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AS AN EMPLOYER, WHAT ARE YOUR PAYG WITHHOLDING OBLIGATIONS FOR EMPLOYEES WHO WORK IN A FOREIGN COUNTRY?

If an employer has any Australian resident employee working outside of Australia with foreign incomes and that does not meet any exemption clauses, but are subject to Pay As You Go (PAYG) withholding requirements then, he needs to be aware of such obligations. Such incomes are to be included as assessable income in the employee’s income tax return. The employer has certain obligations for PAYG withholding of the employee’s foreign income and those are discussed below:

• Your employee must be an Australian resident working in a foreign country for an uninterrupted period of at best 60 days;
• The employee’s earnings must have a foreign source and foreign tax was paid;
• You should reduce the PAYG withholding amount if you pay tax to foreign government for your employee’s foreign earnings. You do not need to withhold any amount if the amount of tax paid is equal or greater;
• If your employee’s foreign earnings are exempt from tax and leave is accrued, you need to report an employee's leave on a PAYG payment summary – foreign employment;
• If the foreign employment income is not exempt and if you provide a fringe benefit to your employee, then you may have a fringe benefits tax liability;
• If your employee’s services are subject to certain development projects, and charitable or government activities, you do not need to be aware of your PAYG withholding as these are exempt from tax.