Sending an employee overseas – double tax relief for prepared employers

Many businesses will have a need to transfer an employee overseas for a time. This might be just a transfer from a local Australian office to an office in another country for an agreed time, or it may be to expand the existing business into a new country so an employee is sent overseas to set up the satellite operation.

Most countries have rules requiring employers to make contributions for the retirement of their employees, as well as requiring them to pay worker insurance and payroll tax. The corresponding obligations here in Australia may continue here as well, depending on how long the employee is transferred for.

Clearly this double coverage increases the costs for employers, as the overseas contributions are not able to be counted when determining if the employer has met their superannuation guarantee obligations. It also gives the employees a headache as they may have superannuation contributions made for them in the overseas country that could be difficult for them to access, and for which they may have income tax liabilities both in the foreign country and in Australia.

In order to address the specific problem of double-contributions of superannuation, Australia has over a number of years entered into bilateral agreements with various countries to try to ensure that Australian resident employees can have the superannuation contributions paid for them in Australia, and ensure that the employer has no liability for equivalent superannuation contributions to be made in the foreign country. This applies only to the 22 countries that these agreements have been made for so far, and only relates to situations where the employee remains employed by their Australian employer, so this solution is not universally available.

To access this, the employer needs to apply for a certificate of coverage from the ATO in relation to the employee. These should be applied for before the employee is transferred. They operate for a limited time (as per the relevant bilateral agreement); extensions can be obtained if both the ATO and their counterpart in the foreign country agree.

For the period that a certificate of coverage is held, the Australian employer continues to make Australian superannuation contributions for the transferred employee. No foreign super contributions are required to be made for the employee.

If a foreign subsidiary entity is set up (or already is in operation) and the employee transfers to a new job with that foreign entity then these rules don’t apply; the foreign employer is liable for the various employment costs in that country, and there is no Australian superannuation obligation.

Of course, the agreements are bilateral, so foreign employees from any of the 22 countries coming here may have the opposite – super paid for them in their home country and no super obligation arising here.

This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. Webb Martin Consulting Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.

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