A foreign resident is someone who is not an Australian resident for tax purposes.
The withholding requirements for foreign resident employees are similar to those that apply to Australian workers. However, a foreign resident:
- can't claim the tax-free threshold
- is subject to special rates of withholding.
It is your responsibility to check if your foreign resident worker can legally work in Australia. The Department of Home Affairs (Home Affairs) has an online verification toolExternal Link you can use to check visa conditions.
- Tax file number declaration
Complete the TFN declaration form so your payer can work out how much tax to withhold from payments they make to you.
You are required to withhold amounts when making payments to foreign resident employees.
It is not compulsory for foreign resident employees to have a tax file number (TFN). However, without a TFN, your payee can't:
- lodge a PAYG foreign resident withholding variation (FRWV) application
- lodge an Australian tax return
- apply online for an Australian business number (ABN).
Also, it will be more difficult for us to look up and discuss your employee's tax records with them.
The employee may also be liable for more tax if they do not provide a TFN.
Where the payment is to an individual foreign resident, withhold at the foreign resident rates in the weekly, fortnightly or monthly tax tables. However, special withholding rates apply if they are employed under any of the following:
- working holiday makers
- Seasonal Worker Programme and Pacific Labour Scheme
- Pacific Australia Labour Mobility scheme
- entertainment, sports, construction and casino gaming activities.
If a payee is required to supply you with an Australian business number (ABN), and they don't, you must withhold the top rate of tax from the payment.
In limited circumstances they do not need to supply you with an ABN. These include when the:
- income is exempt
- payee is not required to pay tax due to a tax treaty
- payee is a foreign resident and does not carry on an enterprise in Australia.
Where the foreign resident payee believes they don't need an ABN, you still need to consider whether you are required to withhold from the payment and the payee may need to apply for a variation.
The withholding requirements where an ABN is not quoted take precedence over foreign resident withholding requirements. Therefore, if you have withheld because an ABN was not quoted, you do not also withhold under foreign resident withholding rules.
It is your responsibility to be satisfied that you do not need their ABN.
Making a payment in a foreign currency
To make a payment in a foreign currency, you need to calculate the equivalent Australian dollar value at the time you make the payment.
After converting the foreign currency payment to Australian dollars, you then calculate the amount to withhold at the required rate.
For more information, visit Translation (conversion) rules.
When and how you report and pay withholding amounts to us depends on whether you are a small, medium or large withholder.
To determine this, we look at how much your total withholding is, or is likely to be, each year.
If you withhold from payments to a foreign resident, you have specific end-of-year reporting obligations. For more information, visit Paying and reporting withheld amounts.Foreign resident PAYG withholding and how it affects non-residents receiving specific payments from Australian payers.