Why you need to tell the ATO if you're working overseas


Following the pandemic, many companies have allowed employees to work remotely from any location.

Moving around the globe and working remotely holds many attractions. But working in another country, even for a few months at a time, requires careful thought and planning if people want to avoid being hit with an unexpected tax bill on their return to Australia or while in another country.

Both businesses and employees must therefore be aware of the potential tax implications of remote working arrangements.

Why you need to tell the ATO if you're working overseas

Three overseas work scenarios that require special attention at tax time

There are three particular scenarios where Australians might need to pay extra attention to their personal tax situation.

The first one is when an employee who is living in Australia and their job is based here, but they spend some time in another country as part of their work.

They might not realise that the amount of time they spend overseas is enough to fall within that country's tax regime.

Depending on their circumstances, the time spent overseas and the nature of their employment, they could be liable for personal income tax in the foreign country.

Another situation is where an Australian works for an overseas company but is living here. Their foreign employer might believe they are doing the right thing and deducting income tax for that employee in the other country, but the Australian Taxation Office might view their tax situation differently and think the employee should be paying tax at home.

It's important not to just rely on your employer to know all the taxation rules that govern the income taxation of employees.

The third situation is an employee who is Australian and working for an Australian company but relocates overseas to work remotely for an extended period, or even temporarily. For example, they may have family overseas and move back temporarily to look after a sick parent but keep working for their Australian employer. They may then potentially be liable for income taxes abroad, rather than in Australia.

In these situations it is vital for them to discuss the situation with their employer to avoid tax being deducted and paid to the ATO which may be difficult to claim back in their Australian tax return.

Professional advice

Companies and individuals should get specific advice both in Australia and in relation to the country to which the person is moving as there may be several taxation factors to consider, both for businesses and for employees.

This planning should be done with taxation adviser experienced in dealing with the tax systems in each country well in advance of any move offshore.

Overseas pensions

Other complications may result when an employee has accrued pension savings abroad.

The pension system in the UK or the US, for example, can create complex tax consequences for locals who worked overseas but are coming back to Australia to live.

People who have been living and working overseas, often on an attractive income, may need to consider how to transfer their pension savings back into the Australian superannuation system.

Foreign tax credits

Yet another common situation is when people have changed tax residency and paid tax in another country; they may be able to claim a credit for the foreign tax paid upon their return but only if they have the proper records and structures in place.

Such considerations need to be carefully thought through to ensure people don't end up in a worse financial position than they started in before they moved offshore or decided to return home to Australia.

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Peter Bembrick is a partner at HLB Mann Judd and a taxation and accounting expert. Peter has over 20 years' tax consulting experience, joining HLB Mann Judd Sydney in 1990 and becoming a partner in 2004, specialising in tax issues. He holds a master of taxation, is a member of the Institute of Chartered Accountants in Australia and a fellow of the Taxation Institute of Australia.