On 20 March 2020, the Australian Taxation Office (ATO) released updated guidance to provide clarity as to how it will approach the tax implications for internationally mobile employees and their employers affected by the COVID-19 pandemic. This guidance forms part of an overall ATO guidance page for tax matters relating to the pandemic. This newsletter covers guidance related to residents temporarily overseas, foreign residents temporarily in Australia, earning employment income while in Australia temporarily, as well as employer obligations.
The Australian Taxation Office (ATO) has provided guidance on how it will approach the tax implications for internationally mobile employees and their employers affected by the COVID-19 pandemic.1
The KPMG Global Mobility team with the KPMG International member firm in Australia has been at the forefront in initiating discussions with the ATO since early February on the tax impact of COVID-19 for businesses and their employees. From the outset, we have highlighted concerns and provided real-time scenarios on the challenges that are facing our clients with a globally mobile workforce.
Many Australians who have been living overseas, over the last few months, have found themselves temporarily back in Australia for various reasons as a result of COVID-19. This movement has further increased in the last week following the advice of the Australian government for all Australian citizens and permanent residents to return. This has created uncertainty for many of those individuals regarding their tax positions and, for their employers, the associated tax and reporting obligations.
On Friday, 20 March, the ATO released updated guidance to provide clarity as to how it will approach the tax implications for internationally mobile employees and their employers affected by the COVID-19 pandemic. This guidance forms part of an overall ATO guidance page for tax matters relating to the pandemic.
We have outlined below the key take-aways from the updated guidance.
There should not be any change to Australian tax obligations for both employers and employees.
Individuals who are in Australia temporarily due to COVID-19 will not become Australian tax residents provided that they:
The tax residency issue may be more complicated if:
Lengthy stays in Australia may result in a change to residency. However, this should not be an immediate concern for people who are in Australia temporarily.
For foreign residents temporarily in Australia and continuing to be paid employment income, the ATO has advised as follows:
Where the wages are not assessable per the above, employer obligations are as follows:
Where an employee remains in Australia beyond the three-month threshold that the ATO specifies in the current guidance, an Australian employer could expect to have to meet the above obligations.
However, a foreign employer would not be required to register and apply PAYGW for an employee working temporarily in Australia as a result of COVID-19, unless it expects the employee to remain in Australia beyond 30 June 2020.
The ATO has acknowledged the issues are complex and will continue to evolve. Consequently it has committed to providing updated and revised guidance as the situation further develops and circumstances change and become clearer.
The ATO is keen to have an open dialogue and better understand the situations that individuals and employers are facing in order to tailor further guidance in the near future. If you or your employees are facing these kind of challenges and need clarity on any of the tax issues arising, please get in touch with the global mobility team with KPMG in Australia to discuss.
Please visit KPMG Australia’s dedicated COVID-19 website that has been developed to support our clients with relevant insights and guidance: https://home.kpmg/au/en/home/insights/2020/03/business-implications-of-covid-19-coronavirus.html .
1 More information is available on the ATO website.
Special thanks to Jackie Shelton, Priscilla Tang and Terry Hoban for their contributions to this article.
Dan Hodgson
Perth, Western Australia
Partner – People Services
Tel. +61 8 9278 2053
Direct Tel. +61 8 9278 2053
Mobile: +61 416 017 131
Mardi Heinrich
Melbourne, Victoria
Partner – Deals, Tax & Legal People Services
Tel. +61 3 9838 4348
Direct Tel. +61 3 9838 4348
Mobile: +61 410 602 993
Ablean Saoud
Sydney, New South Wales
Partner – Deals, Tax & Legal People Services
Tel. +61 2 9335 8550
Direct Tel. +61 2 9335 8550
Mobile: +61 421 052 596
Hayley Lock
Brisbane, Queensland
Partner – People Services
Tel. +61 7 3434 9176
Direct Tel. +61 7 3434 9176
Mobile: +61 477 764 638
Jackie Shelton
Sydney, New South Wales
Partner – Deals, Tax & Legal
Tel. +61 2 9335 8511
Direct Tel. +61 2 9335 8511
Mobile: +61 477 764 638
The information contained in this newsletter was submitted by the KPMG International member firm in Australia.
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