EOR vs Entity Setup in Australia

Australia stands as a strategic destination for global businesses, offering strong opportunities for expansion. In 2025, its economy is expected to grow by 1.8%, driven by technology sectors, renewable energy investments, and robust infrastructure development. The ASX 200 has reached highs of over 9,000 points in 2025, reflecting investor confidence in the country’s stability. For businesses entering this market, the key decision is whether to partner with an Employer of Record (EOR) or establish a local entity.

An EOR lets you hire talent quickly and compliantly without setting up a legal entity, making it ideal for short-term projects or market testing. Setting up your own entity, however, offers greater control, long-term tax efficiency, and direct client relationships, though it involves higher upfront costs and regulatory complexity.

This guide explores both expansion paths in detail, examining costs, timelines, compliance, and strategic considerations so that you can make the right choice for your Australian growth.

Introduction to Business Structures in Australia

Australia provides several options for business incorporation, each with specific requirements for liability, compliance, and taxation. The most common is the Proprietary Limited Company (Pty Ltd), which requires a minimum share capital of AUD $1. This structure protects shareholders from personal liability and mandates registration with the Australian Securities and Investments Commission (ASIC). A Pty Ltd is subject to corporate income tax (ranging from 25% for small businesses to 30% for larger companies) and Goods and Services Tax (GST).

Another option is the Public Limited Company (Ltd), typically suited for larger undertakings that can offer shares to the public. It demands higher governance requirements and allows access to capital markets.

Foreign companies may also consider subsidiaries or branch offices, which come with distinct rules around tax liability and management. Subsidiaries are treated as separate legal entities under Australian law, while branch offices operate as extensions of the foreign parent company.

Residency rules are essential to consider. While foreign ownership is allowed, at least one director must ordinarily reside in Australia to ensure compliance with Australian regulations, annual filings, and tax reporting. These local obligations are central to the broader discussion of business entity setup in Australia.

Why Businesses Expand to Australia

Australia has emerged as a robust Asia-Pacific market, offering a combination of economic stability, a skilled workforce, and strategic geographic location. Companies choose to expand their business in Australia for several compelling reasons:

• Workforce: Australia has a highly skilled, educated talent pool, particularly in IT, engineering, manufacturing, and professional services. The technology workforce alone exceeded one million workers in 2024, with demand projected to reach 1.3 million by 2030. Despite engineering skill shortages in some sectors, the overall workforce quality remains exceptional.
• Economic Incentives: Australia offers a favorable tax environment with corporate tax rates among the lowest in the OECD. The Research and Development (R&D) Tax Incentive supports innovation-driven enterprises. Government policies actively support foreign direct investment through various grants and subsidies.
• Industry Strengths: Australia’s growth industries include technology, renewable energy, mining, agriculture, and professional services. Australia’s growth industries include technology, renewable energy, mining, agriculture, and professional services. The country’s strategic location provides access to dynamic Asia-Pacific markets, with approximately 75% of trade directed to the region. 

This strong foundation makes Australia an ideal choice for companies weighing Employer of Record vs subsidiary in Australia and other entry options.

Employer of Record (EOR) vs Own Entity

An Employer of Record is a third-party service provider that hires and manages employees on behalf of foreign companies. An EOR takes on all employment-related responsibilities such as payroll processing, tax withholding, benefits administration, and ensuring compliance with the Fair Work Act 2009. For companies not ready to establish a local presence, an EOR offers immediate access to Australia’s skilled workforce without the complexities of incorporation.

By contrast, setting up one’s own entity involves registering a legal business structure such as a Pty Ltd company. This route requires incorporation with ASIC, local management appointment, tax registration, payroll systems, and ongoing compliance with corporate regulations under the Corporations Act 2001. While this approach requires greater upfront effort, it provides direct control over business operations and long-term employment relationships.

The distinction between EOR vs entity setup in Australia comes down to flexibility versus control. EORs allow for faster market entry with fewer administrative burdens, while entity setup is more suitable for businesses seeking permanence, autonomy, and scalability.

Setting Up a Local Entity in Australia: Costs & Key Considerations

Establishing a company in Australia involves both financial and administrative commitments. As of 2025, typical incorporation costs include:

• ASIC Registration Fee: AUD $611 for a standard Pty Ltd company (increased from $597 in 2024)
• Professional Services: AUD $990+ for legal setup packages, including company constitution and agreements.
• Business Name Registration: AUD $45 for 1 year or $104 for 3 years (if different from company name)
• Total Setup Costs: Typically AUD $1,500-$3,000+ including professional services.

In Australia, companies must appoint at least one director who ordinarily resides in the country and maintain a registered office address. Additionally, they are required to file annual returns with the Australian Securities and Investments Commission (ASIC) and register for Goods and Services Tax (GST) if their turnover exceeds AUD $75,000. 

All directors in Australian businesses will need to apply for a Director ID Number (DIN). In 2025, DIN application timelines are months long, adding significantly to the process for setting up foreign-owned companies in Australia.

Outside of the DIN process, the setup timeline generally spans a few weeks, depending on the complexity of the structure chosen and document preparation efficiency. Once incorporated, companies must adhere to strict compliance and reporting standards, making business entity setup Australia a more resource-intensive choice compared to using an EOR.

Partnering with an EOR in Australia: Costs & Considerations

Working with an Employer of Record streamlines the hiring process and ensures compliance with Australian labor laws. EORs manage employment contracts, payroll, tax withholdings (including PAYG), superannuation contributions (12% as of 2025), benefits, and onboarding while ensuring compliance with the Fair Work Act 2009.

The EOR cost in Australia typically ranges from AUD $599 to AUD $1000+ per employee per month, depending on the provider. Leading providers such as Remote, Multiplier, Deel, and Employment Hero include comprehensive compliance services, HR support, and employee benefits within their pricing.

Advantages of partnering with an EOR include:

• Immediate market entry with no incorporation costs.
• Reduced administrative and legal risks.
• Compliance with complex Australian employment laws, including Fair Work Act 2009, National Employment Standards, and superannuation obligations.
• Ability to scale operations quickly while maintaining compliance.

This approach is particularly suitable for companies testing the market or maintaining smaller teams, where the overhead of full entity incorporation may not be justified.

EOR vs Setting up Own Entity in Australia: Cost Comparison

The financial implications of EOR vs entity setup in Australia vary based on company size and growth strategy:

EORs provide cost-effective solutions for smaller teams, while entity setup becomes more cost-efficient in the long run for companies planning large-scale hiring operations.

When to Use EOR vs When to Incorporate an Entity

The decision between Employer of Record vs subsidiary in Australia often depends on the company’s objectives and resources.

EOR is recommended when:

• Testing Australia’s market before committing to long-term investment.
• Hiring small teams of fewer than 10 employees.
• Prioritizing quick entry and compliance without high upfront costs.
• Needing expertise in complex Australian employment laws, including Fair Work Act compliance.

Entity setup is recommended when:

• Planning long-term operations and significant workforce expansion.
• Requiring direct control over business decisions, HR policies, and compliance.
• Building a strong local presence with permanent infrastructure.
• Scaling to larger teams where per-employee costs become more economical.

For many organizations, EOR serves as a first step before transitioning into full incorporation once the business case for long-term investment is validated.

Employer of Record vs Entity Setup: What Should You Choose in Australia?

Choosing between EOR vs entity setup in Australia is a strategic decision that hinges on a company’s expansion goals. An EOR offers agility, comprehensive compliance assurance with Australian employment laws, and minimal administrative burden, making it the preferred choice for pilot operations or short-term hiring. Entity setup, however, provides autonomy, deeper integration into the Australian market, and cost efficiencies as the workforce scales.

Companies seeking flexibility and low risk often begin with an EOR to navigate Australia’s complex employment landscape, including Fair Work Act requirements, superannuation obligations, and payroll tax considerations. Organizations pursuing serious, long-term investment in Australia generally move toward setting up an entity to establish permanent operations and retain complete control.

How Commenda Simplifies Entity Setup in Australia

For businesses committed to establishing a strong local presence, Commenda provides comprehensive support for business entity setup in Australia. Its platform covers every stage of incorporation, including ASIC company registration, appointment of resident directors, payroll setup with Fair Work Act compliance, HR administration, and ongoing compliance filings.

By streamlining these processes, Commenda minimizes delays and ensures companies remain compliant with Australian laws, including the Corporations Act 2001, Fair Work Act 2009, and superannuation guarantee obligations. The platform is particularly valuable for ambitious businesses that want to expand business in Australia with confidence, scale efficiently, and maintain complete operational control.

Book a demo call with Commenda today to simplify your entity setup in Australia, making your expansion seamless, compliant, and strategically positioned for long-term success.

FAQs

Q. What is an Employer of Record in Australia?

An Employer of Record in Australia is a third-party provider that legally employs staff on behalf of a foreign company. The EOR manages payroll, PAYG tax withholdings, superannuation contributions (12% as of 2025), employment contracts, and compliance with the Fair Work Act 2009. This allows international businesses to hire employees in Australia without establishing a local legal entity.

Q. Is using an EOR legal in Australia?

Yes, using an EOR is entirely legal in Australia. EOR providers operate under Australian employment law and act as the legal employer of record, while the foreign company directs day-to-day work. This arrangement complies with Australian regulations, including the Fair Work Act 2009, making it a legitimate way to expand operations without local incorporation.

Q. How long does it take to set up an entity in Australia?

Setting up an entity in Australia typically takes 2 to 6 weeks. This process includes registering with ASIC, obtaining an Australian Business Number (ABN), registering for GST if required, and setting up payroll systems. The ASIC registration itself can be completed in as little as 2 days, but additional compliance requirements extend the overall timeline.

Q. What is the cost of using an EOR in Australia?

The EOR cost in Australia ranges from AUD $399 to AUD $799 per employee per month, depending on the provider. This fee generally covers employment contracts, payroll, PAYG taxes, superannuation contributions, benefits administration, and Fair Work Act compliance. There are no upfront incorporation fees, making EORs cost-effective for smaller teams or businesses testing the market.

Q. Can an EOR hire contractors and full-time employees in Australia?

Yes, EORs in Australia can manage both full-time employees and contractors.Full-time employees are required to comply with the Fair Work Act 2009, National Employment Standards, and Superannuation obligations under the EOR. For contractors, the EOR helps with agreements and payments, but contractors remain responsible for their own tax filings under Australian tax law.

Q. What are the tax implications of setting up an entity in Australia?

Entities established in Australia are subject to corporate tax rates of 25% for small businesses (turnover under AUD $50 million) or 30% for larger companies. GST registration is required if turnover exceeds AUD $75,000, with standard rates at 10%. Companies must also comply with payroll taxes, and PAYG withholding for employees.

Q. EOR vs PEO: What’s the difference in Australia?

In Australia, an Employer of Record (EOR) is the legal employer and assumes full responsibility for Fair Work Act compliance and employment contracts. A Professional Employer Organization (PEO), by contrast, requires the company to have a legal entity in Australia already, as the PEO only co-manages HR and payroll functions. EORs are therefore better suited for foreign companies without an Australian entity.

Q. Can an EOR manage employment contracts in Australia?

Yes, EORs in Australia prepare and manage employment contracts in compliance with the Fair Work Act 2009 and National Employment Standards. This includes ensuring proper terms on working hours, paid leave, minimum wage rates (AUD $24.95 per hour as of 2025), and termination procedures. The EOR ensures that all contracts meet Australian legal requirements while aligning with the client company’s employment needs.

Q. What risks are involved in entity setup in Australia?

The principal risks of entity setup in Australia include higher upfront costs (AUD $1,500-$3,000+), longer incorporation timelines, ongoing compliance obligations with ASIC and tax authorities, and the requirement to appoint resident management. Non-compliance with Australian corporate law, Fair Work Act requirements, or superannuation obligations may result in significant penalties. Additionally, winding down an entity can be complex if expansion plans change.

Q. How do I choose the right option for my business in Australia?

Choosing between EOR vs entity setup in Australia depends on your goals. An EOR is best if you want fast, low-risk entry with small teams, need expertise in Australian employment laws, or are conducting temporary operations. Setting up an entity is better if you plan long-term growth, large-scale hiring, or direct operational control. Many businesses start with an EOR to test the market and transition to an entity once they commit to long-term expansion in Australia.