Guidance from the ATO for Foreign Employers

Updated: Jan 19

The Covid-19 pandemic has forced over 400,000 Australians back to Australia from their homes overseas, with thousands of Australians continuing to work for foreign employers for the relative safety of Australian shores.


Consequently foreign companies are likely to have PAYG Withholding and Superannuation obligations at the very least and therefore guidance from the ATO in this often misunderstood area is timely.


On 11 December 2020 the ATO issued a fact sheet entitled "Foreign resident employers - your tax and super obligations". The fact sheet can be accessed here. It does not contain any surprises and is a useful summary for foreign employers of our general law. The trouble is that it underplays the costly overlay that Australia's compliance laws are likely to impose on foreign business.


For a foreign employer to have to register for PAYG withholding in the middle of a pandemic and to get organised to pay Superannuation Guarantee is a headache that most employers and the repatriated Australian could have done without for this year - still a year of enormous uncertainty and transition. The level of regulation could unfortunately lead to some employers terminating the employment of a returning Australian. It would have been excellent if the ATO could approached these matters with more administrative flexibility.


In the fact sheet the ATO says as follows: "As part of our initial COVID-19 response, we did not expect you to register for pay as you go (PAYG) withholding if the only reason your employee was working in Australia was because of the effecs of COVID-19 on travel and it was anticipated that they would leave before 30 June 2020".


That is not quite accurate. It might have been 'internally'anticipated but the ATO's residency guidance for returning expatriates never suggested that an expatriate who is in Australia because of the pandemic had to or should leave by 30 June.