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  • Inbound assignees

    Some multinational employers exchange, or transfer, employees between affiliated entities in different tax jurisdictions. This is done for business and commercial purposes. These employees are known as 'inbound assignees'.

    An inbound assignee is an individual that:

    • is employed by an offshore entity – for example, an entity that is non-resident for Australian taxation purposes
    • is seconded to Australia
    • has all, or part, of their base salary and other remuneration paid by an offshore entity
    • is maintained in Australia using a 'shadow payroll arrangement'. This is a notional payroll for the purposes of
      • paying tax and social security obligations
      • applying internal tax equalisation and protection policies.
       

    Shadow payroll arrangements can differ across entities and vary in complexity. A common practice is to conduct the initial calculations outside of payroll software and then enter the amounts into the software for reporting and reconciliation purposes.

    On this page:

    Why a concession is needed

    There are many factors in operating a shadow payroll arrangement which can make it difficult to report through STP on or before the day an amount is paid to an inbound assignee.

    These factors include:

    • delays in receiving information from an overseas payroll
    • currency conversion of payment amounts
    • a requirement for additional calculations to ascertain liabilities and implement tax equalisation.

    Eligibility for the concession

    You may be eligible for concessional reporting if you are required to report information through STP for an inbound assignee.

    Although you may be eligible for this concession for your inbound assignees, your Australian based employees must still be reported on or before pay day.

    You can't use this reporting concession for payments to employees that are made through an Australian-based payroll.

    Employers who are not required to report through STP

    You will not be required to report through STP if:

    • your entity has no Australian presence
    • the assignee is on a short term assignment in Australia
    • your entity have been granted a PAYG withholding variation to nil.

    In these cases, you will need to report inbound assignees' pay as you go (PAYG) withholding information to us via a payment summary annual report. You should issue a payment summary to the inbound assignee by 14 July.

    Understanding the effect of the reporting concession

    The reporting concession does not impact the tax treatment of payments to inbound assignees.

    For example, if you make a payment but don't process this through a shadow payroll until several weeks later, the payment is still deemed to have been made on the earlier date. This is also the date that would apply for PAYG withholding obligations.

    However, the concession does provide:

    • additional time to gather the information about the payments which needs to be reported
    • flexibility in calculating and reporting the payments. Reporting a reasonable estimate is sufficient provided that the estimate is corrected before or at the end of financial year finalisation.

    Report due date

    Reporting about inbound assignees is due before the last day of the month after the relevant payment was made. For example, if a payment was made on 14 April, it would need to be reported by 31 May.

    One month in arrears

    If you are reporting through STP in relation to your inbound assignees, you will be permitted to submit each report at any time before the end of the calendar month following the date payment is made to the employee.

    This reporting for inbound assignees can be either:

    • a separate STP pay event only for inbound assignees
    • included in the entity's regular STP pay event for its local employees.

    The STP pay event should state the date the payment was actually made to the inbound assignee. If this is not possible, it will be acceptable for the entity to report the same date as the other (local) payments shown in the pay event.

    Example 1: Reporting one month in arrears

    BigMultinational PLC has a presence in several countries including Australia.

    In preparation for a large project, 35 employees of BigMultinational PLC are seconded from South Africa to Australia for the period 27 July 2019 to 26 March 2020. These inbound assignees employees are paid through a payroll in South Africa, with a shadow payroll maintained in Australia for the purposes of tax compliance.

    On 27 August 2019, the employee's salary is paid through the South African payroll. Data about the payments to the 35 inbound assignees employees is sent to Australia. It is processed through the Australian shadow payroll on 5 September.

    Normally, BigMultinational PLC would be required to submit an STP report to us, on or before 27 August, showing the salary paid to the inbound assignees on 27 August.

    However, we have granted concessional reporting to BigMultinational PLC because of the shadow payroll arrangements. This means the deferred due date is the end of the month after the payment date, that is 30 September.

    On 20 September, the salary of other employees is paid through the Australian payroll. BigMultinational PLC prepares and submits an STP report on 20 September which includes both:

    • the Australian payroll salary payments on 20 September
    • the shadow payroll salary payments to the inbound assignees on 27 August.

    BigMultinational PLC met its STP reporting obligations when it included its inbound assignees in the same STP report as the local employees. The shadow payroll values can be shown in the STP report as being paid on 20 September.

    End of example

    Payments made in June

    There are two ways you can report payments made in June:

    • Lodge a separate pay event for the payments made to inbound assignees in June
    • Lodge an update event which includes the June payments into the year-to-date amounts for each inbound assignee.

    The final submission may also be used for the purpose of finalising STP reporting for the financial year. The final submission for a year will be due by the same date as the finalisation is due.

    We understand that if you submit June payment information using an update event, you will not submit a pay event during the month of July.

    Extensions to the concessional period

    We expect that most entities operating shadow payroll arrangements will be able to report through STP by the end of the next month after the payment date. However, if you can't do so you will need to request additional time.

    Any request will need to include supporting material to demonstrate the reasons why you can't meet your obligations. We will assess requests on a case by case basis.

    How to apply for additional time

    You can apply for additional time by:

    • logging in to the Business Portal
    • selecting Manage employees then STP deferrals and exemptions
    • from the STP deferrals and exemptions form choose Recurring deferral and complete the fields as follows
      • Start and end date – enter the period of time for which the extension to the concession will apply. The period end date must be within the financial year in which the application is made.
      • Number of additional days required to lodge each report – the number of days in addition to the existing concession period
      • Number of employees currently on payroll – the number of employees subject to shadow payroll arrangements
      • Reason – choose ‘Other special circumstances’
      • Describe the special circumstances – enter ‘Shadow payroll – please see attached’
      • Attach supporting documentation – provide supporting material to demonstrate the reasons you need additional time.
       

    Your registered agent can also apply using the same steps through:

    • the Tax or BAS Agent Portal – select Client’s employer obligations then STP deferrals or exemptions
    • Online services for agents – select Business then STP deferrals and exemptions.

    Payments included in the report

    The report needs to include your:

    • employees’ year-to-date amounts – up to and including the last pay day of the quarter
    • total gross wages – same as the W1 label on your activity statement
    • total pay as you go withholding – same as the W2 label on your activity statement.

    These amounts can be reasonable estimates.

    Reasonable estimates

    There may be occasions where you do not have the full details of payments made to inbound assignees in time for you to meet your STP reporting obligations. In these situations, you can report a reasonable estimate.

    What is a reasonable estimate will depend on the situation. For example:

    • If an accurate currency conversion rate is not available, use the latest available rate or an average rate to determine the reportable amounts until the correct rate is available.
    • The receipt of information from overseas is delayed, but the employee has previously received a regular monthly salary with minimal adjustment. Report the salary payment in line with the previous pattern. Make any adjustments in a future report when the final information is received.
    • There is uncertainty about how to classify an amount within payroll. Make a judgment about whether to include or omit that amount. Make a correction (if required) when the uncertainty is resolved.

    Estimated information will need to be corrected when you submit a finalisation declaration for the inbound assignee.

    Example 2: How to apply reasonable estimates

    Michael is seconded to Australia for work. He is paid out of the payroll in his home country. A shadow payroll is maintained in Australia by his Australian host entity.

    Every month, Michael is due to receive a salary of US$10,000. There are regular deductions that mean the gross payment reportable in STP by the Australian host is consistently US$9,200 (converted to Australian dollars). There are occasionally other deductions that mean the amount varies.

    In March 2020, due to an administrative error in Michael’s home country, his compensation information isn't sent to his Australian host. However, his Australian host knows Michael has been performing work and was due to receive a salary.

    Michael’s Australian host makes a reasonable estimate of the amount to include in their STP report, based on the pattern of previous reporting.

    Later, the Australian host discovers that Michael was in fact paid a higher amount due to a scheduled salary increase. In the next STP pay event they submit, they include Michael’s new regular salary and a correction of the previous estimate.

    End of example

    Finalisation declaration due dates

    You will need to finalise your STP information at the end of the financial year. This tells us your data is complete and we can change your employees' income statement to 'Tax ready'

    A finalisation declaration for inbound assignees may be:

    • included in the final pay event
    • submitted separately through a STP update event.

    If a concessional finalisation declaration is made for a shadow payroll arrangement, the declaration must be done by:

    • 14 September 2020 for the 2019–20 financial year
    • 14 August following the end of the financial year for 2020–21 and future years.

    See also:

    Example 3: How to apply concessional finalisation due date

    BigMultinational PLC has a presence in several countries including Australia.

    In preparation for a large project, 35 employees of BigMultinational PLC are seconded from South Africa to Australia for the period 27 April 2020 to 26 March 2021. These inbound assignee employees are paid through a payroll in South Africa, with a shadow payroll maintained in Australia for the purposes of tax compliance.

    On 27 June, the employee's salary is paid through the South African payroll. Data about the payments to the 35 inbound assignees is sent to Australia. It is processed through the Australian shadow payroll on 5 July.

    Normally, BigMultinational PLC would be required to submit an STP report to us, on or before 27 June, showing the salary paid to the 35 inbound assignees on 27 June.

    However, we have granted concessional treatment to BigMultinational PLC because of the shadow payroll arrangements. This means the deferred due date for reporting these June payments is 14 August.

    On 20 July, BigMultinational PLC:

    • pays the salary of other employees through the Australian payroll
    • prepares and submits an STP pay event showing the Australian payroll payments. The payments for the inbound assignees are not included.

    On 3 August, BigMultinational PLC prepares and submits an update event which

    • updates the year-to-date amounts for each of the 35 inbound assignees to include the salary payments from 27 June
    • updates the year-to-date amounts for each of the 35 inbound assignees to incorporate any reconciliation adjustments or corrections required
    • includes a finalisation declaration for each record.

    BigMultinational PLC has now met its reporting obligations in STP.

    End of example

    See also:

    Last modified: 19 Sep 2019QC 59487