The Australian Taxation Office (the ATO) has
recently issued their final Taxation Determination TD 2011/1 which
indicates a non-resident entity will generally be subject to PAYG
withholding obligation if there is a sufficient connection with
Where a non-resident entity has a sufficient connection with
Australia to have an obligation to withhold from payments made to
an Australian resident for work performed overseas, it will also
have obligations under the FBTAA in relation to any benefit
provided to that person in respect of the employment of that
In these circumstances, the payment will be 'salary or
wages' for the purposes of the terms 'current employer'
and 'current employee' as defined in subsection 136(1) of
the Fringe Benefits Tax Assessment Act5 ( the
FBTAA). As a result, the non-resident entity and
the Australian resident will be an 'employer' and an
'employee' respectively as these expressions are defined in
subsection 136(1) of the FBTAA.
The following example is taken from the tax Determination:
Sheree is an Australian resident for tax purposes.
She is employed as a project manager working in the Australian
operations of a non-resident consultancy company. The company
transfers her overseas for 5 months to work on a new consultancy
project. The company continues to carry on business and maintains a
physical presence in Australia. Sheree's wages are assessable
income in Australia. The company has an obligation to withhold an
amount for Australian tax purposes from the salary paid to
Sheree is provided with a car while overseas and is
reimbursed for some additional living expenses. As amounts must be
withheld from her salary, her employer will have obligations under
the FBTAA in respect of the benefits provided to her. Sheree is not
required to include these in her Australian assessable
The ATO believes a non-resident entity will have a sufficient
connection with Australia if they have a physical business presence
in Australia. This will be the case if the non- resident entity
carries on an enterprise or income producing activity (or part
thereof) in Australia and has a physical business presence in
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).