Tax and super obligations for foreign employers

February 2021

The ATO has released a fact sheet to assist foreign resident employers to comply with their PAYG and super guarantee obligations for employees in Australia.

A new guide from the ATO is intended to help employers meed their PAYG and super guarantee obligations for any Australian employees.

PAYG withholding for Australian resident employees

In relation to PAYG withholding, the guide states that withholding should apply to:

  • Employment income earned by Australian residents; and
  • Australian-sourced employment income earned by employees who are foreign residents.

However, it is important to note that many Australian double tax agreements provide that employment income earned by a foreign resident while working in Australia for a short period (up to 183 days) is not to be taxed in Australia (the short-term visit exception) if the employer is a non-resident and does not have a permanent establishment in Australia.

If it can be confirmed that the employees' employment income is not taxable in Australia it should not be necessary for the employer to withhold amounts under the Australian PAYGW system.

Foreign employers may have FBT obligations

Foreign employers should also note that if they are required to withhold PAYG from payments to employees they may have FBT obligations in Australia.

Paying superannuation for Australian resident employees

For superannuation guarantee purposes, foreign resident employers will usually be required to pay super for Australian resident employees and foreign resident employees who perform work in Australia to prevent the super guarantee charge from applying.

There are some instances where employers will not be required to pay super, including for employees earning less than $450 a month or employees who are under 18. Other exclusions can include employees temporarily working in Australia who are covered by a bilateral super agreement as well as certain foreign executives.

Get guidance for your Australian resident employees

Residency, employment, and tax are complex areas of Australian Tax law and we highly recommend seeking guidance from our International Tax team for any Australian resident employees. Contact us on 02 9957 4033 for additional information.

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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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