12/12/2025 • 15 min read
Remote Work Taxation: OECD Updates 2025 (Australia)
Remote Work Taxation: OECD Updates 2025 (Australia)
Remote work taxation has shifted from an “HR policy issue” to a material tax risk because OECD guidance and BEPS-era principles increasingly treat cross-border remote workers as potential triggers for permanent establishment (PE), corporate tax residency issues, payroll withholding, and employment tax/social security obligations—risks that Australian businesses must manage alongside ATO rules on residency, PAYG withholding, FBT, and employee deductions. For Australian groups and SMEs employing staff who work overseas (or employing non-residents working remotely into Australia), the practical outcome in 2025 is that you need documented controls, contract settings, and evidence trails to prevent unintended PE creation, double taxation outcomes, and compliance failures.
What are the key OECD updates Australian businesses should care about in 2025?
The OECD’s central message remains that “facts and circumstances” drive outcomes, and remote work can create tax presence where employees habitually work—particularly where their activities are core to the business or involve concluding contracts.
From an Australian accounting practice perspective, the OECD developments that matter most are:
- Permanent establishment (PE) principles are still anchored in the OECD Model Tax Convention and Commentary
- BEPS Action 7 “anti-avoidance” concepts remain highly relevant
- “Place of effective management” and corporate residency risk has become more practical, not theoretical
- Transfer pricing and profit attribution is not optional once PE risk exists
Practical point for Australian businesses: OECD guidance does not replace Australian law, but it heavily influences treaty interpretation and the approach taken by foreign tax authorities. The real risk is getting assessed overseas while still being taxed in Australia.
How does remote work create tax risk for Australian businesses?
Remote work creates tax risk by moving people (and therefore business functions) across borders, which can shift taxing rights under DTAs and trigger foreign compliance obligations.
Key risk categories to actively manage:
- Permanent establishment (PE) risk (corporate income tax nexus)
- Payroll withholding and employer registration risk
- Employment taxes and benefits
- Employee tax residency and individual compliance
- Corporate residency / central management and control
What does the ATO focus on for remote work and cross-border employees?
The ATO focuses on residency, PAYG withholding, record-keeping, and substantiation—while recognising that treaty outcomes and foreign law can also apply.
Australian sources and rules that are commonly relevant include:
- Tax residency guidance (individuals)
- Double tax agreements (DTAs) and treaty concepts
- PAYG withholding framework
- Employee deductions for working from home (WFH)
Professional note: For formal positions, Australian businesses should rely on primary law (Income Tax Assessment Acts), applicable DTAs, and ATO guidance. Where uncertainty exists—particularly with PE risk—private advice or foreign counsel input is often warranted.
When does remote work create a permanent establishment (PE) under OECD principles?
Remote work can create a PE when the overseas work arrangement constitutes either a fixed place of business PE or a dependent agent PE under the relevant DTA (typically aligned to OECD concepts).
In practice, PE risk increases when:
- Fixed place PE indicators are present
- Dependent agent PE indicators are present
Real-world scenario: Australian SaaS sales executive in Singapore
An Australian SaaS company allows a senior salesperson to relocate to Singapore for 12 months. They negotiate deals and effectively finalise commercial terms with enterprise customers in Asia.- Likely risk points:
Practical mitigation commonly includes contract governance (who signs and where), limiting authority, ensuring offshore work is genuinely auxiliary (where commercially feasible), and documenting the factual position.
How do DTAs interact with Australian domestic rules for remote workers?
DTAs can reallocate taxing rights even when Australia taxes on the basis of residency, and they can prevent or reduce double taxation if applied correctly.
From an operational standpoint, Australian businesses should treat DTAs as a required layer of analysis in cross-border remote work, not a “later” consideration.
Key DTA touchpoints for remote work:
- Employment income articles often look at:
- Business profits articles determine whether profits can be taxed offshore only if there is a PE
- Residency tie-breakers may apply when both countries treat the person (or potentially the company) as resident
What practical steps should Australian businesses implement now?
Australian businesses should implement a remote work tax governance framework that is auditable, documented, and aligned to OECD PE risk factors and ATO compliance expectations.
Recommended control set (practice-ready):
- Create a “Remote Work Tax Risk Register”
- Classify roles by PE sensitivity
- Update employment contracts and delegations
- Implement “contract conclusion controls”
- Coordinate payroll, HR, and finance
- Document “facts and circumstances” contemporaneously
- Obtain foreign tax advice for “red flag” countries
How should Australian accounting practices advise clients on remote work policies?
Accounting practices should advise clients to treat remote work as a governance issue with tax outcomes, not merely an HR benefit.
A practical advisory approach:
- Policy design
- Onboarding workflow
- Ongoing monitoring
Real-world scenario: Australian consulting firm with “work from anywhere”
A 25-person consulting firm allows staff to work anywhere. Two managers spend 8 months in the UK delivering projects and negotiating scope variations with UK clients.- Common outcomes to evaluate:
How does technology reduce remote work taxation risk in practice?
Technology reduces remote work tax risk by improving evidence, speed of reconciliations, and audit-ready documentation—particularly where payroll, cross-border expenses, and entity-level allocations become more complex.
From a workflow perspective, the biggest gap in many firms is that remote work creates scattered data (bank feeds, reimbursements, allowances, multi-currency expenses, inconsistent narrations) which then undermines the quality of the tax position.
This is where AI accounting software Australia solutions that automate coding and substantiation can materially improve defensibility:
- Automated bank reconciliation
- Evidence-ready working papers
- ATO integration accounting software
While tools do not eliminate PE risk (a legal/treaty issue), they materially improve the ability to identify issues early and maintain defensible records.
What are the common mistakes Australian businesses make with cross-border remote work?
The most common mistakes are governance failures and incorrect assumptions based on outdated “COVID-era” thinking.
Frequent issues observed in practice:
- Allowing overseas remote work without tracking days and locations
- Assuming “home office can’t be a PE” (it can, depending on facts)
- Letting offshore staff negotiate and effectively finalise contracts
- Ignoring foreign payroll registration/withholding triggers
- Failing to document where strategic decisions are made (executive remote work)
- Treating remote work costs inconsistently in the ledger (weak audit trail)
Next Steps: How Fedix can help
Fedix helps Australian accounting practices and finance teams operationalise remote work compliance by making the underlying accounting data faster to reconcile and easier to evidence. Learn more about how MyLedger can support automated bank reconciliation, consistent transaction coding, and automated working papers so your team can spend more time on PE risk assessment, DTA analysis, and governance—rather than manual processing.
Suggested next actions for 2025:
- Establish a remote work tax register and approval workflow
- Review “high PE risk” roles and contract conclusion controls
- Standardise expense and payroll coding rules across clients/entities
- Evaluate Fedix MyLedger for faster close and more reliable evidence trails (home.fedix.ai)
Conclusion
OECD-aligned PE concepts and BEPS principles mean remote work can shift tax outcomes across borders, and Australian businesses must manage this risk through documented governance, DTA-aware analysis, and strong accounting evidence. The ATO’s compliance focus on residency, substantiation, and correct reporting makes it essential that remote work arrangements are tracked and supported by reliable records. For Australian accounting practices, the best outcomes come from combining policy controls with high-quality, automation-driven accounting workflows.
Disclaimer: This material is general information only and does not constitute tax or legal advice. Cross-border taxation depends on specific facts, the relevant DTA, and foreign domestic law. Advice should be obtained from a qualified Australian tax adviser and, where applicable, foreign tax counsel.