Yes, Reading Life works for side-loaded books and based on my experience so far there aren't any awards locked to Kobo store books. I do imagine that you can access the store from Australia since 1) Collins and (for what it's worth) Borders sell the devices there and 2) the main reason for the creation of eReaders is to tie you to a particular ecosystem be it Kobo or Kindle or whatever. In any case you should see if the website allows you to purchase books over there before you buy
http://www.kobobooks.com/ Cheers!