Employees who are not living or working in their regular location due to COVID-19 mobility restrictions need to be aware of the tax implications that apply to their situation.
Individuals who ordinarily work and live in Australia but are temporarily overseas due to COVID-19 restrictions will not experience any changes to their Australian tax obligations. If the employee is paying foreign income tax overseas, they will receive a foreign income tax offset to reduce their Australian tax payable.
Foreign residents working from Australia who are not able to leave as a result of COVID-19 restrictions will not experience Australian tax impacts if their stay in the country is under three months. However, non-residents working in Australia for longer than three months may need to lodge an Australian tax return if they earn any assessable income from an Australian source. Other than this, their Australian tax obligations will remain unchanged.
Employment income will not be taxable in Australia if the employee:
- Is not an Australian resident;
- Are intending to leave as soon as they are able to;
- Has no employment connections to Australia other than the fact that they are performing remote work in the country.
Employees who typically reside in a country that Australia has a double tax agreement with may already qualify for an exemption in Australia.