You will need to seek specialist tax advice from an Australian accountant or tax lawyer as regards any need to submit a formal claim for relief under the particular Double Tax Treaty concerned. Apart from the 183 day rule, the other criteria for obtaining relief are usually that you are paid by a non-Australian company and that the costs of your employment are borne by a non-Australian company. You should not, generally, have a problem satisfying these criteria.

Withholding Obligations

Where salaries are paid by an Australian company or by a non-resident company from a base in Australia, pay-as-you-go (PAYG) tax instalments must be withheld. PAYG tax must also be withheld from payments to contractors in an Australian Business Number (ABN) is not provided by the contractor and the payment amount, disregarding Goods & Services Tax (GST), exceeds A$50. You should contact an accountant or tax lawyer in Australia to discuss the obligations and practicalities of your limited company making and remitting Australian payroll deductions.  It may be that using an Australian payroll bureau will be the most straight-forward way of meeting any obligations you may have as an employer.

Social Security – International Aspects

As an employee of a non-Australian limited company seconded to Australia, depending upon the country of tax residence of your company and, perhaps, your own nationality, it may be possible for you to remain within your home country social security scheme for a limited period.  This will be the case if Australia has a Totalisation Agreement covering social security contributions with the country of your employer or, in some cases, the country of your nationality.  You will need to seek specific advice from an Australian accountant or tax lawyer to establish whether there is a relevant agreement that can apply to you, especially since new agreements are being made on an ongoing basis. 

Any relevant Totalisation Agreement will cover the contributions of both employer and employee.  It will be necessary for you to apply for a ‘Certificate of Coverage’ from the organisation dealing with social security in your home country.  In making the application, you will probably require assistance from a tax adviser in the country of tax residence of your company, who happens to specialise in expatriate matters.  Obtaining the Certificate will enable you (as employer and employee) to continue to pay into your home social security scheme and thereby protect your entitlement, as an individual, to social security benefits, particularly pensions.  At the same time, you would normally apply for a certificate to cover you for publicly-available health care in Australia.

If your home country contributions are higher than in Australia, e.g., as in France, it could be that you would prefer to pay social security in Australia instead.  In this case, you would not make an application for a certificate to keep you in your home country scheme but would withhold Australian Medicare and Superannuation contributions together with the tax withholding.

In the case of the UK and Australia, there is no Totalisation Agreement that covers contributions, only one that covers benefits.  Because of this, an employee seconded to Australia and their employer have to remain in their home scheme for a 52 week period and are exempt from making contributions into the Australian during this period.  From the 53rd week, UK contributions cease and Australian contributions commence.

Corporate Tax Considerations

Your company will only be subject to Australian corporation tax if it has a permanent establishment in Australia.  Whilst this is generally an office or branch, a permanent establishment can also be deemed to exist if the actual operations take place in Australia.  To avoid this deeming provision, you should draw up and sign contracts outside of Australia and also avoid having Australian letterhead, business cards, name plate etc.  Aside from the fact that Australian corporation tax may be more than in your home country, there are a number of other obligations you would have to meet as an Australian company and you would wish to avoid these if at all possible.

Individual Tax Rates and Allowances

Since tax rates and allowances generally change on a tax year (ending 30 June) basis, it is best to obtain specific advice from an Australian accountant or tax lawyer at the appropriate time. This also affects the availability of business and non-business deductions, tax credits and allowances, which may be more or less generous than what you have been used to.  There are no state or city taxes due in Australia.

Tax rates are fairly high in Australia in comparison with the US, the UK and Germany with the marginal rate, on income above $60,000, being 47% for the year ending 30 June 2002 for both residents and non-residents. There are no social security contributions as such but there is a 1.5% levy on taxable income for residents only to cover the funding of a National Health Scheme plus a surcharge of 1% for high income taxpayers not covered by private health insurance.  Employers and self-employed individuals also have to contribute to complying superannuation entities and retirement savings accounts at a rate of at least 8% (for the year ending 30 June 2002) of their payroll and specialist advice should be sought in this respect.

Expatriate Tax Developments

On 15 October 2001, the Australian federal government announced that from 1 July 2002 it would enhance the tax exemption for certain foreign-source income of expatriates resident in Australia for less than four years.  These enhancements include an exemption for their foreign-source income from assets, regardless of when acquired, and for interest withholding tax on interest payments for liabilities, regardless of when incurred.  This could provide a major tax planning mechanism as far as the dividends from your non-Australian limited company are concerned, especially if you do not remain a tax resident of any other country or are assessable on the remittance basis only.

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