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Australia: ATO guidance, presence of employees not creating permanent establishment (COVID-19)

Australia: ATO guidance, permanent establishment

The Australian Taxation Office (ATO) updated guidance concerning whether the presence of employees in Australia, due to coronavirus (COVID-19) pandemic-related travel restrictions, creates a permanent establishment.

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The updated guidance states that the ATO will not apply compliance resources to determine if there is a permanent establishment under the following conditions:

  • There was no permanent establishment in Australia before the effects of COVID-19;
  • The temporary presence of employees in Australia continues solely as a result of COVID-19 related travel restrictions;
  • Those employees temporarily in Australia will relocate overseas as soon as practicable following the relaxation of international travel restrictions; and
  • The employee has not been recognised as creating a permanent establishment or generating Australian-source income in Australia for the purpose of the tax laws of another jurisdiction.

According to the ATO, this approach is applicable until 30 June 2021, after which, employers will be required to consider whether ongoing arrangements give rise to a permanent establishment in Australia.

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