[Ed note: Did you know that if you second or transfer an employee overseas, the Fair Work Act 2009 (FW Act) may still apply to that employment? This would mean that despite working overseas, the employee would have the benefit of:
the National Employment Standards (NES);
unfair dismissal; and
general protections laws.
This is the case in some circumstances, and Charles Power will explain it below.]
Overseas secondments and assignments
If you second or transfer an employee overseas, the Fair Work Act 2009 (FW Act) will still have coverage if during the overseas assignment:
the employee’s primary place of work remains in Australia; and
the employee does not enter into a new contract outside Australia to perform duties outside Australia.
If an employee is seconded to work overseas for a specified period exclusively for another company related to the employee’s Australian employer, and the overseas business has agreed to pay his or her wages, then the employee will be subject to the labour laws applicable in the country in which he or she is working.
If you decide to keep the seconded employee’s Australian employment contract on foot, but wish to suspend its operation during the period of the overseas assignment, then you should to obtain the employee’s written agreement to vary the Australian contract to suspend its operation during the assignment. This suspension should be described as a period of “unpaid authorised absence”. This will stop the accrual of long service leave and FW Act entitlements during the period of the assignment, without breaking the employee’s service.
If the employee’s Australian contract is later terminated, either during or at the end of the overseas assignment, the employee will have access to FW Act termination provisions, such as unfair dismissal and the general protections provisions.
The overseas business may need to comply with obligations under Australia’s tax laws to withhold PAYG amounts if they have a “sufficient connection with Australia”. This might arise where:
the overseas business carries on an enterprise or income-producing activities in Australia; or
the Australian business is carrying on the business of the overseas business; or
the Australian business is the common law agent of the international parent or subsidiary.
If the employee remains an Australian resident for tax purposes during their secondment or transfer, then the employee has an Australian tax liability and the overseas business may be required to withhold PAYG amounts (in addition to any foreign tax amounts, and taking into account applicable tax offsets).
If the assignment is for a period of less than 2 years, and the employee does not establish a permanent home in the foreign country, the employee is likely to continue to be an Australian resident for tax purposes.
Superannuation Guarantee obligations will not apply if the employee is not an Australian resident for tax purposes and performs work outside of Australia, or is an Australian resident for tax purposes, but is paid by a foreign entity for work outside Australia.
For more information about tax issues, you may be interested in the Smart Tax Bulletin. Click HERE to take a look.
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