# Working in Australia for US company



## hAndrew (Apr 2, 2010)

Hi,

Soon I will be living and working as a consultant from home in Australia for a US company. Previously I worked for this company as an employee at their office in the US. I am a little confused about the tax/super/insurance implications for me and/or for the US company.

The intended arrangement is for me to invoice the company monthly for a fixed amount of pay in US dollars, probably just deposited into my US bank account. But it seems it cannot be that simple...

I am no accountant... so I have been reading a lot of stuff online to try to find out the tax/superannuation/insurance obligations of me and or the US company but I can't find any definitive answers.

It seems I may need to charge GST when invoicing the US company. The US company would need to claim it back somehow? Does it mean they should engage the services of an Australian accountant?

Concerning superannuation and workers insurance: Do the compulsory super contributions need to come from the US company and not from me directly? I had assumed I could just make the required contribution myself but I can't find any evidence that that is allowed. A similar question applies for workers compensation insurance.

I guess my general question is, does the US company basically have to behave like any other Australian company in this regard? It would be tricky for them since they don't really have any presence in Australia or knowledge about doing business in Australia.

Other data: I am an Australian citizen.

Thanks so much for any help!

-- Slightly confused


----------



## kaz101 (Nov 29, 2007)

Hi hAndrew, 

Welcome to the forum. 

I just want to check that I understand your situation. You are an Australian citizen living and working in Australia and you will be a consultant for a US company. Will this be as a contractor or employee? 

As I understand it if you are a contractor and you (or your company) earn more than A$75,000 then you must register for GST (see Guide to GST). 

However 'Exports of goods and services from Australia will generally be GST-free' see Exporting goods or services overseas. 

I'm in a similar situation with a UK company that I used to contract for and my company doesn't charge them GST since I work on a system in the UK and the programs are used outside Australia. 

Regards,
Karen


----------



## hAndrew (Apr 2, 2010)

Hi Karen, thanks for your fast reply!

You got the situation right: Aus citizen living and working in Aus for US company.

As to whether I am a contractor or an employee... A contractor I think. That's how we envisaged the relationship. Although I don't know the exact technical meaning of those two terms, and when I use a tool like this one:

_Employee/contractor decision tool_ at the ATO website (I am new so I can't post links inside posts yet sorry!)

I am lead to believe that I am classified as an "employee" for tax and superannuation purposes. But I don't know whether the above link is applicable to situations such as mine where the company I work for is not an Australian company.

Thankyou for the link concerning GST. I think my work consists entirely of exporting "services" to the US. Do you think it means I don't need to register for GST in that case?

Do you have any ideas on superannuation / workers compensation insurance in my scenario?

Other data: I would be living in the ACT.


----------



## kaz101 (Nov 29, 2007)

Hi hAndrew, 

I spoke to a local accountant and we set up a pty ltd company to work through. Even though all the income may be taxed as my personal income I can still claim business expenses and I am not an employee of the UK company.

Since I basically work for myself (I'm the only employee of my company) I haven't had to deal with super or workers compensation insurance. I have private super anyway since it was transferred from the UK. 

Have a chat with an accountant since they should be able to guide you in what you need to do. 

Regards,
Karen


----------



## hAndrew (Apr 2, 2010)

Thanks for that information Karen.

That is very interesting about not having to deal with super or workers compensation insurance with a suitable company arrangement. I did not realize something like that would be possible.

I will seek an accountant. From what I have read choosing the right accountant is a big topic by itself ...


----------



## kaz101 (Nov 29, 2007)

hAndrew said:


> I will seek an accountant. From what I have read choosing the right accountant is a big topic by itself ...


We found a local accountant while buying in local shops - we asked the business people who was their business accountant and one name kept cropping up so we contacted him. In fact we were in a small business meeting the other week and more than half of us are with the same accountant


----------



## baljinsi (Aug 15, 2010)

Hi,
need your help..I am in the same situation. Would you please mind sharing how did you handle this? Did you manage to pay tax only once and where?
Overall how did it work for you>?

thanks,
-Baljinsi


----------



## hAndrew (Apr 2, 2010)

baljinsi said:


> Hi,
> need your help..I am in the same situation. Would you please mind sharing how did you handle this? Did you manage to pay tax only once and where?
> Overall how did it work for you>?
> 
> ...



In the end I "handled" this by following the advice I received here and getting an accountant.

First I decided to use to use their "salary packaging" type service, in which they invoice the company for you, and then pay you a salary while taking care of insurance, tax, deductions you specify, etc.

However, my company was not willing to enter this arrangement involving a middle man.

Therefore, my accountant suggested I simply invoice them directly, and personally set aside the estimated tax. This worked nicely. At the end of the year I listed off all the business expensy-type things (home office stuff etc) and handed it all over to my accountant who completed my tax return.

In subsequent years the ATO sends a bill every quarter for estimated tax, which is fine.

I think you asked about double taxation. This wasn't an issue for me as I am not a US citizen. I'm pretty sure the IRS doesn't know or care about you while you are a non-American and not living in America, even if you are invoicing a US company.


----------



## workingfromhome (Apr 16, 2013)

I work from home, which I guess is kinda rare for someone fresh out of college. I am really not very busy and would like to meet more people my age. Does anyone have any ideas?


----------



## raynejan (Aug 29, 2013)

hAndrew said:


> In the end I "handled" this by following the advice I received here and getting an accountant.
> 
> First I decided to use to use their "salary packaging" type service, in which they invoice the company for you, and then pay you a salary while taking care of insurance, tax, deductions you specify, etc.
> 
> ...


Hi hAndrew,

Firstly, thank you for this thread. This is very useful for me.

I would like to ask you a question in terms of visa process. It appears I may need to go back home and work remotely for my U.S. company (I'm Australian too).

Were you required to obtain any visa (based on what I have read so far, I'm assuming no, as you're not working within the U.S.). I'd like to double check this. Other than the whole financial side of things (again, thank you), is there anything in particular you could suggest to someone who is doing what you are?

I'd really appreciate any and all assistance.

Thank you,

raynejan.


----------



## PsychoWallaby (Sep 4, 2014)

*Another person asking about this*

Hi hAndrew,

It seems as though you've been doing this quite a while now ( assuming you're still at it ).

I'm about to be in the exact same boat, although I am a dual citizen ... not worried about the US side of taxes though, I've already got all that handled with my US tax accountant.

My question here is, as an independent contractor working for an overseas company, have you had to charge GST? I'm finding it a little difficult to get a consistent answer.

I don't know what industry you're in, but I am a programmer and am about to relocate, while continuing to work for a US company, although switching to being an indpendant contractor.

Any information you can provide would be appreciated!

Thanks,

PW.


----------



## namdo (Jan 31, 2017)

hAndrew said:


> In the end I "handled" this by following the advice I received here and getting an accountant.
> 
> First I decided to use to use their "salary packaging" type service, in which they invoice the company for you, and then pay you a salary while taking care of insurance, tax, deductions you specify, etc.
> 
> ...


Hi, since you have your own company that you bill the US company, do you have to pay 30% flat company tax and 10% GST? I heard it's expensive to have your own company rather than being an employee of one...


----------



## Manu2000 (Nov 11, 2020)

kaz101 said:


> Hi hAndrew,
> 
> Welcome to the forum.
> 
> ...


Hello Karen, I know this is very old but I am hoping you can reply, I am doing some reasearch work, for a US start up I need to understand the needs and rules behind hiring Australian resources to work from Australia for US company.
Many thanks in advance!


----------



## Moulard (Feb 3, 2017)

Manu,

I don't know if you will get a response from original posters on the thread, so I will jump in.

These sorts of things can get quite complicated so I will try to give you some broad brushstrokes and we can deep dive if you need more info at this point. All the following assumes you are a permanent resident or citizen of Australia... If not, then some of the following would not be true.

On the US side there is no legal issue (Department of Labor or IRS) with a US company hiring you to work from overseas - so they are free to hire you an an employee or as a contractor. Its worth bearing in mind that US and Australian labour laws are very different and even vary from State to State. You will want to read any contract very carefully.

If you are performing the work from Australia, it is considered Australian sourced - which means at a federal level Australian has the primary right to tax it. This is important from a income tax and a tax withholding perspective. You can file a form with the US company to prevent US Federal Income Tax withholding. Under the totalisation agreement if you are working in Australia for a US employer who hired you in Australia, then you are subject to Australian Social Security rules, and should not have US social security taxes withheld.

note, that this is different from US State income taxes (treaty rules exclude US states). Depending on the state where the company operates, you may be subject to State Income tax and withholding. Australia will give you a foreign tax offset for US State taxes you pay. You are likely to want to get an ITIN to be able to file US State Income tax returns, and potentially a US Federal return, if you are paid into a US bank account that accrues interest above filing thresholds or ever perform work in the US (see below)

Unless you already have a US bank account, you will need to consider how they will pay you for the work - most US businesses are not really set up to pay into foreign accounts.

Its worth noting that if they ever require you to go to the US, you will need be be careful about choice of visa and the tax implications. While you can go to the US on a business visa or an ESTA, to attend conferences, and meetings you are not allowed to perform substantive work on that visa. If you are an Australian citizen you would be able to work in the US on an E3 visa, which would be easier to obtain than any other temporary work visa. You will also need to be mindful of the sourcing rules... If you are in the US on business, then any income you earn while there may be treated as US sourced, and the US would have the primary right to tax it.

On the Australian side, if you end up as their employee, legally they are meant to set up a business in Australia so that they can comply with Australian Income tax, Medicare levy withholding & Super contribution requirements. But, of course it is difficult for the ATO to enforce that. So if they don't you will have to set aside enough to cover your income tax and medicare levy liabilities. 

If you are hired as a contractor, then you will need an ABN and operate under a company structure that suits your needs. Sole trader, Pty Ltd or Partnership are the three most likely.
If you are expect your turnover to exceed $75k you should register for GST. And if you don't, and it ever exceeds that then you will have to register for GST within 21 days.


----------



## Manu2000 (Nov 11, 2020)

Thanks Moulard! Much appreciate it. I will review this with my employer to see our next steps.
Thanks again!
Manu


----------



## michaelpa (Aug 23, 2021)

Hi guys. I'm also in this position, but I'm a US Citizen as well as an Australia Citizen. I'm moving home to Australia but staying employed by the company I work for. Wondering if as a dual citizen this changes any of the above info?
Many thanks for anyone's time.


----------



## Moulard (Feb 3, 2017)

Dual citizenship changes nothing ..

If you are an employee of a US company and are working in Australia then...

You can request your US employer stop US Federal income tax withholding
Under the totalisation agreement your US employer can continue to contribute into US social security for up to 5 years
By you working in Australia for more than 90 days (i think), your US employer may be deemed to have permanent establishment in Australia and will need to get an ABN and do income, FBT withholding etc for the ATO
This last point is the reason why most employers won't support these sorts of things long term

If you end up contracting for your US company, assuming you set up as a sole trader,..

You would need to get an ABN and possibly register for GST once your contracting income exceeded relevant levels
You would be responsible for your own income tax withholding
You would be responsible for any super contributions (optional for
Alienation of personal services income rules would likely come into play so income of your business would be treated as personal income
In both cases you would still have to file US tax returns by virtue of your US citizenship and file Australian returns by virtue of being a tax resident of Australia


----------



## VinOz (Jan 3, 2022)

Hi Moulard,

A couple of questions I'm hoping you can answer.
I'm an Australian citizen, relocated recently to Australia and about to do consulting work for US company (previously my employer when I was in the US).

My accountant suggested I set up a company (pty Ltd, with 1 director) Why can't I just be set up as a sole trader? It seems sole trader is less admin than swrting up a pty ltd company so why would my accountant suggest to set up pty ltd?

Also, is it a problem if US firm pays my consulting fees to an existing US bank account I had when I was working for them as an employee? If so, is there a best option for US firm to remit my consulting fees to my Australian bank account? Some banks such as CBA give a very bad rate when doing USD to AUD international transfer.

Thank you.


----------



## Moulard (Feb 3, 2017)

VinOz,

There are a number of factors to consider in the balance when choosing sole trader v a Pty Ltd (or any other business construct) - each has their pros and cons. There are dozens of websites out there that look at the pros and cons.

Under most circumstances I would generally recommend starting out as a sole trader, simply because the setup and startup costs are lower and there is nothing that would prevent you from swapping to a Pty Ltd Structure later on.

They key advantages of a company structure are

Tax Rates - sole traders are taxed as individuals and the individual tax rate is higher than the full company rate. Given the oncosts etc of managing a Proprietary Ltd company the tipping point is about about $150-180k per year. Of course you would still need to pay yourself (Director fees, Dividends and or an Income) and that income would still be taxed at the individual rate
Limited Liability - company structure provides some legal protections because it is a separate legal entity.
Withholding and Super - a Pty Ltd will have to pay you Super and withhold income tax for the ATO. As a sole trader you would not have compulsory super, and you would be responsible to ensure you had enough available to pay your income tax liability.
Whether and how your client pays you is purely a commercial and contractual matter; being paid in USD will clearly be easier for your US client, but it does subject you to the vagaries of exchange rates. It also introduces, as you mention the issue of easy access to funds. In the short term, simply using US credit and debit cards is probably the easiest, but not necessarily the cheapest method.

One thing you don't state is whether or not you are also a US Person (US Citizen, National or Greencard Holder). If you are, then remember you will continue to have US tax obligations even if you have no US Sourced income. Sourcing rules for business income are slightly different, and there could be situations where the services you provide to your company are treated as sourced in the State your client is based. Some US States tax business income based on where the economic benefit is generated. You may well want to get good US tax advice to tease out some of the disadvantages for a "mini-multinational".


----------



## VinOz (Jan 3, 2022)

Thank you so much for you response. I was a Greencard Card holder. I submitted the form I407 in September 2021 to abandon my greencard. USCIS have been very slow in processing any requests. I am still waiting on formal confirmation that greencard has been abandoned. USCIS have been a nightmare to deal with. Anyway it sounds like I may still be subject to state taxes in the US.


----------



## 255 (Sep 8, 2018)

@VinOz -- Remember to submit: https://www.irs.gov/pub/irs-pdf/f8854.pdf with your 2021 U.S. income tax return (I assume you worked in the U.S. Jan - Sep,) to officially extricate yourself from the U.S. federal income tax system. Cheers, 255


----------



## Moulard (Feb 3, 2017)

If you submitted the I-407 then 2021 should be your last "real" US tax return ; both State and Federal (unless you have other US Sourced income ; investments etc that would require you to file a 1040-NR in future)

Assuming you meet the substantial presence test, you can file as a resident for the full year - this has the advantage of being able to use the standard deduction. 

Remember to file a W8 with your bank so that correct non-resident withholding occurs so yo


----------



## VinOz (Jan 3, 2022)

255 said:


> @VinOz -- Remember to submit: https://www.irs.gov/pub/irs-pdf/f8854.pdf with your 2021 U.S. income tax return (I assume you worked in the U.S. Jan - Sep,) to officially extricate yourself from the U.S. federal income tax system. Cheers, 255


I actually relocated to oz in July 2020 but continued to work remotely as an employee for us employer until 31 dec 2021. For 2022 onwards I plan to consult for same US employer but as them being a client. I received greencard in 2014 and needed to give it up by 2021 I believe to avoid expat taxes (23.8%). I have no intention on ever returning to US to live or work there. Dreading all the US tax forms! Thanks for all your info. The us client asked me to complete a W8-Ben.

Also just spoke to Accountant and they said I can't be set up as sole trader as us client would be liable for Superannuation.


----------



## 255 (Sep 8, 2018)

@VinOz -- You still need to file your (final) tax return for 2021, but you'll be able to utilize the Foreign Earned Income Exclusion or the Foreign Tax Credit to eliminate double taxation. You were considered a U.S. person, as a Greencard holder, until you elected to turn in your Greencard.

If you form an entity, you'll need to provide your "new U.S. client," with a W-8BEN-E vice the W-8BEN they requested. https://www.irs.gov/pub/irs-pdf/fw8bene.pdf . 

Good luck with your new business! I am sure your accountant can help you establish your "books," and any filings you'll be required. It's not that hard -- just try to stay on top of everything. Cheers, 255


----------



## Moulard (Feb 3, 2017)

VinOz said:


> Also just spoke to Accountant and they said I can't be set up as sole trader as us client would be liable for Superannuation.


I don't believe your accountant is correct. If your client was your employer they would be liable for Super and income tax withholding, but I do not believe that is the case if you are operating as a sole trader.

If I were you I would contact the ATO









Contact us


Main ATO contact phone numbers and options for managing your tax and super without phoning us. Includes myGov and self-help options.




www.ato.gov.au





EDIT... actually, thinking on it, if they are your only client, and you are effectively acting as an employee.. your accountant may be right.. Go to the ATO - they are nice and helpful folks for the most part. 

EDIT Again.. and if he is right on Super they would probably also have income tax withholding requirements too.


----------



## VinOz (Jan 3, 2022)

Moulard said:


> I don't believe your accountant is correct. If your client was your employer they would be liable for Super and income tax withholding, but I do not believe that is the case if you are operating as a sole trader.
> 
> If I were you I would contact the ATO
> 
> ...


Yes, spoke to ATO and Super dept at ATO. 1 client means employee/employer relationship. US client will need to withhold tax and remit super.


----------



## VinOz (Jan 3, 2022)

VinOz said:


> Yes, spoke to ATO and Super dept at ATO. 1 client means employee/employer relationship. US client will need to withhold tax and remit super.


I believe I have option to set up pty ltd then US client will not have payg or super obligation.


----------



## Ausysdhome (Jan 28, 2014)

Hi All,
I moved to Australia on a Australian PR from the US recently. I am not a US GC Holder/Citizen. My US employer has asked me if I would like to work for them as a CONTRACTOR. I am a software programmer. I have gone through all the above discussions; I will just summarize my understanding and questions.

I could either work as a Sole Trader or set up a Pty. However setting up a Pty is bit complicated and will involve considerable cost. Also if I hire an accountant I would also need to add the accountant's fees.
I was thinking of starting as a Sole Trader. For that I need to apply for an ABN and GST.

questions -
1. Since I will be doing software work, does it mean that I can claim back the GST?
2. Does my US employer need to bother about Super etc ? They indicated that I can invoice them and they will do an ACH transfer. P.S. As per business.gov.au portal super for sole trader is not compulsory.










Please let me know if I need to take care of anything else while setting myself up as a Sole Trader. Thanks.


----------



## Moulard (Feb 3, 2017)

OK. This sort of stuff is always complicated... and as a US person it becomes even more so.. but I will try to unpack some of the stuff you need to consider.

This is high level... happy to dig into details and answer additional questions..

If your business expects to have a turnover in excess of $75k AUD then yes, you will be required to register for GST.
The supply of a service is usually GST-free if the recipient of the service is outside Australia. so while you may have to register, you may not have to charge your US client GST.
I am not really familiar with GST rules particularly when it comes to GST exempt income, but I presume you should be able to claim GST paid on business expenses incurred in Australia as part of your BAS Statement

Whether a sole trader or a Pty Ltd, given you are providing personal services, you will likely fall under the alienation of personal services clauses that mean from the perspective of the ATO your income will be treated as personal income not business income both under a Sole Trader and a Pty Ltd arrangement if you only have the one client.

As a US citizen you will continue to have to report your global income to the IRS and as a sole trader you would be technically be subject to US self employment taxes.

That said the totalisation agreement between exempts self-employed U.S. citizens who reside in Australia from U.S. Social Security coverage. As a result, if you are a self-employed U.S. citizen and reside in Australia, you do not have to pay U.S. Social Security contributions on your self-employment income. To document the exemption from the payment of U.S. Social Security self-employment contributions, you must get a letter of exemption from the U.S. Social Security Administration. You would need to attach that letter with your US tax returns going forward.

If you chose to go down the Pty Ltd route, your company would be required to pay you Super and I would expect that you would choose to treat it as a passthrough entity and report its income as your own personal income. There are a bunch of US tax considerations that you will want to explore if you decide to go down the Pty Ltd path.

If on the other hand you were an employee of the US company, then technically the company would need to set up an Australian branch with an ABN in order to comply with Australian tax requirments related to income tax withholding, super contributions etc if you were to continue to work for them for more than 3 months. Hard of course for the ATO to enforce that... but that is another matter.

You would want to submit Form 673 to your US employer to avoid US federal income tax withholding. You may or may not be subject to US State income taxes and you would likely have US social security contributions. Not necessarily a bad thing depending on your age, and how many quarters you have contributed. Under the totalisation agreement you would need at least 6 quarters of US contributions to be eligible for a partial US Social security pension when you hit retirement age.


As to income tax, the generally higher income tax rates in Australia mean you will be probably better off using foreign tax credits rather than the foreign earned income exclusion. Due to the difference in tax years you will need to plan carefully for your first US tax return... but this is long enough .. that can be another post.


----------



## Ausysdhome (Jan 28, 2014)

Thanks for your prompt response.But I indicated earlier in the post that I am neither a US Citizen nor do I hold a US Green card. I was in the US on a work visa. Can you please advise based on this fact? I am an Australian Permanent Resident.


----------



## Moulard (Feb 3, 2017)

Apologies..

I somehow read "I am a US GC Holder/Citizen" when it was clear there was a NOT in the middle there. Not sure how I missed it.. I blame a long day.

At its core, what I said remains unchanged -- just ignore the parts related to the global taxation of US persons.

Assuming you change to a contractor relationship..if you operate under an ABN in Australia....

If your business expects to have a turnover in excess of $75k AUD then yes, you will be required to register for GST. 
If you are supplying services outside of Australia you should not have to apply GST to your invoices.
If you set up as a sole trader, and invoice as a contractor they will not be required to contribute to Super, nor will you (but may make sense for you to make voluntary contributions)
If you set up as a Pty Ltd, your company will have to pay you super, do income tax withholding etc if you pay yourself a wage. 
In both cases, the alienation of personal services income rules could come into play given you are providing personal services under contract.


----------



## Ausysdhome (Jan 28, 2014)

Thank you very much for your response !!


----------

