PAYG withholding obligations for Australian employer paying NZ-based remote employee

(Newbie)Newbie

31 Mar 2026

Hi,

I am trying to understand the PAYG withholding obligations for an Australian resident company that employs a New Zealand tax resident working entirely remotely from New Zealand.

The scenario is:

The employer is an Australian resident company
The employee is a New Zealand tax resident living and working in New Zealand
All work is performed physically in New Zealand — the employee never travels to Australia for work purposes
The employee is not an Australian citizen, permanent resident, or Australian tax resident
The work is remote IT work — not entertainment, construction, sports or gaming

My understanding based on the ATO's published guidance on "Withholding from a foreign resident employee" is that withholding is unlikely to be required for services performed outside Australia that are not related to entertainment, sports, construction or gaming junket activities — unless the income is Australian-sourced and assessable.

I also note that under Article 14 of the 2009 Australia-New Zealand Double Tax Agreement (as explained in the Parliamentary Explanatory Memorandum for the International Tax Agreements Amendment Bill No. 2 2009, paragraph 271), employment income is generally taxable only in the country where the employment is exercised. Since all work is performed in New Zealand, my understanding is that the income is NZ-sourced and not Australian-sourced or assessable in Australia.

Based on this, my questions are:

Is the Australian employer required to withhold PAYG from salary paid to this NZ-based employee?
Is the Australian employer required to make superannuation guarantee contributions for this employee?
Is there any other Australian tax obligation that applies to the employer in this scenario?

I want to be well prepared as I explore remote work opportunities with Australian companies, so that I can address any concerns an employer may raise about their obligations when hiring a NZ-based remote worker.

Any guidance or references to relevant ATO publications would be greatly appreciated.

Thank you

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JayATO

(Community Support)Community Support

1 Apr 2026

Hi @avaya.rijal,

No, the Australian employer isn't required to withhold PAYG tax from salary paid to you as a New Zealand tax resident performing all work in New Zealand. The income you earn is not Australian-sourced and isn't taxable in Australia.

The Australian employer also has no superannuation guarantee obligations for you in this scenario. Super obligations don't apply when the employee is a foreign resident performing work entirely outside Australia.

Based on the circumstances you've described, there are no Australian tax obligations for the employer when hiring you as a New Zealand-based remote worker. The Australia–New Zealand tax treaty supports this outcome, as employment income is generally taxable only in the country where the work is performed.