COVID-19 and permanent establishments

March 2021

The ATO has provided additional guidance for non-resident companies with employees caught by Australia's COVID-19 travel restrictions.

One of the unintended consequences of Australia's COVID-19 travel restrictions is whether the presence of employees in Australia for longer periods of time could cause non-resident businesses to  have a permanent establishment in Australia.

Having a permanent establishment here could mean that business profits generated by non-resident entities could be taxable here.

The guidance indicates that for the period up to 30 June 2021 the ATO will not be applying compliance resources to determine whether a permanent establishment arises if:

  • The business did not otherwise have a permanent establishment in Australia before the effects of COVID-19;
  • The temporary presence of employees in Australia continues to solely be as a result of COVID-19 related travel restrictions;
  • Those employees temporarily in Australia will relocate overseas as soon as practicable following the relaxation of international travel restrictions; and
  • The business has not recognised those employees as creating a permanent establishment or generating Australian source income in Australia for the purpose of the tax laws of another jurisdiction.

After this time clients will need to consider whether the continued presence of employees in Australia could be a risk from a tax perspective.

Contact our International Tax Team on 02 9957 4033 if you or your business are impacted by travel restrictions within Australia.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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