Hello Neil,
You have already been offered some good advice, and you must start your research here in Australia and work backwards from your own parents, this is essential before any serious research can begin in Germany.
A simple check of the passenger arrival indexes either on line or at your local family history library for each state in Australia would have told you that an L Demel arrived from New Zealand at the Port of Melbourne in 1885. (just go to google and type in Public Record Office Victoria and then click on their on-line immigration index, there are several entries for Demel)
His naturalization may well be in New Zealand as well, check this index at your local library if available, order a copy from New Zealand, this record may indicate if he was resident in England or America prior to his arrival in New Zealand. Keep in mind that New Zealand was part of Australasia until Federation in 1901. It would not have been necessary for him to become naturalized again when here arrived in Australia.
Purchase all BDMs, or obtain copies from other researchers, collectively they should provide you with important information which could give you clues to his exact place of origin. Death certificates usually indicate the number of years the deceased has been resident in the Colony.
The LDS (Mormons) have filmed a significant amount of records for Germany, Australia and New Zealand check their "Family History Library Catalog" for details, these records include immigration, naturalization, civil and church records, military records, census, cemetery records, education, apprenticeship/ guild records etc...films can be ordered from your nearest Mormon library, no matter where you live in Australia.
Once you identify your ancestors arrival, confirm his personal details such as his age on arrival, at the time of his naturalization, his marriage and when his children were born etc. serious research can begin only when these details are known.
Check the National Archives of Australia www.naa.gov.au there are 17 entries for Demel, most interesting is a Bankrupt Estate file for Louis Demel, held in the "Perth office", the date range is from 1892-1960 you should order a photocopy (fees apply) of this file and see what it contains. Because it covers 68 years it should contain some family details and business information.
There are numerous "Trade Mark" files held in Canberra. The Canberra files can be ordered as on-line digital images for free. The files held in the Melbourne office can only be photocopied and posted to you for a fee. There is also a military service record for George Blake Demel, already digitised on line, his mother is Mrs Marion Blake Demel of Western Australia.
Talk to your family, include relatives, their friends and business colleagues.
These are just a few hints to get your research started, when you have more information I am sure there are several people on this list who will be happy to assist you further.
Good luck.
Elizabeth
NSW Australia