What UK Trade & Investment does

Nick McInnes, Director General
UKTI Australia & New Zealand
A presentation on Australian Business Opportunities for the World Trade Fair in the Black Country

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AgendaNick McInnes, Overview of the Australian marketTaxation considerations, Joelle Tabone, Partner, HLB Mann JuddLegal considerations, Stephen Dobbs, Partner, Herbert Smith FreehillsUnipart Rail experience, Steven Scriven, Sales Director, Unipart Rail

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Why Australia?Youll feel at home immediatelyOver 1,000 UK companies and more Brits than in any other country outside the UKVery similar business, legal and regulatory cultureStrong economy, with good growth prospectsExchange rates make UK goods and services attractiveGood trading links with fast growing Asia-Pacific nations

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A comparison with Australia

AustraliaUKPopulation23.3 million64.1 millionGlobal GDP ranking12th (IMF 2013)6th GDP growth est. 20142.6% 2.9%GDP per capita ($US 2014)US$61,137$43,803Ease of doing business (World Bank 2013)11th 10th Unemployment (July 2014)6.4% (ABS)6.4%Land mass sq kms7 692 000242 000

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Australia: its bigger than you think

- I love this slide. Many people underestimate the size of Australia. This slide sets it in context. Please remember that when planning your visit here. It takes 5 hours to fly from Perth to Sydney the same from London to Moscow!*

UK Exports to Australia

Australia has been a high-growth market for UK exporters. In 2012, total UK exports to Australia reached 10.9bn. In 2013, however, goods exports fell 8.5% and total exports are estimated at 10.6bn (with services figures not yet available but estimated to have grown modestly).Over the five years to 2012, we have experienced a 75% rise in services exports, and over six years to 2013 a 45% rise in goods exports.

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Cars the big goods export, o/taking meds/pharma over the last six years.Five categories of machinery & equipment, with a mining boom boost, then O Trans, Beverages, ClothingTop Ten categories of goods exports account for almost two-thirds (65%) of the UKs total goods exports to Australia.Goods exports fell 8.5% in 2013. We should focus our efforts in goods on quality, sophisticated, high-end goods and strong and upmarket British brands. We must defend our strong historical market share particularly in Financial, Insurance & Pensions and Other Business (Professional) Services *

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Opportunities in the Australian MarketSignificant opportunities for UK companies in the following industries;

Automotive Defence Oil and gasConstruction services Life sciencesTransport infrastructure ICTEducationFinancial and business services

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Australian Aerospace IndustryA$4bn industry

Boeing manufacturing 787 components

BAE servicing RAAF

Australian Aerospace Ltd manufacturing helicopters

Stable sector dominated by big Aerospace players. UK firms might be able to enter the Australian market through the supply chains of Boeing, BAE and Australian Aerospace Ltd (a Eurocopter subsidiary)

Boeing Manufacturing facility provides 787 components.

BAE services the RAAF Hawk fighter trainer fleet. Australia is purchasing Joint Strike Fighter aircraft.

Australian Aerospace Ltd is a Eurocopter subsidiary that manufacturers civilian helicopters.

The civil airline industry in Australia is dominated by Qantas and Virgin Australia. Both airlines have posted operating losses in 2014 and are looking to rationalise operations including reducing capacity on certain routes, staff reductions and retiring older, less fuel efficient aircraft. Qantas tipped to be upgrading the inflight entertainment systems of its 737 fleet in 2015.*

Australian Automotive IndustryLarge market A$170bn

Local car manufacturing ceasing in 2017

Imports of new cars rising

UK exports 800m+

Online automotive parts sales A$380m and growing 7.5%

A recovery in new car sales following the global financial crisis has defined the five years through 2014-15.

Consumer sentiment and business confidence have strengthened, stimulating demand for new cars. Demand grew, especially for imported vehicles.

Wholesalers and retailers benefited from growth in imported vehicle sales, but this was to the detriment of domestic motor vehicle manufacturers and upstream parts manufacturers.

Industry revenue is forecast to rise by a compound annual 1.5% over the five years through 2014-15, to be worth $170.8 billion.

New car sales recovered, with consumers shifting their demand toward more fuel-efficient small cars as petrol prices surged.

The trend took consumers away from locally manufactured large cars to imported small cars, and compact SUVs. This, coupled with a high Australian dollar and a reduction in import tariffs, led to significant import penetration

Alexander Dennis has successfully exported buses to New Zealand and has acquired a coach makers (Custom Coaches) in New South Wales.*

Transport: Major Road ProjectsMajor Road Projects

West Connex, NSWEast West Link, VictoriaBruce Highway, QueenslandOpportunitiesConstructionDesign, Project ManagementEngineering, Project Finance & PPPDrainage, CCTV, Road safety management and providers of building equipment, materials, and supplies.

VEast West Link - $8.8 billionOne of the largest infrastructure projects ever constructed in Melbourne. The East West Link will be an 18km cross-city road connection extending across Melbourne from the Eastern Freeway to the Western Ring Road. It includes the following:Procured by PPP with construction from 2014 to 2018.

New South Wales: WestConnex - $10 billion (Construction value $5b)

WestConnex will include a 33km link between Sydneys west with the airport and the Port Botany precinct. It will accommodate growing transport needs of greater Sydney and strengthen access for industry to commercial centres, improving growth opportunities for local businesses. It is also designed to stimulate urban renewal along the Parramatta Road corridor. Construction on the first stage will start in early 2015.to 2019. below.*

Rail Projects

State Project Estimated value Queensland Bus and Train (BAT) Tunnel AU$5 billionMelbourne Melbourne Rail LinkUp to AU$11 billionWestern Australia Perth Airport Rail Link AU$2.2 billionNew South Wales North West Rail LinkSydney Light RailAU$7.5 billionAU$2 billionACT Capital Metro Light Rail AU$2.1 billion

The 2013 Budget saw the Government bring forward the second round of its Nation Building funding programme, with a headline figure of $24 billion over five years.

The second phase of the Nation Building Programme is timed to follow concurrently from the first phase of the programme which finishes at the end of the 2013-14 Budget year. The first phase of the programme totalled $36 billion over six years. Of the $24 billion of funding commitments included in the second phase of the Nation Building Programme, around $13.5 billion is allocated in the forward estimates to 2016-17, with remaining funding falling outside the current Budget horizon.

Headline projects in the rail industry to be funded under Nation Building Programmes include the Melbourne Metro and the Brisbane Cross River Rail project.

The Budget contained a number of significant transport project commitments under the second phase of the Nation Building Programme. Additional details of funding for major projects include: $500 million for the Perth Light Rail Project, and $75 million for the Port Botany rail line upgrade.

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Rail Sector OpportunitiesAdvisory OpportunitiesTechnical Standard HarmonisationTelecommunicationsSignallingFinancing and PPPsMaintenance and upgrading of existing track Electrification Digital Railway

UK expertise in this sector is widely recognised AustraliaStrong UK diaspora working in the Australian rail sector.UKTI has notched up several contract wins in New South Wales with Sydney Trains. UK well positioned to pick up consulting and specialist equipment supply opportunities during CAPEX phase.UK experience in managing rail operations also recognised.*

How UKTI can help?Passport to ExportGateway to Global GrowthExport Market Research SchemeOverseas Market Information ServiceTrade show Access ProgrammeTrade Missions

For further information, please contact: Nick.McInnes@fco.gov.uk

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Doing business in Australia
- Taxation RequirementsPresented by
Joelle Tabone

Partner,
Business Services

jtabone@hlbvic.com.au

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DisclaimerThe content of this presentation is of a general nature only and should not be used or treated as professional advice. This presentation does not take into account your particular objectives, situation or needs. As a result, it may not be appropriate to your particular circumstances, and should not be relied upon. You should rely on your own enquiries, together with professional advice that takes into account your particular circumstances, in making any decisions concerning your own interests.

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Overview of Taxation SystemTax is imposed by both the Federal and State governmentsStandard financial year end is 30 June Australian resident company or branch?Australian resident Public Officer/DirectorLodgement of annual Income Tax Return and Financial Statements (consider audit exemptions)

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Taxation RequirementsCorporate Entities

Company tax rate of 30%Employer taxes: Payroll tax, Superannuation, WorkCover, Fringe benefits taxWithholding taxes on payments to overseas entities

PaymentWhat rate (UK/Australia)Interest10% gross amount of interest paidNon-franked dividends15% gross dividend paidRoyalties5% gross royalty

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Taxation RequirementsIndividuals

Australian tax residents assessed on worldwide ordinary incomeNon residents assessed on Australian sourced income 183 day rule Resident individual tax rates

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Taxation RequirementsThe above rates do include the Medicare levy of 2% and the Temporary Budget Repair Levy of 2% for taxable incomes over $180,000.

Taxable IncomeTax on this income0 - $18,200 Nil$18,201 - $37,00019c for each $1 over $18,200$37,001 - $80,000 $3,572 plus 32.5c for each $1 over $37,000$80,001 - $180,000$17,547 plus 37c for each $1 over $80,000$180,001 and over$54,547 plus 45c for each $1 over $180,000

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Other Tax ConsiderationsGoods and Services Tax rate of 10% (rebatable)Thin capitalisationTransfer pricing

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Stephen Dobbs, Partner, +61 9225 5511, stephen.dobbs@hsf.com30 SEPTEMBER 2014WEST MIDLANDS WEBINARDOING BUSINESS IN AUSTRALIA

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INTRODUCTIONCommon law legal system based on English lawMultiple jurisdictions

Federal (Commonwealth) State / Territory all have own statutes and courtsTaxes are levied at the federal level (corporations tax, personal income tax, capital gains tax)Stamp duty can be significant and is levied on a state by state basis generally imposed on a much broader range of transactions than in the UK10% GST (federal)Customs duty (federal) depends on class of goods

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BUSINESS STRUCTURESEssentially as per UK

sole traderspartnershipsprivate companiespublic companiestrustsCompanies must have at least one director ordinarily resident in Australia (three for public companies).

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IS A LOCAL ENTITY REQUIRED?An overseas corporation is required to register in Australia if it carries on business in Australia - usually requires some form of regularity of commercial transactionsKey exceptions:

maintaining a bank accounteffecting sales through an independent contractor (ie distributor)soliciting or procuring orders that become binding contracts only if accepted outside AustraliaRegistration requires appointment of a local agent, filing of financial information etcAlternatively can establish Australian subsidiary

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FOREIGN ACQUISITIONS OF AUSTRALIAN BUSINESSESStatutory foreign investment regime overlaid by published government foreign investment policyAdministered by Foreign Investment Review Board (FIRB)Generally foreign acquisitions of Australian businesses require notification and approval if value above approx A$250 millionDirect or indirect acquisitions of non-agricultural land generally require approval regardless of value (some exceptions apply)National interest test No exchange control restrictions

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EMPLOYING STAFF IN AUSTRALIAFederal legislation Fair Work Act

minimum employee entitlements (re leave etc)industry /occupation based awards (collective bargaining)enterprise agreements between particular employer and its staffStatutory long service leave state by stateMandatory superannuation contributions by employer currently 9% but scheduled to ultimately increase to 12%Wages generally high by international standards given high cost of living

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TRADINGLaw of contract broadly as per English law. However considerable statutory overlay

Prohibition on misleading or deceptive conduct in trade or commerce applies to all commercial dealingsAdditional consumer protection provisions statutory guarantees of fitness for purpose etcProtection for consumers against unfair trading terms and unconscionable conductStrict anti-trust laws and restrictions on third line forcing, boycotts, price fixing etc (exclusive distribution arrangements generally fine)Privacy legislation protects personal information of customers

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PRODUCT LIABILITYStrict liability for manufacturers of defective goods that cause injury, loss or damage regime based on 1985 EC product liability directiveUN Convention on Contracts for the International Sale of Goods may apply to certain international contracts for the sale of products (no application to products for personal, family or household use)

*The contents of this publication, current at the date of publication set out in this document, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.Herbert Smith Freehills LLP and its affiliated and subsidiary businesses and firms and Herbert Smith Freehills, an Australian Partnership, are separate member firms of the international legal practice known as Herbert Smith Freehills. Herbert Smith Freehills 2014

DISCLAIMER

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Doing Business in Australia

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Unipart Rail JourneyInvested time and effort in Specific desk top researchNumber of key visits Opened Unipart Rail Office Nov 2007 AusRail trade showSydney Location due to sister companyFormed JV with UGL in 2011JV Successful with RailCorp Maintenance Contract in 2011 worth $1.4B Unipart Rail growth into other statesDifferent solutionsProductsSupply Chain ServicesConsultancy

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Market Research & IntelligenceDo as mush research as possibleBest option go and seeUnderstand your marketLocal competitionWhere you fit against local activityUnderstand win factors Local contentLocationTyranny of distanceCommunicationNationally / Internationally Time zonesPortability of the offering

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ResourcingCosts

Local v Ex pat Cost of livingBusiness costs 457 Visa, travel, FBTDo your research

Workforce Flexibility

Distance from UKVisa process and rulesExperience/Skill setUnion strengthResponsivenessSupport for in-territory team

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Rail Opportunities

Major Infrastructure projectsNWRL Melbourne Link

Train Build ProjectsQR NGRNSW Intercity

Light Rail State Capitals

InnovationPartnerships

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Next Steps

Strategy agreedUnderstand opportunities and threatsUnderstand the onion AusRail 2014 meeting / Visit programmeUKTI advice

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*- I love this slide. Many people underestimate the size of Australia. This slide sets it in context. Please remember that when planning your visit here. It takes 5 hours to fly from Perth to Sydney the same from London to Moscow!*Australia has been a high-growth market for UK exporters. In 2012, total UK exports to Australia reached 10.9bn. In 2013, however, goods exports fell 8.5% and total exports are estimated at 10.6bn (with services figures not yet available but estimated to have grown modestly).Over the five years to 2012, we have experienced a 75% rise in services exports, and over six years to 2013 a 45% rise in goods exports.

*Cars the big goods export, o/taking meds/pharma over the last six years.Five categories of machinery & equipment, with a mining boom boost, then O Trans, Beverages, ClothingTop Ten categories of goods exports account for almost two-thirds (65%) of the UKs total goods exports to Australia.Goods exports fell 8.5% in 2013. We should focus our efforts in goods on quality, sophisticated, high-end goods and strong and upmarket British brands. We must defend our strong historical market share particularly in Financial, Insurance & Pensions and Other Business (Professional) Services *

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*Stable sector dominated by big Aerospace players. UK firms might be able to enter the Australian market through the supply chains of Boeing, BAE and Australian Aerospace Ltd (a Eurocopter subsidiary)

Boeing Manufacturing facility provides 787 components.

BAE services the RAAF Hawk fighter trainer fleet. Australia is purchasing Joint Strike Fighter aircraft.

Australian Aerospace Ltd is a Eurocopter subsidiary that manufacturers civilian helicopters.

The civil airline industry in Australia is dominated by Qantas and Virgin Australia. Both airlines have posted operating losses in 2014 and are looking to rationalise operations including reducing capacity on certain routes, staff reductions and retiring older, less fuel efficient aircraft. Qantas tipped to be upgrading the inflight entertainment systems of its 737 fleet in 2015.*A recovery in new car sales following the global financial crisis has defined the five years through 2014-15.

Consumer sentiment and business confidence have strengthened, stimulating demand for new cars. Demand grew, especially for imported vehicles.

Wholesalers and retailers benefited from growth in imported vehicle sales, but this was to the detriment of domestic motor vehicle manufacturers and upstream parts manufacturers.

Industry revenue is forecast to rise by a compound annual 1.5% over the five years through 2014-15, to be worth $170.8 billion.

New car sales recovered, with consumers shifting their demand toward more fuel-efficient small cars as petrol prices surged.

The trend took consumers away from locally manufactured large cars to imported small cars, and compact SUVs. This, coupled with a high Australian dollar and a reduction in import tariffs, led to significant import penetration

Alexander Dennis has successfully exported buses to New Zealand and has acquired a coach makers (Custom Coaches) in New South Wales.*VEast West Link - $8.8 billionOne of the largest infrastructure projects ever constructed in Melbourne. The East West Link will be an 18km cross-city road connection extending across Melbourne from the Eastern Freeway to the Western Ring Road. It includes the following:Procured by PPP with construction from 2014 to 2018.

New South Wales: WestConnex - $10 billion (Construction value $5b)

WestConnex will include a 33km link between Sydneys west with the airport and the Port Botany precinct. It will accommodate growing transport needs of greater Sydney and strengthen access for industry to commercial centres, improving growth opportunities for local businesses. It is also designed to stimulate urban renewal along the Parramatta Road corridor. Construction on the first stage will start in early 2015.to 2019. below.*The 2013 Budget saw the Government bring forward the second round of its Nation Building funding programme, with a headline figure of $24 billion over five years.

The second phase of the Nation Building Programme is timed to follow concurrently from the first phase of the programme which finishes at the end of the 2013-14 Budget year. The first phase of the programme totalled $36 billion over six years. Of the $24 billion of funding commitments included in the second phase of the Nation Building Programme, around $13.5 billion is allocated in the forward estimates to 2016-17, with remaining funding falling outside the current Budget horizon.

Headline projects in the rail industry to be funded under Nation Building Programmes include the Melbourne Metro and the Brisbane Cross River Rail project.

The Budget contained a number of significant transport project commitments under the second phase of the Nation Building Programme. Additional details of funding for major projects include: $500 million for the Perth Light Rail Project, and $75 million for the Port Botany rail line upgrade.

*UK expertise in this sector is widely recognised AustraliaStrong UK diaspora working in the Australian rail sector.UKTI has notched up several contract wins in New South Wales with Sydney Trains. UK well positioned to pick up consulting and specialist equipment supply opportunities during CAPEX phase.UK experience in managing rail operations also recognised.*

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