Non-resident employers’ obligations to deduct PAYE, FBT and ESCT in cross-border employment situations

This operational statement discusses and provides guidance on the approach to take with regards to a non-resident employers’ obligations to deduct PAYE, FBT and ESCT in certain cross-border employment situations.

Tax Information Bulletin Vol 34 No 1 - February 2022

Note: There have been some amendments to the Income Tax Act 2007 and the Tax Administration Act 1994 from 1 April 2023 and 1 April 2024 which may affect some of the operational content of this Statement.

These amendments are outlined in TIB Vol 35, No 6, July 2023 (Cross-border workers) and have expanded the obligations for non-resident employers who provide fringe benefits or make contributions to an employee’s foreign superannuation fund as discussed in this Statement.

The non-resident employer is now required to account for FBT and ESCT, regardless of whether they have a sufficient presence or not.  Changes have also been made that allow any liability for FBT or ESCT to transfer to a cross-border employee if the employer and employee agree to this.

Employers can also now choose how their contributions to a cross-border worker’s foreign superannuation scheme are taxed and whether they remain taxed under the FBT regime or become taxed under the PAYE rules.