Selling goods from a treaty country through your permanent establishment in Australia
In this section we discuss your tax obligations if all of the following apply:
- you are a resident entity of a country that has a tax treaty with Australia
- you export goods to Australia through a permanent establishment in Australia
- you employ staff in Australia.
Under these circumstances, you will have the following tax obligations:
- Income tax - Your business profits that are attributed to your Australian permanent establishment will be subject to Australian income tax.
- CGT - You will be subject to Australian CGT if you sell or dispose of assets that are taxable Australian assets - refer to Guide to capital gains tax (NAT 4151).
- GST - You may be liable for GST, which is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia - refer to Supplying goods and services in Australia - goods and services tax.
- ABN - You will need to register for an ABN for certain tax purposes, which may include GST and pay as you go (PAYG) withholding. You generally need to quote an ABN on your invoices or other documents relating to sales that you make to other businesses. If you don't quote an ABN when you supply goods or services to another business, they may have to withhold tax from their payment to you at the rate of 46.5% under the PAYG withholding system.
- If you employ full-time, part-time or casual workers in Australia, you are likely to have Australian superannuation obligations and PAYG withholding obligations. You may also have fringe benefits tax (FBT) obligations.
What is a permanent establishment?
A permanent establishment is a fixed place through which you either wholly or partly carry on your business activities. It includes:
- a sales outlet
- a branch
- a place of management
- a factory
- a workshop
- an office
- a dependent agent who has authority to enter into contracts on your behalf and regularly exercises that authority.
Generally, having a website that is hosted by an independent internet service provider is not regarded as having a permanent establishment in Australia.
What if you operate a subsidiary?
If you operate a subsidiary in Australia, different arrangements may apply. A subsidiary that is incorporated in Australia is treated as an Australian resident for Australian tax purposes. The subsidiary is generally taxed in Australia on its worldwide income and its worldwide capital gains, subject to a number of exemptions. Generally, an Australian resident subsidiary is not considered to be a permanent establishment of its parent company.