Working remotely for a Foreign Company while Resident in Australia
As we mention and discuss elsewhere, we have seen a very significant increase in Australian travelling and residing overseas while continuing to work remotely with Australian employers. This gives rise to tax and other related issues that need to be fully understood and managed, otherwise they can give rise to long-term, intractable tax issues.
On the other side of the coin, we have also found a large number of Australians returning from abroad wishing to continue working with overseas employers, and these arrangements can also give rise to a distinct set of issues that need to be understood and addressed - preferably prior to an individual returning to Australia.
In very general terms, individuals are typically taxed in the country in which they perform or carry out their services. This means that whether you are an employee of an overseas firm, or have in place contractual arrangements, you may expect that any income generated will be subject to tax in Australia rather than in the country in which the company is resident. Consistent with the issues that can arise in Australia, there are situations where foreign companies will simply seek to continue an individual as an employee on the local payroll - this is particularly the case with smaller companies without significant international exposure. This can give rise to the following, sometimes serious, issues:
- Local payroll systems may deduct tax and social security levies in that country and in practice these can prove difficult to recover even though you will be taxable on this income in Australia - raising the prospect of double taxation or a prolonged period before taxes can be recovered.
- Employers of resident Australians are required to make a superannuation guarantee (SG) payment, currently comprising 11% of an employee's ordinary time earnings, and there may be payroll tax and workers compensation obligations at the individual state level, and
- Having an employee resident in Australia could result in the company being regarded as having a "permanent establishment" in the country - and this can have very significant corporate tax implications - both in terms of compliance and liabilities.
For the reasons enumerated above, it is unlikely that a foreign company without an operating presence in Australia should retain an individual as an employee - and particularly on their existing "domestic" employment contract. Much will depend on individual circumstances, but the better, cleaner and more effective approach will usually be to engage an individual on a contract basis in Australian - and preferably - from our perspective - through a company established for that purpose and professionally set up to ensure that it meets all Australian and foreign legal, tax, HR and administrative requirements.
Our general view is that unless both you and the company are prepared to properly structure your work arrangements in Australia then you should look to work for a local Australian employer.
Our tax advisors have very significant experience in providing advice and service in these circumstances and if you would like arrange professional advice please complete the Inquiry form below providing details and you will be contacted promptly.