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Paying overseas freelancers and contractors

Your guide to superannuation, tax and transfer methods when paying overseas contractors from Australia.

No matter what business you're in, hiring overseas contractors can be an affordable and efficient way to get the job done. But if you hire workers based overseas, it's vital that you understand the ins and outs of paying overseas contractors from Australia.

There are tax and super obligations to consider, while you'll also need to find a fast and cost-effective way to pay your international workers. Keep reading for all the key details you need to know.

Do Australian companies need to worry about tax and super for overseas workers?

As a general guide, overseas contractors are responsible for managing their own tax and superannuation obligations. However, requirements can vary depending on where they live, whether they're a tax resident of that country, and whether they're classed as a contractor or an employee.

Difference between employees and contractors

One of the key factors to consider when paying an overseas worker is whether they're classified as a contractor or an employee. There are different tax requirements depending on which category they fall into, so take care to ensure you get it right.

Guidance from the ATO outlines the key differences between employees and contractors, such as:

  • Serving in your business. An employee serves in your business, while a contractor provides services to your business in order to further their own business.
  • How, where and when they work. If the person is an employee, your business controls how they complete their work. While you can provide direction about this to a contractor, they have the freedom to choose how, where and when they perform their duties.
  • Payment. Contractors are contracted to perform a specific task, while employees are paid for the time they work, a price per activity completed, or receive commissions.
  • Subcontracting or delegating. Employees are responsible for completing the work, while contractors can delegate jobs to others and pay them to complete the work.
  • Tools and equipment. Your business will provide most or all of the tools and equipment an employee needs to complete their work, while a contractor is responsible for providing their own tools and equipment.

If you need help determining whether a worker is an employee or contractor, speak to a tax expert.

Finder survey: What is the most common region Australians send money to?

Response
Asia42.22%
Europe25.56%
Other13.33%
North America11.11%
Oceania (including New Zealand)10%
The middle east3.33%
Central America2.22%
South America1.11%
Source: Finder survey by Pure Profile of 1110 Australians, December 2023

How to deal with taxes for overseas contractors and employees

Contractors are typically responsible for managing their own tax obligations, so you won't have to worry about withholding tax from their payments. However, the tax obligations for overseas employees vary depending on whether they're an Australian resident or non-resident.

Resident

If your employee is an Australian resident working internationally, pay as you go (PAYG) withholding obligations may apply. If they usually live and work in Australia but are temporarily working overseas, your pay as you go (PAYG) withholding obligations remain the same.

The employee will need to report their earnings as assessable income on their tax return, and they may be eligible for a foreign income tax offset.

Non-resident

If the employee is not a resident of Australia for tax purposes, PAYG withholding requirements apply. However, foreign resident tax rates are different to those for Australian residents, and there's no tax-free threshold for the employee.

Do you need to pay superannuation for overseas workers?

Yes, you may have superannuation obligations for overseas workers. However, requirements once again vary depending on whether the worker is an employee or contractor and whether they're an Australian resident or not.

If you're an Australian company paying an overseas employee who is an Australian resident, you'll need to pay super contributions. However, the country where they're working may also require you to make super contributions, so you'll need to be aware of local laws to avoid what's known as 'double super coverage'.

Australia has bilateral social security agreements in place with other countries to help deal with this issue. Under these agreements, you can apply for a certificate of coverage that exempts you from the requirement to pay super in the foreign country.

If your employee is not an Australian resident for tax purposes, you don't need to make Australian super contributions. However, the foreign country the employee is working in may require you to make contributions, so make sure you're aware of local laws.

Finally, independent contractors are typically responsible for managing their own superannuation, so you usually won't have to pay them super contributions.

Best ways to pay international contractors

There are several options to consider when paying overseas freelancers and contractors:

  • International money transfer. Dedicated money transfer companies specialise in sending international payments. They tend to offer better exchange rates and lower fees than banks, so it's worth comparing a range of money transfer services to find the best deal.
  • Bank wire transfer. Sending money directly from your business bank account is a secure and convenient option. However, a high exchange rate markup usually applies, while you'll also need to watch out for transfer fees.
  • Multi-currency account. A multi-currency account allows you to hold several different currencies in the one account, making it quick and easy to pay workers in foreign currencies. This also gives you more flexibility about when you convert to and from AUD, taking advantage of favourable exchange rates to save money.
  • PayPal. PayPal is another popular option for businesses paying overseas freelancers and contractors. It's quick and easy to use — all you have to do is enter your worker's email address — but high currency conversion charges and other fees mean it's often not the most cost-effective option.

Compare international money transfer services

1 - 23 of 23
Name Product Filter Values Fastest Transfer Speed Fees (Pay by Bank Transfer)
TorFX
24 hours
$0
TorFX sends money overseas in 40+ currencies, with competitive rates for transfer amounts over $2,000.
Xe Large Transfers
24 hours
$0
Xe has fast transfers with low fees and a range of foreign currency tools.
OFX
24 hours
$0
OFX has no maximum limit transfers, with competitive exchange rates for 50+ currencies.
Send Payments
24 hours
$0

Send provides fee-free transfers via its 24/7 multi-currency payments platform with real-time quotes.
Revolut
Within minutes
$0
Sign up and get a AUD$15 top-up. For new customers only. T&Cs apply.
Send money with great rates and low fees in 30+ currencies.
Xe Money Transfers
Within minutes
$0
Xe has fast transfers with low fees and a range of foreign currency tools.
Instarem
Within minutes
From 0%
50% off first transaction fee from any country in APAC (outside India).
Minimum transfer of $250 and max transfer of $500,000
Wise (TransferWise)
Within minutes
From 0.43%
Wise uses the mid-market rate and transparent fees to help you send money in 50+ currencies.
TorFX
24 hours
$0
TorFX sends money overseas in 40+ currencies, with competitive rates for transfer amounts over $2,000.
Remitly
Within minutes
From $0
Remitly has quick, affordable transfers around the world, with both express and economy options.
Rocket Remit
Within minutes
From $0 to $5
Send money instantly to friends and family in over 45 countries using just your mobile number.
MoneyGram
Within minutes
From $1.99
MoneyGram has fast cash pick-up transfers to more than 350,000 agent locations worldwide.
SingX
Within minutes
From 0.5%
SingX offers the real exchange rate every time you make a transfer and can help you send money across the world.
CurrencyFair
Within minutes
€3
CurrencyFair has bank-beating exchange rates and fast transfer times on 15+ popular currencies.
OFX
24 hours
$0
OFX has no maximum limit transfers, with competitive exchange rates for 50+ currencies.
Send Payments
Send Payments
24 hours
$0
Send provides fee-free transfers via its 24/7 multi-currency payments platform with real-time quotes.
MasterRemit
Within minutes
From $0
Get your 1st and 2nd money transfer for free with promo codes FIRSTFREE and MASTERFINDER!.
Send money in minutes at competitive exchange rates to the Middle East, Africa and South Asia.
Western Union
Within minutes
From $0
Western Union sends money online to friends and family in 200+ countries around the world.
Qantas Business Money
Within minutes
$0
Earn up to 100,000 bonus Qantas Points on your first currency conversion by 31 July 2024. Conversion limits and T&Cs apply.
Set up accounts in 11 different currencies and get rewarded for global business payments by earning Qantas Points.
TorFX Business Transfers
24 hours
$0
TorFX guarantees to match any competitor's exchange rate. Conditions apply.
TorFX sends money overseas in 30+ currencies, with competitive rates for transfer amounts over $2,000.
OFX Business Transfers
24 hours
$0
OFX has no maximum limit transfers, with competitive exchange rates for 45+ currencies.
WorldFirst
24 hours
From $0
Open bank accounts in Australia, the UK, US, Canada, Japan and Europe. Send and receive funds with zero fees for large sums, including same-currency supplier payments.
Send business
24 hours
$0

Send provides fee-free transfers via its 24/7 multi-currency payments platform with real-time quotes.
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Benefits of hiring contractors

There are plenty of good reasons why you might want to hire an overseas contractor:

  • Flexible arrangements. Hiring a contractor is a much more flexible arrangement than taking on a full-time employee, allowing you to find a worker with specialist skills whenever you need.
  • Find the best talent. Looking overseas allows you to expand your search for workers to a much larger talent pool. This can help you find the people with the skills you need to grow your business.
  • Save money. Hiring overseas contractors is also an affordable way to find workers and improve your bottom line.

Bottom line

There are tax and super obligations to consider when paying foreign workers, but don't let them put you off looking overseas to find the right talent for your business. If you're unsure about your tax obligations when paying overseas contractors or employees, speak to a tax professional.

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