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With more than six months into the COVID-19 pandemic, the needs of the workforce are changing. Refer to the results of our latest survey that shows how companies are planning their remote work arrangement policies.
Australian superannuation is complex at the best of times, but overlay that with an internationally mobile employee population and most employers are in uncharted territory. The superannuation guarantee obligations for employers need to be carefully considered not just for long-term expatriates who have come to work in Australia but also short term business visitors who are temporarily based in Australia due to COVID-19. Read more here.
COVID-19 has created a situation where there are many displaced employees based all around the world. If the employer carries on business overseas, including where it has employees working overseas, this can create tax obligations in that overseas country. In other words, mobile employees can unknowingly trigger foreign corporate tax obligations for their employing entity. To understand the connection and what to look out for, read more here.
The results from our second survey are in. Organisations are less optimistic about mobility returning to its pre-COVID-19 state and are instead expecting a significant increase in remote and flexible work arrangements into the future. We move on from the initial crisis stage, to look at how companies are reevaluating the current situation, planning for the future and assessing what it means for mobility and their global workforce. See the aggregated results from our survey of companies in the APAC region.
As a result of current travel restrictions, we are seeing an increase in individuals commencing their employment but being unable to relocate to the intended employment location. In these scenarios, what are the payroll, tax and compliance considerations? Read more here.
COVID-19 highlighted the need for organisations to change their approach to Global Mobility. Now is the time to review and refresh: Read the article.
I have employees who have stayed in Australia longer than 3 months, what are the tax implications? Read the answer.
1 July 2020 provides the perfect opportunity to set goals for the year ahead, including in relation to a globally mobile workforce. What will be your focus in FY21? Read the article.
PwC conducted a survey on business responses to COVID-19 in relation to their globally mobile workforce. We learned from this survey that looking forward, 46% of organisations in the APAC region believe that the number of international moves will remain the same, whilst 20% believe they will decrease.
As expected, the results differed across industries - the ability for certain roles to better accommodate remote work certainly had an impact. Find out where your organisation stands.
An employee has a 400 visa that is about to expire, what are our options? Read the answer.
Many globally mobile employees have found themselves stranded in Australia when borders closed. How are these employees taxed and how does the company report for them? Here is some guidance to get you started.
The COVID-19 outbreak presents some specific potential tax challenges - for both individuals and their employers - when an individual is not living or working in their normal jurisdiction.
The Australian Taxation Office (ATO) has clarified that individuals such as foreign aid workers, who returned earlier than planned from overseas to work in Australia due to COVID-19, will only be able access the income tax exemption for their foreign earnings where they meet the usual requirements of that provision.
As background, Australian tax residents may be entitled to an income tax exemption on foreign earnings from service in a foreign country where the earnings are attributable to work conducted for an Australian overseas aid program, a relief fund, an exempt institution or defence force (under section 23AG of the Income Tax Assessment Act 1936). This exemption only applies where the foreign earnings are derived from a continuous period of service in the foreign country that lasts for at least 91 days.
Any period of absences from foreign service breaks the continuity of the foreign service, unless the absence still counts as foreign service (e.g. recreation leave, absence due to an accident or illness, etc.) or it does not exceed one-sixth of the total period of foreign service. In these limited circumstances, temporary absences from foreign service (such as time spent in Australia) may still count as a period of no contract foreign service.
Where an Australian tax resident has returned to Australia earlier than the 91 days as a result of COVID-19 and commenced working in Australia, the ATO is applying the law strictly and indicated that this is not considered as a temporary absence from foreign service that falls into one of the exceptions. Therefore, such absences that would otherwise break continuity of service can only be bridged by satisfying the one-sixth test.
In those cases, where 91 days of continuous foreign service (having regard to the temporary absence exceptions noted above) has not been undertaken, the foreign earnings from any period of foreign service will not be exempt and would become assessable in Australia. Furthermore, any earnings from the same employer attributable to any period while in Australia would also be assessable.
Many individuals have come back to Australia temporarily or have been unable to return to their usual overseas work location as a result of COVID-19.
The ATO has published guidance which is integrated into the COVID-19 FAQ page of its website.
Without working: No taxation impact in Australia
The ATO has confirmed that an individual who is otherwise a non-resident of Australia should not become an Australian resident for tax purposes by virtue of being in Australia temporarily; i.e. for some weeks or months as a result of the COVID-19 crisis. This is on the basis that the individual lives overseas permanently and intends to return there as soon as they are able to.
The individual’s Australian tax obligations should remain unchanged; i.e. not assessable on their worldwide income and only assessable on their Australian source income (e.g. Australian rental property).
Working remotely: No taxation impact in Australia if the stay is less than three months
Where the individual is stranded in Australia due to COVID-19 but is working remotely from Australia, they may earn employment income. In this situation, the ATO has confirmed that there will be no tax impact in Australia if the individual is not able to leave and stays in Australia for less than three months.
Other exceptions may apply for individuals having a foreign employer.
Working for periods in Australia extending beyond three months
In its latest update published 23 April 2020, the ATO has provided details in relation to situations where the three month time period is exceeded. Specifically, in cases where more than three months has passed, the ATO states that the individual’s employment income would only be taxable in Australia if it actually has an Australian source.
Specifically, employment income may not have an Australian source where the only thing that has changed about the individual’s employment is that they are now performing that role in Australia as a result of COVID-19, there are no other connections to Australia and they intend to leave Australia as soon as they are able to do so.
Whilst employment income of individuals who are ordinarily resident in a country with which Australia has a double tax agreement may already qualify for exemption in Australia, the additional ATO guidance will extend this relief to individuals from non-treaty countries such as Hong Kong. In addition, there is no time limit to the relief provided by the ATO so long as the individual intends to return to their usual country of employment as soon as they can after the COVID-19 crisis ends.
Resident vs non-resident
Where it is determined an individual’s employment income does not have an Australian source, the income will not be taxable in Australia provided the individual is not an Australian tax resident.
The ATO has confirmed that an individual who is otherwise a non-resident of Australia should not become an Australian resident for tax purposes by virtue of being in Australia temporarily for some weeks or months as a result of the COVID-19 crisis and the individual intends to return to their home country after the crisis has finished.
The ATO has indicated that foreign employers do not need to register for PAYG withholding if their employees are temporarily working in Australia and it is anticipated that they will leave Australia before 30 June 2020.
On the other hand, for Australian employers, the ATO has confirmed that employer obligations that apply for all other Australian employees also apply to employees temporarily working in Australia; i.e. PAYG withholding, FBT and SG obligations. Although, as noted above, there is no tax impact for an employee working remotely in Australia for less than three months and therefore this would extend at least to relieve the employer from PAYG obligations.
The COVID-19 outbreak is presenting many challenges. Whilst there will be many more questions, the update from the ATO is a great start to giving individuals and businesses one less thing to worry about.
The President of the United States signed into law (the CARES Act) on 27 March 2020 relief in the form of an immediate payment from the Internal Revenue Service (IRS) for certain individuals, including many mobile employees currently in Australia.
The credit - which is available to an eligible individual who has a social security number - is determined based on filing status, number of qualifying children and phased out for taxpayers with higher adjusted gross income. An estimate of the credit (an advance refund) will be automatically paid to certain individuals as soon as possible starting from 6 April 2020, but no later than 31 December 2020. Nonresident aliens are not eligible.
Global employers may have employees in Australia, on assignment or recent transfers from the U.S., whereby the amount of relief (or timing of relief) will be directly impacted due to the assignment or transfer. For example, some participants may not receive an advance refund and/or the credit even though they would have had they lived and worked solely in the U.S.
Employers of globally mobile individuals should evaluate the impact of the CARES Act and develop a documented plan, optimally prior to the IRS issuing payments. The plan should include timely employee communication, quick-paced revisions to mobility policies and prioritisation of the most critical issues based on the specific company’s situation.
For more information, read our global alert, United States: New '2020 recovery rebates' may create inequalities for mobile employees
For the latest on travel restrictions in response to COVID-19, see our Immigration COVID-19 updates.
People & Organisation Tax Leader, PwC Australia
Tel: +61 2 8266 5864
Partner, PwC Australia
Tel: +61 (8) 9238 3138
Partner, PwC Australia
Tel: +61 (8) 8218 7494
Global Mobility Australia Practice Leader, PwC Australia
Tel: +61 3 8603 5424