In this article:
Working Overseas
International Taxable Presence
How Does One Employee Create That Risk?
The OECD's 2025 Update
The 50% Safe Harbor
What the Safe Harbour doesn't fix
Employee Tax Exposure
Foreign Payroll and Social Security
Visa and Right to Work
Insurance
A Traffic Light Approach
Before You Say Yes
Frequently Asked Questions
The Bottom Line
Employee Wants to Work from Bali?
What Perth Business Owners Need to Know Before Saying Yes.
The email usually arrives on a Tuesday afternoon. Your best project manager is heading to Bali for six weeks. Can she log in from there?
A Complicated Answer
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Sometimes the answer is a quick yes. Other times it's the start of a problem that takes two years and a team of tax advisers to unwind.
Remote work overseas can trigger foreign tax registration, local payroll withholding, visa breaches, insurance gaps, and a risk most Perth business owners have never heard of: a permanent establishment in another country. Whether any of that applies to your situation depends on who the employee is, what they’ll actually do there, how long they’ll stay, and which country they’re going to.
This article walks through the risks owner-operated Perth businesses run into, and what to check before you approve the request.
The Big Risk: A Taxable Presence Overseas
A permanent establishment — PE for short — is a taxable presence in another country. Build one, even accidentally, and that country gets to tax the profits attributable to what’s happening there.
The consequences bite hard. You may need to register with the foreign tax authority. Lodge corporate tax returns. Calculate profit attribution. Deal with local payroll and social security. Hire a local tax adviser to help with all of it.
A multinational can absorb that. An owner-operated Perth business usually can’t — and often the compliance cost alone dwarfs whatever benefit the arrangement delivered.
How Does One Employee Create That Risk?
Two tests do most of the work.
The fixed place of business test asks whether your business has somewhere in that country it carries out activities from. An office is obvious. A home office used consistently for months can count too.
Role matters. So does what the employee actually does on the keyboard.
The dependent agent test is broader and often catches people out. If someone in that country is routinely negotiating or concluding contracts for your business, that alone can create a PE.
Take the real example most Perth firms should worry about: a senior business development manager spends four months in Singapore servicing Asian clients, running pitch meetings and finalising deals over coffee. That employee could create both a fixed place of business PE (working consistently from an apartment) and a dependent agent PE (concluding contracts on the company’s behalf). Compare that to a junior analyst logging in from a family home in Italy for three weeks while they visit relatives — same remote work, entirely different risk profile.
The Update Helps — But Only So Far
Late last year, the OECD updated its commentary on cross-border remote work. Employers have been waiting years for this, and it finally acknowledges that modern remote work doesn’t always create a foreign taxable presence.
It’s useful. It’s not a free pass.
The 50% Safe Harbor
Under the updated commentary, where an employee works less than 50% of their total working time for the enterprise at a remote location in another treaty country over a twelve-month period, that location generally won’t be treated as a fixed place of business.
That covers genuinely incidental arrangements well — short stays, extended travel for personal reasons, temporary overseas work with no real tie to the employer’s business in that country.
The Commercial Reason Test
Cross the 50% line and the analysis gets harder. The question becomes whether the employee’s presence in the country serves a genuine commercial purpose for the business.
Lifestyle reasons with no local business link? PE risk stays low. Services to local clients, market development, deal negotiation? Risk climbs fast.
What the Safe Harbor Doesn't Fix
Three limits worth remembering.
The safe harbor applies only to fixed-place-of-business PE. Dependent agent risk is untouched — an employee concluding contracts can still create a PE in weeks.
It applies between treaty countries. Non-OECD jurisdictions and some high-enforcement countries like India may ignore it entirely.
And it doesn’t override any of the other obligations described below. PE is one problem; payroll withholding, visas, employment law and insurance are separate problems that the OECD commentary doesn’t touch.
Employee Tax Exposure
Your employee may become taxable in the foreign country, sometimes quickly.
The “183-day rule” gets quoted a lot, usually wrongly. It’s a treaty tiebreaker with three conditions — the employee being present for 183 days or less, the salary being paid by an employer who isn’t resident in the host country, and the salary not being borne by a PE there. All three have to stack up. Miss one and local tax applies regardless. In countries with no tax treaty, local tax can start from day one.
Foreign Payroll and Social Security
Some countries require local payroll withholding on salary earned while the employee is physically there — Australian employer or not.
Social security is the other piece. Australia has bilateral agreements with around 30 countries, including the US, UK, New Zealand, Germany, Japan and Korea. Where one applies, get a Certificate of Coverage from the ATO before the employee leaves and they’re exempt from the local system. Miss the window, or pick a country without an agreement, and you’re paying twice.
Superannuation
For Australian resident employees working overseas temporarily, Australian Super Guarantee obligations generally continue. That doesn’t mean the foreign country will leave you alone — without a Certificate of Coverage, local retirement contributions can also apply.
Visa and Right to Work
A tourist visa almost never permits work, even remote work for a foreign employer. Employees routinely assume otherwise and travel on the wrong visa.
More than 60 countries now offer digital nomad or remote work visas, which can provide a clean legal basis — though most come with their own tax and duration conditions. Check before the trip, not after.
Local Employment Law
Once an employee is working in another country, local employment protections can attach. Minimum entitlements, leave, termination notice, unfair dismissal. The Australian contract doesn’t necessarily save you, particularly in jurisdictions with strong mandatory employee protections like France, Germany, Indonesia or Brazil.
Insurance
Check every policy before the employee leaves.
Workers compensation usually covers temporary overseas work for a limited period — often around six months, depending on the state and the policy — but longer stays and unusual activities can fall outside cover. Professional indemnity, cyber and device insurance often have territorial limits, disclosure obligations, or outright exclusions for overseas work. Don’t assume cover exists. Get it in writing.
Client Contracts
This one can catch professional services firms cold.
Some client agreements explicitly prohibit work being performed outside Australia. Others restrict offshore data access. Breach either and you have a commercial problem regardless of whether the tax position is fine — and for some Perth service businesses, losing a key client matters far more than a foreign tax bill.
A Traffic Light Approach
A practical starting point for owner-operated businesses.
Lower Risk
Short stay
Employee overseas for personal reasons, not business expansion
No authority to negotiate or conclude contracts
No local client-facing activity
Treaty country
Visa position checked
Insurance confirmed
No client restriction issues
Medium Risk
Longer stay
Employee has client contact
Unclear payroll or tax position
Role has some commercial influence
Limited documentation
Uncertainty on visa or insurance
Higher Risk
Sales or senior commercial role
Employee negotiates or signs contracts
Employee services local clients or develops a market
Non-treaty or high-enforcement jurisdiction
No visa review
No insurance confirmation
Client data or contract restrictions in play
Before You Say Yes
Confirm the country, role and duration. A two-week Bali trip isn’t the same as a six-month Singapore arrangement for a BDM.
Work out what the employee will actually do. Internal work is one risk profile. Negotiating, selling, managing clients or signing documents is another entirely.
Review visa and work rights. Don’t assume remote work is permitted.
Get country-specific tax advice early. PE risk, employee tax, payroll withholding, social security — all country-specific, all worth a conversation before the flight, not after.
Apply for a Certificate of Coverage if relevant. Before departure. Retrospective applications are harder.
Check insurance in writing. All of it — workers comp, PI, cyber, device, health.
Check client contracts and data restrictions. Critical for service businesses.
Document the arrangement. Country, duration, duties, review points, and your right to end it at any time.
Frequently Asked Questions
Managing employees who work overseas raises questions that sit across workers compensation, tax, visas and superannuation — and the answers often depend on which state your business is based in, where the employee is going, and how long they’ll be there. The following questions cover the issues that come up most often.
Not automatically. Most Australian schemes cover temporary overseas work for a limited period, often around six months with extensions available, but the rules vary by state and by policy. Longer stays, permanent relocations and unusual activities can fall outside cover. Check with your broker before the employee leaves and get it in writing.
An ATO-issued document confirming that an Australian employee working overseas remains in the Australian super system and is exempt from the host country’s retirement or social security system. It only applies where Australia has a bilateral social security agreement with the destination country. Apply before the employee leaves — retrospective applications are much harder.
Almost never. Tourist visas generally prohibit any form of work, including remote work for a foreign employer. More than 60 countries now offer digital nomad visas that legitimise the arrangement, each with its own rules and tax conditions. Confirm the visa position in writing before travel.
No. The safe harbor helps for short, incidental stints in treaty countries, but it applies only to fixed-place-of-business PE — dependent agent PE isn’t covered and can trigger much faster. It also doesn’t remove payroll, visa, social security or employment law obligations. For anything longer than a short trip, get country-specific advice.
The Bottom Line
Letting an employee work from Bali isn’t automatically reckless. It isn’t a casual HR perk either.
The 2025 OECD update has made some short, incidental arrangements easier to manage. Beyond that — senior employees, client-facing roles, longer stays — the risks are exactly where they were, and getting it wrong costs more than tax. It can cost you an insurance claim, a client contract, or the ability to recover costs from the person who caused the problem.
If one of your team is asking, or thinking about asking, we’d rather help you scope it before they travel than untangle it after the foreign tax office comes calling. Get in touch before the next request lands in your inbox.
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