Withholding arrangements for some foreign residents
The pay as you go (PAYG) withholding system includes certain payments made to foreign residents. This guide covers those payments made to foreign residents for construction and related activities.
If you engage a foreign resident as an employee, you should withhold from those payments.
If you are a business in the building and construction industry and you make payments to foreign resident contractors for building and construction services, you do not report these payments in the Taxable payments annual report.
If you are making dividend, interest or royalty payments to foreign residents, different withholding rules apply. See More information.
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Payer and Payee
The payer is the person or entity making a payment and the payee is the person or entity receiving the payment.
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Which payments are subject to withholding?
You are required to withhold amounts when making payments to foreign residents for construction and related activities. The types of payments that fall within the description of construction and related activities include, but are not limited to, the following.
Contract payments
The payments covered are those made under a contract . The payments are for construction works or related activities. Withholding is required from all payments, including payments to subcontractors.
Works include the construction, installation and upgrading of buildings, plants and fixtures.
Examples of construction works include, but are not limited to:
- dams
- electricity links
- mine site development
- natural gas field development
- natural resource infrastructure
- oilfield development
- pipeline works
- power generation infrastructure
- railway or road works
- residential building
- resort development
- retail or commercial development
- road and rail developments
- airport upgrades
- telecommunications equipment upgrades
- water treatment plant works.
In addition to construction activity, other activities such as commissioning of infrastructure, training and support of personnel to operate infrastructure and supervision during the initial phase of operation are included. Where payments are made under the contract or a related contract for these activities, these payments are also subject to withholding.
Related activities include activities associated with the construction, installation and upgrading of buildings, plant and fixtures.
Examples include, but are not limited to:
- administration
- assembly
- decommissioning plant
- commissioning and operation of facilities
- costing
- engineering
- erection
- fabrication
- hook up
- installation
- project management
- site management
- supervision and provision of personnel
- supply of plant and equipment
- warranty repairs.
In some circumstances, you may have to make payments to an agent on behalf of a foreign resident. You should withhold from payments made to an agent as though the payment were made directly to the foreign resident. This is the case even if the agent is a resident in Australia.
If an Australian resident agent receives a payment subject to foreign resident withholding on behalf of an overseas resident and an amount has not already been withheld from that payment, the agent must withhold from the payment.
Last Modified: Thursday, 8 November 2012