The global workforce continues to be less confined by borders. Australian employers are deploying staff abroad, hiring overseas-based talent in Australia, and accommodating employees who wish to work remotely, even from other countries on the opposite side of the globe.

While these arrangements offer flexibility and access to new pools of talent, they also introduce tax and compliance complexities in new jurisdictions that must be carefully managed.

Global mobility is not simply a relocation matter. It triggers a suite of obligations across income tax, payroll withholding, superannuation, fringe benefits, social security, immigration, and corporate tax exposures. These can often occur in both the home and host country of the employee.

Employers simply cannot afford to treat global mobility as a “tick the box” exercise. Each cross-border arrangement, from a single persons request to a move as part of a large structured global program, should be assessed on its own merits with a full understanding of the downstream consequences.

This article outlines the critical tax, payroll, and compliance elements of global mobility that every Australian employer and employee should understand before engaging in international work arrangements.

Tax Triggers of Cross-Border Work

The starting point in managing a globally mobile employee is determining where the tax obligations will arise – both for the individual employee and for the employer.

For the Employee:

• Tax residency status in Australia and residency status in the host country determine whether they are taxed on worldwide income or income only sourced in that jurisdiction.
  
• The location of services performed affects whether host countries assert source-based taxing rights.
  
• Foreign employment income, benefits, and allowances may be subject to different treatment depending on local law and the relevant double tax agreement (DTA). There may be further complications with respect to equity based compensation as well.
  
• Immigration and right to work considerations are also critical to consider at the outset.

For the Employer:

• Income tax withholding obligations may arise in either or both countries.
  
• Operating in a foreign country may expose the Australian entity to potential permanent establishment (PE) risk, which can create host country corporate tax obligations.
  
• Employer liabilities, such as payroll tax or social security, can differ substantially across jurisdictions.

Takeaway: Begin with a clear mapping of the tax landscape. Determine residency, source, and employer location for each assignment before any work is undertaken.

Payroll is More Than Just a Payment System

Payroll processing is often the most underestimated element of global mobility. Yet, it is the vehicle through which most compliance risks materialise and can create exposures for by the employer and the employee.

In a cross-border setting, payroll must be responsible for:

• Local tax withholding and reporting.
  
• Allowance payments.
  
• Superannuation Guarantee or social security.
  
• Payroll Taxes.
  
• Fringe benefits and other non-cash compensation such as employee share schemes.
  
• Foreign exchange considerations and currency fluctuations.
  
• Split income allocations based on work performed in multiple locations.

Where an employee remains on an Australian payroll but works overseas, shadow payroll may be required in the host country to meet local withholding, reporting, and social security obligations.

Conversely, if a foreign employee is working in Australia for a non-Australian employer, STP (Single Touch Payroll) reporting may still apply if the work is performed in Australia or if the employee becomes an Australian tax resident.

Takeaway: Evaluate whether a single payroll model is sufficient. Engage tax and payroll advisors in both countries to ensure compliance with local withholding and employer reporting obligations.

Employer Obligations

Certain obligations, including in relation to Superannuation Guarantee, payroll tax and fringe benefits continue to apply for outbound Australian employees, depending on their tax residency, length of assignment and employment contract terms. These obligations also likely apply for inbound transferred employees, subject to certain considerations for short terms arrangements or business travel.

Superannuation:

• Employers may be required to continue contributing to superannuation under the Superannuation Guarantee (SG) even while an employee is working offshore.
  
• If the employee is no longer an Australian tax resident and is covered by a foreign social security system, SG contributions may cease if permitted under the terms of employment.
  
• Consideration should also be given to Company policies and whether contributions may be made for outbound employees even when not technically required under the law.
  
• Superannuation obligations will generally arise for inbound globally mobile employees, subject to certain exemptions depending on their visa class and role.

Fringe Benefits Tax:

• FBT applies as a tax on employers who provide non-cash benefits to employees and their associates in respect of employment, regardless of where the benefit is provided.
  
• Benefits which are commonly provided to globally mobile employees include:
  • Housing.
  • Relocation costs.
  • Accommodation.
  • Cars.
  • Flights.
  • Living-away-from-home allowances.
  • School fees.

The ATO takes a wide view of employer-provided benefits. Even if paid offshore, benefits may still be assessable if the employment relationship remains with an Australian entity. Consideration should be given to the potential FBT cost of benefits, as well as the application of various concessions and exemptions which can reduce the FBT impact on the business.

Payroll Tax:

Payroll Tax is a State based obligation levied on employers who employ and make payments or provide benefits or employee share schemes to employees.

Globally mobile employees typically add additional complexity to the monthly payroll tax filings for many businesses in Australia.  Common complications arise due to the existence of overseas payrolls, split payrolls, shadow payrolls, and the provision of equity.  There are also potential complications for inbound and outbound employees as to when wages should be included or excluded from payroll tax, particularly with respect to equity awards.

Workers Compensation Insurance Premium

Workers Compensation Insurance Premium is a State based obligation levied on employers who employ and make payments or provide benefits to employees.

Globally mobile employees are an often overlooked inclusion for Workers Compensation Insurance Premium for many businesses due to employees being paid on overseas payrolls, or having split or shadow payrolls.

Takeaway: Employers should engage with their insurers on complex issues with respect to globally mobile employees.

Assignment Letters and Cross-Border Agreements

Assignment letters are the legal framework underpinning global mobility movement and outline the understanding of the arrangement for both the employee and the employer. They should do more than set out compensation—they must clearly establish:

• The legal employer during each phase of the assignment.
  
• The expected period of the assignment.
  
• The work location and anticipated tax residence.
  
• Details of any tax equalisation or tax protection arrangements.
  
• Allocation of costs between the home and host entities.
  
• Clarity around benefits, housing, dependents, allowances, treatment of equity and repatriation terms.

Ambiguous or poorly drafted letters create tax risks, particularly when:

• The employee’s role shifts from one entity to another mid-assignment.
  
• The employee performs high-value activities that may trigger PE.
  
• No agreement is reached on who bears the tax cost.

Takeaway: Assignment documents must reflect not just HR terms but tax and legal structuring. This includes clear wording around reporting relationships and remuneration funding.

Permanent Establishment and Employer Withholding Risks

When employees work abroad, their presence may expose the home entity to potential corporate tax obligations in the host country.

PE Risk:

A permanent establishment (PE) may be created where:

• The employee habitually exercises authority to conclude contracts on behalf of the home entity.
  
• The employee plays a principal role in negotiating contracts.
  
• The employer has a fixed place of business through which substantial business is carried on.
  
• Services are provided in the host country over a sustained period.

In the event a PE is created, the foreign country may impose:

• Corporate income tax on attributable profits.
  
• Local VAT or GST.
  
• Social security, payroll tax, workers’ compensation, and other employment-related levies.

Withholding Tax Risk:

Even without a PE, local laws in many jurisdictions may require the employer to:

• Withhold income tax at source.
  
• Register for local payroll or other employment taxes.
  
• Remit social security contributions.

Takeaway: A short-term assignment or remote work arrangement may still create PE and withholding risk. Evaluate this risk with legal and tax input before approving a new mobility request.

Social Security and Totalisation Agreements

Australia has Totalisation Agreements with a limited number of countries to avoid requirements for double contributions to social security systems.

Where such an agreement exists, employers may be exempt from making local social security contributions in the host country, provided a Certificate of Coverage is obtained from the ATO. This document proves that contributions are being made to the Australian system.

Countries without an agreement may still require contributions, which are not always creditable against Australian superannuation.

We note this can also work in reverse for inbound employees in certain countries.

Takeaway: Always assess social security exposure. Where an exemption applies, ensure the correct certificate is obtained and lodged with the relevant foreign authority.

Monitor Compliance Obligations Beyond Tax

In addition to the many tax and payroll obligations, global mobility can trigger obligations with respect to:

• Immigration law – visas, work permits, and employer sponsorship.
  
• Employment law – host country labour rules, leave entitlements, terminations, and collective agreements.
  
• Privacy law – cross-border data transfer and employee record keeping.
  
• Equity reporting – particularly where share options or long-term incentive plans are awarded during international assignments.

Non-compliance in these areas can result in penalties, reputational harm, and operational disruption.

Takeaway: Build a cross-functional process involving tax, HR, legal, and finance for all global mobility events. Assign ownership of compliance in each functional area and track deliverables.

Final Thoughts

Global mobility is not a matter of simple HR administration. It is a strategic business decision with benefits for both the employee and the company, however there are significant legal, tax, and financial implications across every stage of the assignment lifecycle.

Organisations with international workforces must establish governance frameworks that cover:

• Pre-assignment tax and legal structuring, including immigration considerations.
  
• Payroll and social security setup.
  
• Assignment documentation.
  
• Monitoring of workdays and PE risk.
  
• Filing and reporting obligations in all affected jurisdictions.

The cost of getting it wrong can be significant, but with the right planning, these risks are entirely manageable.

Summary: Practical Actions to Manage Global Mobility Compliance

Action	Purpose
Perform residency and DTA analysis	Determine taxing rights and treaty access
Implement shadow payroll and STP if required	Meet withholding and reporting obligations
Assess employer tax obligations	Avoid non-compliance with employment tax laws
Draft assignment letters with tax and legal precision	Prevent misunderstandings and employer exposure
Evaluate PE and employer registration requirements	Avoid foreign corporate tax and payroll penalties
Confirm social security agreements and apply for certificates	Minimise double contributions
Monitor fringe benefits, equity events, and timing of vesting	Ensure correct reporting and tax treatment

Andersen Australia’s Global Mobility Practice supports clients with the structuring, implementation, and compliance of cross-border employment arrangements. Our team advises on tax residency, assignment planning, payroll structuring, FBT, equity, and international tax returns.

Contact us to assess your global mobility program and mitigate exposure before it arises.

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