Remote working can help your company to find the best person for the job beyond geographical restrictions. It gives you the chance to build a diverse team that includes workers of different genders or backgrounds. You can also find high-quality talent who might be living across the world but still want to work for your company.
But hiring remote workers in Australia involves understanding compliance, labor laws, and tax practices. It can be complicated to set up a payroll system to pay your global workers in their local currency. Despite the challenges, though, hiring remote workers can open up many possibilities for your business.
If you want to expand your team in Australia, you’ll have to understand the rules associated with hiring employees in the country. This complete guide explains everything you need to know about hiring and paying remote workers in Australia.
How do foreign businesses pay remote workers in Australia?
Foreign businesses have multiple options to pay their employees in Australia, such as:
Opening a legal entity in Australia
By setting up a legal entity in Australia, you can easily employ workers under your entity's name. This option is better for larger companies committed to growing their business in Australia.
To set up an entity, you will have to register your business, complete incorporation, and hire a skilled team to handle global payroll , and tax requirements.
This route can take time, and be cost-intensive. It also requires extensive knowledge of local payroll and employment regulations. In addition, the business must consult a local accounting firm and legal team to comply with Australian employment laws.
Working with a global employment partner
Foreign businesses can also easily work with an employer of record or global employment solution to hire remote employees across Australia. A global employment solution like Remote provides a full range of services for employers to hire workers, manage HR, handle social security payments, and other statutory requirements. Remote ensures compliance with Australian labor laws and guarantees the smooth, easy management of your workforce.
Paying Australian workers as contractors
If you hire your remote worker as a contractor, you can pay them directly. However, it’s crucial not to default to treating your worker like a contractor to avoid hiring them as an employee. Australian laws are not in favor of employers trying to bend the rules by hiring employees as contractors while avoiding paying benefits at the same time. Accidentally or intentionally misclassifying workers can lead to fines and penalties . It is better to hire a contractor if they are self-employed, and you require their services for a short-term project.
In what currency do companies pay remote workers in Australia?
The best currency to pay Australian workers is the Australian dollar (AUD or A$). Nonetheless, if the remote worker can accept your foreign currency, you can convert the net AUD salary to the currency of their choice and deposit it into their specific foreign currency account.
What are the tax rates for tax brackets in Australia?
Where remote workers pay taxes depends on the nature of their employment in Australia. The following tax rates apply to residents in Australia. Note that these rates do not include the 2% Medicare levy.
The 2022/2033 individual income tax rates for Australia are:
0 to A$18,200 = 0%
A$18,201 to A$45,000 = 19%
A$45,001 to A$120,000 = 32.5%
A$120,001 to A$180,000 = 37%
A$180,001 or over = 45%
Which parts of salary in Australia are taxable?
In Australia, not every part of the salary is taxable. While some allowances may be fully taxable, others can be tax-exempt.
Components of Australia salary that incur full taxes
Basic salary, including salespeople commissions
Profit-sharing earnings and bonuses
Benefits converted to pay
Personal expense reimbursements
Components of Australia salary that incur partial taxes
Laundry allowance from the excess over the threshold amount
Award overtime meal allowance from the excess over the threshold amount
Domestic or overseas travel allowance involving an overnight absence from an employee's ordinary place of residence from the excess over the threshold amount
Overseas accommodation allowance
Is per diem taxable in Australia?
Per diem payments are travel allowances that employers pay on top of the usual salary. It is made to an employee to cover drink, food, accommodation, or other incidental expenses an employee may incur while traveling on the job.
Per diem allowance folded into an employee's wages or salary are taxed as wages and salary, and you have to withhold tax unless an exception applies. An exception may apply if:
The travel allowance is not for overseas accommodation.
You expect your employee to spend all their travel allowance on food, drink, accommodation, or incidental expenses.
You show the nature and amount of the travel allowance separately in your accounting records.
The amount of travel allowance you pay is equal to or less than the reasonable travel allowance rate.
Is there a difference between allowance and reimbursement in Australia?
Under Australian law, an allowance is a separately identified payment you make to an employee for special duties or qualifications as well as work-related expenses, which the employee can claim as a tax deduction. Examples of such expenses include traveling between work sites, regular travel between work and home, first-aid certification expenses, or allowances for danger or height. Allowances folded into normal wages or salary are not considered separately for withholding.
Reimbursement, on the other hand, is a payment for expenses already incurred by an employee. Expenses such as office supplies, mobile phone bills, internet connection fees, and public transportation fares are all reimbursable. In this case, an employer may be subject to fringe benefits tax (FBT). If the FBT covers the reimbursement, the amount becomes non-assessable income for the employee, who does not need to claim a deduction for the expense.
What payroll deductions are employers required to make in Australia?
A payroll deduction is the amount of money subtracted from an employee's gross wage to pay for a service or government program. The amount left over after the deductions is the net pay, which the employer will then pay to the employee. Typically, you will need an employee’s express written authorization, unless a court order, the law, or an industrial instrument authorizes the deduction.
Pension schemes
By law, employers must contribute to superannuation or “super”, which is kept aside to support an employee’s financial needs following retirement. A super is important for employees because the more they save, the more money they will have when they retire from work.
An employee can only withdraw their super if certain circumstances are met, for example, when they retire or turn 65. If you run payroll with a global employment partner like Remote, our team can ensure that your employees’ super is paid in when it should be. Remote also pays employers' deductions to the Australian Tax Office (ATO) on time each time.
Insurance schemes
Employees can claim a deduction for premiums they have to pay for insurance against the loss of their employment income. Only the premiums you pay to protect your income are deductible. This is known as income protection or “continuing salary cover.”
For the continuing salary cover, you must include any payment you receive under an income protection policy in your tax return.
All employees in Australia are entitled to a minimum wage , which is typically set by the award that covers an employee's occupation or industry. Awards encompass many occupations and industries, so it's important to ensure their accuracy.
When a registered agreement or award doesn't cover an employee, the National Minimum Wage applies. This rate is provided by the Fair Work Act 2009 and is reevaluated every year.
As of July 2022, the national minimum wage in Australia is A$812.60 per week or A$21.38 per hour.
How much is overtime pay in Australia?
Australian law describes overtime as work performed outside the ordinary hours listed in an agreement or award, and it is usually paid at a higher rate. When overtime is considered, its details vary according to each registered agreement or award.
Overtime typically involves working outside a specific spread of hours, exceeding a specific number of hours per week/day for a full-time employee, or exceeding the standard working hours per week/day for a part-time employee.
Most enterprise agreements and modern payments involve overtime payments based on a multiple of an employee’s ordinary time hourly rate of pay. These modern awards provide overtime, requiring overtime to be paid at:
150% of an employee’s ordinary hourly rate for the first two or three hours of overtime worked
200% of an employee’s ordinary hourly rate after the two or three hours of overtime worked
In addition, some awards may provide various overtime payment arrangements for people working overtime on a public holiday, Saturday, and Sunday and for shift workers working overtime.
What are the local labor laws in Australia?
A primary piece of legislation that governs employment arrangements in Australia is The Fair Work Act (2009). It forms the foundation of employment arrangements in Australia and has been established to protect employees.
Most employers and employees will be subject to this federal legislation because it outlines basic employer and employee rights and obligations together with modern awards, enterprise agreements, and workplace determinations.
The Fair Work Act (2009) applies across all industries and occupations throughout Australia, though there are some state-based variations.
Other laws and awards that may impact how you pay your employees are:
Disability Discrimination Act 1992, which prohibits discrimination against employees due to disability
Work Health and Safety Act 2011, which provides for the health and safety of employees working under the law
How to pay contractors in Australia?
Paying a contractor in Australia involves many of the same steps as paying a contractor elsewhere. Foreign businesses can pay contractors in Australia directly using various payment methods such as bank transfer, direct deposit, virtual wallets, or digital payment platforms like Wise or PayPal.
Importantly, remember that you have to be careful about contractor misclassification . If you treat a worker as an employee, the law will consider them as such, and there may be a heavy penalty for misclassification.
If you think a worker is misclassified, it's always better to convert contractors to employees and pay them the appropriate amount and give them the benefits they deserve, rather than face a penalty for misclassification. This often applies if you plan to work with a worker for a long time. For example, if a worker performs a series of contracts with you over several years, they will likely be considered as an employee from the outset under Australian law.
Alternatively, you can use a contractor management platform like Remote to handle your contractor payments. Partnering with Remote means that you can pay your workers quickly and compliantly, without being worried about worker misclassification.
How to pay remote employees in Australia?
When you're working with remote contractors and employees in Australia, you can risk triggering permanent establishment in the country. Permanent establishment is a tax term used for businesses that have a continued presence in a foreign country. Most businesses typically try to avoid becoming permanent establishments in countries where they have remote employees. This situation can make employers subject to corporate taxation and other compliance standards.
To avoid permanent establishment risks, it’s best to use an employer of record , or EOR to hire workers in Australia. An EOR like Remote is the simplest, safest, and most reliable way to hire remote employees globally. Remote takes on the burden of local regulations, payroll, and taxes so that you can compliantly employ workers in Australia.
Read our helpful article on how you can choose the right EOR to suit your business needs.
Pay remote workers in Australia with Remote
Building a global team is an exciting process. Not only do you get access to new markets and opportunities, but you also get to work with talented people from all over the world.
Australia is a hub of talent and innovation, and with Remote, you can hire remote workers in Australia in minutes. As an employer of record, Remote has expertise in local laws, tax practices, compliance requirements, and payroll processes — making hiring remote workers easy.
Don't let compliance and other obstacles hold you back from building your best possible team. Let our team handle it for you and watch your business grow. If you require any assistance developing your global team, book a call with our experts to get started right away.
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