors matter. Staff transferred from China may also need visas, which our immigration colleagues can advise on.
Protecting intellectual property
Trade mark rights are territorial, so registration in China does not protect a brand in Australia. Founders may consider registering trade marks here early and giving the Australian entity a written licence to use the group’s IP. Contracts with developers, contractors and staff should deal with who owns new work.
Privacy and data issues for AI and tech businesses
The Privacy Act 1988 and the Australian Privacy Principles may apply, including rules on collection, use, security and sending data overseas, and the notifiable data breaches scheme. A small business exemption exists, but it has limits.
The law is changing. The Privacy and Other Legislation Amendment Act 2024 introduced a statutory tort for serious invasions of privacy, which commenced on 10 June 2025 and can apply regardless of the business’s size. The same Act adds transparency obligations about automated decision-making from 10 December 2026. Further reforms have been announced and may follow. AI products may also raise questions about training data and where data is stored.
FIRB if the business acquires assets or land
A foreign-owned business that acquires an interest in Australian land, including some commercial leases, or buys an Australian business or shares, may need foreign investment approval, depending on the type of asset, the investor and the value. Some sectors, including certain technology and data businesses, may raise national security considerations.
A hypothetical scenario
Consider a Chinese software company that set up a local company with the founder’s daughter, who lives in Melbourne, as resident director. Questions arose about how to fund the company, whether its software licence from the parent was documented, how customer data would be stored, and whether the outbound investment steps in China had been completed. The right approach depended on facts that needed advice.
Questions to discuss with your adviser
- Should we operate through a subsidiary or register the overseas company?
- Who will be the resident director, and do they understand their duties?
- How will the Australian entity be funded and the intercompany dealings documented?
- Has PRC counsel confirmed the outbound investment steps?
- Do our contracts, IP registrations and privacy practices fit Australian law?
Frequently asked questions
Can a Chinese company set up a company in Australia without an Australian director?
Generally not if it uses an Australian proprietary company, which needs at least one director who ordinarily resides in Australia. A registered foreign company instead needs a local agent, among other requirements.
Do I need FIRB approval to start a company in Australia?
Incorporating a new company is not usually the trigger. Approval may be needed when the business acquires land, an existing business or shares, depending on the circumstances.
Why does the Australian bank ask where the money came from?
Australian banks have legal obligations to know their customers and understand the source of funds.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates acts as ongoing corporate and commercial counsel to growing businesses, including founders expanding from China into Australia. We advise on structure, company set-up, funding and intercompany documents, contracts drawn from a broad library of precedents we adapt to each deal, and employment and IP issues, and our firm’s Accredited Specialists in Immigration Law advise on visas. Justin Chua trained in accounting (Bachelor of Commerce, accounting major), worked in finance in Hong Kong before law, and has owned and run businesses himself. We work alongside accountants, PRC counsel and other overseas lawyers, and advise in English, Mandarin and Cantonese.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
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Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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