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I am considering doing remote freelance work for an Australian business as a Sole Trader with an Australia Business Number (ABN). I am a non-resident in Australia. My question is: do I pay taxes on that business income in Australia or my home country? (Canada, which has a tax-treaty with Australia).

According to the ATO website it sounds like I do not pay income tax in Australia, so long as I don't have a "permanent establishment" in Australia. Reading the treaty, it seems as though a remote-worker with no physical presence is not a "permanent establishment". Is my interpretation correct?

[EDIT: previously, my question may have been interpreted that I will be physically present within Australia (and would therefore pay Australia income tax). This is not the case. I will be physically OUTSIDE Australia. But my ABN is registered in Australia (from when I was a student a few years ago).]

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With respect to your comment on Victor's answer:

"Honestly, I am not sure, but I have been told by my client that they prefer for their contractors to have an ABN, otherwise they must automatically withhold %50 of the contract amount as tax."

Your client could be assuming all contractors must be treated the same, but there is a difference between an Australian contractor vs. a foreign contractor. Perhaps your client has only dealt with the former so far.

If your business is in Canada and not carrying on enterprise in Australia (i.e. you are doing all the work in Canada, not in Australia) then, as far as I can tell*, you wouldn't qualify for an Australian Business Number, nor would you need one to avoid the hefty withholding tax.

Rather, you'd provide your client with a prescribed declaration form (from the ATO), which would indicate that you/your business are not required to quote an ABN. Your client would need to keep this on file in case the ATO ever asked about the lack of withholding on payments made to you.

See Statement by a supplier not quoting an ABN. Quote:

Certain suppliers are not required to quote an ABN to a payer. In these cases, the suppliers can use the form Statement by a supplier (PDF, 145KB). This link will download a file to justify the payer not withholding from the payment to the supplier. [emphasis mine]

Notably, one of the conditions listed in the declaration form is:

  • The supplier is not entitled to an ABN as they are not carrying on an enterprise in Australia. [emphasis mine]

FWIW, there is a related question at the Freelancing StackExchange:


* If your client hasn't been supplied with such a statement from a foreign contractor before, they may be more comfortable having a tax professional confirm such a finding, if they're not keen on interpreting tax rules from the ATO web site.


One slightly-related note I'll add from the Canadian perspective, based on my own been-there and done-that: As you'd be invoicing a foreign company, you would not charge your client Canadian GST/HST. Instead, your supply of services to the foreign company would be considered zero-rated.

Nevertheless, even if all of your invoiced work is zero-rated, you can still register for GST/HST in order to claim input tax credits (ITCs) and get refunded the GST/HST portion of your business expenses. This can add up to the point where it is really worth claiming ITCs.

But, keep all of your receipts (and this applies to any case, not just the zero-rated case), as requesting the CRA refund the GST/HST your business paid without in turn having collected any will have the CRA asking for an explanation ("My supplies are zero-rated. My customer is foreign.") and perhaps detailed proof that GST/HST claimed back was only on account of reasonable business expenses.

p.s. Don't take my word for any of this. Do find a good tax professional who can help you. I wouldn't work as a contractor/freelancer without one, and especially not in situations like the one you describe.

  • I think this is a good comment about GST/HST, especially because part of the advantage of registering for an ABN would be so that I could deduct expenses from the ABN business income (on the aussie tax side). This is a principle motivation for acquiring a ABN, it seems. – Robert Rankin Sep 20 '18 at 0:18
  • @RobertRankin Why are you thinking you need an ABN still? You're a foreign contractor, not carrying on an enterprise in Australia. You wouldn't pay taxes in Australia. You would pay taxes in Canada -- which is where your business is operating. – Chris W. Rea Sep 20 '18 at 1:15
  • @RobertRankin I suggest you seek professional advice. What may complicate the matter here is that you already have an ABN. I suspect you should have cancelled your ABN a few years ago when you ceased being a resident and ceased carrying on an enterprise in Australia. I believe you're now in a situation where you have an ABN but don't need to have an ABN. As a foreign contractor, things would be much simpler without the ABN. – Chris W. Rea Sep 20 '18 at 1:40
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    Yes it sounds as though I should have cancelled it. I am researching the matter with a professional and my client and will come back to post my findings. – Robert Rankin Sep 20 '18 at 12:51
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If you are in Australia and do work in Australia you will need to complete a Tax Return in Australia and pay tax on any income earned in Australia.

With Canada having a Tax-treaty with Australia, this might mean that when you file your taxes in Canada you may get a tax credit for the taxes you paid in Australia, however this part you will need to check with the Canadian Government/Tax Agency.

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    I will not be physically in Australia. However, I do have an ABN, and part of my original question was to clarify whether this is a complicating issue. The ABN allows my client company to not have to withhold tax from the payment to me. That seems suspicious. – Robert Rankin Sep 18 '18 at 18:05
  • @RobertRankin Do you need an ABN if you won't physically be present in Australia? – Chris W. Rea Sep 18 '18 at 20:17
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    Honestly, I am not sure, but I have been told by my client that they prefer for their contractors to have an ABN, otherwise they must automatically withhold %50 of the contract amount as tax. – Robert Rankin Sep 19 '18 at 2:22
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    No, I would invoice them for the services I provided. No Payment summary (is that what we Canadians call a payslip or paystub?l – Robert Rankin Sep 19 '18 at 9:48
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    @Victor Yep, that's why the OP should get rid of the ABN if he isn't required to have it as a foreign, outside-Australia supplier to an Australian client. If he's physically doing the work from Canada, but also keeps and uses the ABN, he may have two tax authorities to contend with, when one would have been enough. Oh the horrors! – Chris W. Rea Sep 20 '18 at 18:53
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Physical presence is where you are so income tax is specified in the country which you live in for most of the year. This is an international standard. This doesn't necessarily mean living in a house. People having a house in Canada but are mostly in hotels in Australia might be considered as Australian residents.

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    Thanks Chris for clarification. I edited the Question to clarify that I will not be physically present in Australia. By your reasoning, I would not pay Aussie income tax; I would pay income tax in my tax residency (canada). I do have an ABN (if that is a complicating issue?) – Robert Rankin Sep 18 '18 at 17:50

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