If an Australian business, contracts an overseas company for services to be performed in Australia — The overseas company will send their employee (who has legal working rights in Australia but is not a resident for tax purposes) to Australia to provide the service. My question is what are the tax and GST implications for both the overseas company and their employee.
Hi @halides,
The tax and GST implications depend on several factors, including whether the overseas company establishes a permanent presence in Australia and the residency status of their employee.
For the overseas company, if they're providing services in Australia, GST will generally apply to the supply because the service is performed in Australia. The supply of a service is not GST-free if the service is provided in Australia, even if the recipient is not in Australia. The overseas company may need to register for GST if they're carrying on an enterprise in Australia.
From 1 October 2016, changes were made to reduce compliance costs for non-resident businesses. Generally, a non-resident's enterprise must register for GST if it's based in Australia for more than 183 days in a 12-month period and has a GST turnover of $75,000 or more. The overseas company will need to review their enterprise arrangements in Australia to work out if they need to register for GST.
For the employee who's not a resident for tax purposes but has working rights in Australia, if they perform work while they're in Australia, the overseas company may have Australian obligations. This can include registering for PAYG withholding and reporting through Single Touch Payroll. The company may also need to meet superannuation guarantee obligations, depending on the circumstances.
If the employee isn't an Australian resident and performs work in Australia, the income source and tax treaty provisions will determine the tax treatment. Any relevant tax treaty between Australia and the employee's country of residence will set out which country has taxing rights.
The overseas company should check if they need to register for GST and review their obligations for PAYG withholding and superannuation. They can find more information about tax and super in Australia on our website. The employee should confirm their residency status and tax obligations based on where the work is performed.
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