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James Millar
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Divert To Mobile, post: 123351 wrote:
Thats a really good question.
My guess is that there is no legislation to cover that yet.
Hence, no tax, no super, no insurance, no awards etc.


Sorry guys – our tax system is one of the most comprehensive and convoluted in the world. Yes it is covered. First look at PAYG withholding and then look at others forms of withholding. It’s normally one of these two.

1. If they are an employee per standard tests and they don’t quote a TFN then it’s 46.5% PAYG withholding on employer. Obviously few foreign employees will have TFN’s.

2. If they are a contractor and they are not entitled to an ABN because they don’t carry on an enterprise here then it may be a royalty withholding tax matter (the definition of royalty under Australian tax law extends far beyond what you would expect. The provisions have become a bit of a “catch all”). The RWT rate depends in the contractors tax jurisdiction. From 30% down to nil.

The recent trends in cross border small business transacting pose some interesting challenges for Australian tax law. People jump on freelancer and regularly pay foreign entities for services provided. Are those services “royalties” within the meaning of RWT? Are affiliate payments paid from Australia royalties for the purpose of RWT? These international tax laws were considered the domain of big business only five years ago and increasingly we are seeing SME’s exposed. Just keep in mind that withholding tax is imposed on the payer so the ATO will come after you and not the payee that’s based overseas. Moral is get advice before you pay the money out. We had a client two years ago with an unexpected RWT liability of more than $1m AUD and they failed to withhold it from the payee overseas. Do you think the foreign entity paid the money back to our client here in OZ so that they could pay the ATO? No.

Good question and important (topical) issue for SME’s.

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