BRINGING IN FOREIGN PERFORMERS
A common question we get asked here at Generate is this:
I’m bringing in a performer from overseas. How does the tax work?
Whilst this can become complicated quickly, the basic mechanics of how to deal with this are reasonably simple as I’ll attempt to explain here!
If you’re hiring a foreign performer to perform in Australia, whom you know to be a non-resident for tax purposes here in Australia, then the way you pay them will depend upon whether they are being engaged as an employee (this is common for actors) or as a business (this is common for bands and other performers).
If you’re hiring a foreign performer as an employee, for example an actor for a feature film, then you’ll need to treat them as if they were any other employee. You’ll need to ascertain whether they are an Australian tax resident or not which you can do via this helpful page on the ATO website. Let’s assume for the sake of this example that they are a non-resident.
A non-resident employee will get put into your payroll software (e.g. Xero) and processed with everyone else. When you’re setting them up you’ll need to ensure you mark them as a non-resident so the software withholds the correct amount of PAYG tax. You can check out the current rates here and you’ll see the foreign resident rates are higher than those for Australian residents.
You will also likely need to make a superannuation contribution on their behalf. Actors are specifically mentioned under the Superannuation Guarantee Act as being in the extended definition of employee. If they are only here for a brief period and unlikely to return they can apply to have the superannuation paid out, but be aware that there is a tax penalty for the priviledge (refer to DASP – Departing Australia Superannuation Payment).
One area with foreign resident employees that can get complicated is whether or not to pay the Medicare Levy. There are different agreements with various countries around the world, so it’s best to look into this for each person you employ to make sure you’re doing the right thing.
You’ll report the amounts you pay to the foreign resident on the BAS just like you do with ordinary employees (i.e. wages go at W1 and tax withheld at W2) and you’ll issue them with a PAYG Payment Summary as per usual. That said, you may issue the Summary once the project is finished rather than waiting until after 30 June.
If you’re paying a foreign business to perform here in Australia the siutation is a little different, but again, not overly complicated.
Any foreign entertainer performing here in Australia as a business will likely be considered to be ‘carrying on a business’ under the relevant taxation agreement between Australia and the foreign performers home country. Normally you’d need to set up what is known as a ‘permanent place of establishment’ before you’d be considering to be carrying on a business, but as an artist can fly in and do a few shows then fly out again the rules are somewhat stricter.
So, as the foreign performer is considered to be carrying on a business here in Australia they will need to comply with all the regular rules:
- Register for a TFN
- Register for an ABN (though you can get out of this in limited circumstances)
- Register for GST (if turnover is going to be over $75,000)
- You many need to register with ASIC
- Lodge BAS
- Lodge a tax return
From your perspective, you’re going to want to see an invoice with an ABN on it. No ABN means you need to withhold 49% just as you would with any supplier that fails to provide an ABN (or provides a Statement by a supplier showing they don’t need one). Any amount withheld because of failure to provide an ABN goes on the BAS at label W4.
Assuming they do have an ABN and you know them to be a foreign resident entertainer then you’ll need to withhold 30% if they are a company and at the foreign resident rates if they are a sole trader. Any amounts withheld will get reported on the BAS at label W3. They may apply to the ATO to have these withholding rates reduced – if they have done that they’ll be able to provide you with a statement that supports the reduced percentage (the paperwork is called a PAYG foreign resident withholding variation, or FRWV).
You will also be required to report the payments made to the ATO at year end via a PAYG payment summary statement – foreign residents form. This is pretty similar to the ordinary PAYG Payment Summary Statement you complete for your employees.
Note: There is an exemption from withholding from entertainers who are residents of the United States where the gross payment is less than USD$10,000.
As you can see, the basics of paying foreign entertainers isn’t too complicated, but it can get messy quickly. Plan ahead, get advice and ensure the entertainer has a local tax agent well versed in these matters so they can stay on the right side of the tax man here in Australia.
The above is a fairly simplistic interpretation of the issues that you’ll face bringing foreign talent to perform here in Australia. Here at Generate we work with countless businesses that bring foreign talent to our shores so if you’d like help in this area, please get in touch, we’d love to help. We’re also able to refer you to local accountants who specialise in foreign performers and their Australian tax obligations.
If you’ve got issues in your business you don’t seem to be able to get on top of, why not get in touch? Not only do we provide a full suite of bookkeeping and tax services here at Generate, but we’re also able to help with business coaching, strategy workshops, business plans and much more. You name the problem and I’m sure we can help.