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RacquelA(Initiate)Registered Tax Professional
21 Apr 2026

Hi, I am struggling to find something clearly written on the ATO website that explicitly advises that an employee who has moved overseas, works overseas and is no longer considered an Australian resident for Tax Purposes, who receives wages paid by an Australian Employer... that PAYG is not required to be withheld from their wages.


FYI, the country where work is performed is the Philippines.


Can you provide a link to a webpage that I can give to my Client that clarifies that PAYGW no longer applies to a worker with these circumstances?


I note this has been written in a Nov 2025 post by JayATO --

Hi @bsmi4897

If you're no longer an Australian resident for tax purposes, your employer doesn't need to withhold PAYG tax in Australia. This is because work performed overseas is usually considered foreign income, and foreign residents aren't taxed on foreign income in Australia.


Since you've permanently moved to Denmark 16 months ago, you may have ceased being an Australian resident for tax purposes. Your Australian employer should have stopped withholding tax once your residency status changed.


I'm interested to find out where on the ATO website it clarifies that once your residency status changes (to foreign resident) the Australian employer can stop withholding tax.


Thanks for your assistance,

Racquel



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ATO Certified Response
RachelATO(Community Moderator)Community Moderator
ATO Certified Response21 Apr 2026

Hi @RacquelA,


PAYG withholding depends on whether the income is taxable in Australia. This is determined by:

  • the employee’s residency status for tax purposes
  • where the work is physically performed, and
  • the source of the income.

Employment income has a foreign source when the work is performed offshore. Where an employee isn't an Australian resident for tax purposes and performs all employment duties outside Australia (for example, in the Philippines), the income earned is foreign‑sourced and generally not taxable in Australia.


PAYG withholding is a mechanism for collecting Australian tax, and it applies only to income that is assessable in Australia. This is reflected in our guidance that no payment summary is required for a foreign resident who is employed by you in a foreign country and works in a foreign country.

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RacquelA(Initiate)Registered Tax Professional
21 Apr 2026

Thanks so much Rachel for your quick reply, much appreciated.


So if there is no payment Summary required, does the worker's pay still get processed via Payroll and reported through STP?


Also, reading the links provided (thankyou) the 60 day rule has confused my understanding. I thought an employee who permanently resides in Australia can work overseas for up to 6 months and still be taxed and paid by the Australian Employer as a Aust Resident for Tax Purposes, so no change to their PAYGW and net pay for the first 182 days. Is this incorrect? This employee would be living temporarily overseas caring for their family but intends to return to Australia just before 6 months.

RachelATO(Community Moderator)Community Moderator
21 Apr 2026

Hi @RacquelA,


Yes, if no payment summary is required, the pay still goes through payroll and STP. Foreign‑sourced employment income is STP‑reportable even when no Australian tax is withheld.


The 60‑day rule isn't a tax residency rule. It’s purely an STP reporting trigger. It’s used to decide how foreign employment income should be reported, not how it is taxed.


Australian residency

If an employee remains an Australian tax resident, and goes overseas temporarily, and clearly intends to return to Australia, then they continue to be taxed as an Australian resident. What happens is:

  • PAYG withholding continues
  • their net pay doesn't automatically change
  • their foreign earnings remain assessable in Australia.

Where employees usually live and work in Australia and temporarily work overseas, there is no change to PAYG withholding obligations.


Tax residency isn’t worked out by a simple count of days. An employee doesn’t become a foreign resident just because they are overseas for more than 183 days. And they don’t automatically stop being a resident before that either.


The fact that your example employee is overseas temporarily, is caring for family, and intends to return before six months strongly supports continued Australian tax residency, meaning PAYG continues unchanged during that time.

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Where can I find information about PAYG Withholding for a Foreign Resident working o/seas? | ATO Community