Converting an Australian Branch into a Subsidiary

Many foreign companies start in Australia with a registered branch because it is quick and cheap, then move to a Pty Ltd subsidiary once the business grows. The usual reasons are limiting the parent's liability, simpler Australian tax filings, access to local banking and government programs, and the ability to bring in local shareholders. This guide sets out the steps and the tax points. For the underlying choice, see branch vs subsidiary.

Step by step

1. Plan the transfer date, usually the start of a month or financial year, so the branch accounts close cleanly.
2. Incorporate the Pty Ltd with the foreign company as shareholder and at least one Australian-resident director. Every director needs a director ID first. The ASIC fee is $636 from 1 July 2026.
3. Register the subsidiary for tax: its own ABN, TFN, GST and PAYG withholding. The branch's registrations do not carry over.
4. Transfer the business: a business transfer agreement covering assets, contracts, IP licences, leases and employees. Contracts usually need the other party's consent to assignment or novation.
5. Move employees to the subsidiary (see below).
6. Stop trading through the branch. Within 7 days of ceasing to carry on business in Australia, the foreign company must lodge Form 407 with ASIC (s601CL). There is no fee if it is lodged on time; late fees are $102 up to a month late and $428 after that.
7. Tidy up the branch: lodge any outstanding financial statements (the obligation survives deregistration), the final tax return, final payroll reporting, and cancel the branch ABN within 28 days of ceasing business, cancelling PAYG withholding first.

Capital gains tax: the rollover

A foreign company is taxed in Australia on capital gains from assets used in carrying on business through an Australian permanent establishment, which includes branch assets. Transferring them to the subsidiary is a CGT event. Subdivision 126-B of the Income Tax Assessment Act 1997 allows a rollover between companies in the same wholly-owned group where one of them is a foreign resident. It fits a branch transfer: the transferor is the foreign company, the recipient is the Australian subsidiary, and the asset must be taxable Australian property just before the transfer. Both companies must choose the rollover, and it is not available for assets that become the subsidiary's trading stock. Depreciating assets transferred under the rollover also get automatic balancing adjustment relief. The rollover defers tax rather than removing it, so keep the cost base records.

Stamp duty

Duty is a state tax and depends on what is transferred and where. In NSW, duty on non-land business assets such as goodwill and IP was abolished from 1 July 2016, but duty still applies to land and interests in land, such as a lease. NSW corporate reconstruction relief reduces duty on eligible intra-group transfers to 10% of the normal amount (for transactions from 1 February 2024), subject to a 90% common ownership test. Other states have their own rules, so check each state where the branch holds property.

GST: supply of a going concern

The transfer can be GST-free as a supply of a going concern if it is for consideration, the subsidiary is registered (or required to be registered) for GST, both parties agree in writing that it is a going concern, and the branch supplies everything needed for the business to continue and carries it on until the transfer day. A transfer for no consideration does not qualify, so the business transfer agreement should set a price.

Employees

Under the Fair Work Act, moving employees from the branch to the subsidiary is a transfer of business where they are re-employed within 3 months to do substantially the same work, and the two employers are associated entities. Their service with the branch counts as service with the subsidiary, so leave and long service accruals carry over, and any enterprise agreement moves with them. Issue new contracts from the subsidiary that recognise prior service. Super, payroll tax and workers compensation registrations need to be set up for the subsidiary from day one.

Timing and cost

A straightforward conversion takes 4 to 8 weeks, mostly waiting for contract consents and bank account opening. Our company formation fee is From $900 (+ $636 ASIC fees), and we quote the transfer work, ASIC notices and final branch lodgements as a fixed fee once we know what the branch holds.

Frequently asked questions

Can a foreign company convert its Australian branch into a subsidiary?

Yes. The usual method is to incorporate a Pty Ltd, transfer the branch business to it, and notify ASIC on Form 407 within 7 days of the branch ceasing to carry on business in Australia.

Is there CGT rollover relief when moving branch assets to a subsidiary?

Subdivision 126-B allows a rollover for transfers between companies in the same wholly-owned group where one is a foreign resident, which covers a foreign parent transferring branch assets to its Australian subsidiary. Both companies must choose it, and trading stock is excluded.

Is the transfer subject to GST?

It can be GST-free as a supply of a going concern if it is for consideration, the subsidiary is registered for GST, both parties agree in writing, and everything needed to carry on the business is transferred.

What ASIC form closes the branch?

Form 407, the notification that a registered foreign company has ceased to carry on business in Australia. It must be lodged within 7 days of ceasing and has no fee if lodged on time.

This content is general information only and is not legal, financial or tax advice. Laws and regulations change often. For advice on your circumstances, speak to a qualified adviser.