The rise of remote work has changed the way Australians earn and report income.
Did you know that over 41% of Australian employees now work remotely at least part of the time?
This shift, accelerated by global trends, has transformed how we earn a living.
Yet, it also brings new challenges—especially when it comes to taxes.
This significant shift raises important questions about your tax return obligations when working from a home office, for interstate employers, or even for companies based overseas.
Whether you’re an employee, contractor, or business owner, understanding how remote work affects your tax situation is crucial for financial compliance and optimisation.
Tax Residency Status And Global Income
Where you’re considered a tax resident shapes your tax obligations. For Australian tax residents, the Australian Tax Office (ATO) taxes your worldwide income.
That means if you’re living in Australia and working remotely for a company in, say, the United States, your earnings are subject to Australian tax laws. It doesn’t matter where your employer is based. You’re still required to report this income in your income tax return.
For Australian tax residents working for foreign companies, it’s important to understand:
- You must report all foreign-sourced income on your Australian tax return
- Your employer should register with the Australian PAYG system
- Double taxation agreements may provide relief through Foreign Income Tax Offset (FITO)
PAYG With holding And Overseas Employers
More stringent rules for overseas employers have, of late, come into effect. When they wish to hire Australian tax residents, they must register with the Australian Tax Office and deduct tax from the employee under the Pay As You Go (PAYG system).
Basically, that just deducts tax from your salary before you get it, making sure ATO gets its cut all throughout the year. When done right, it makes filing a tax return much easier for you. Not all foreign employers comply, however, so some may ask you to work as a contractor instead, using an Australian Business Number (ABN).
You will indeed be liable for your own tax payments and make super payments if you work as a contractor. Now you get to do all those calculations and submit taxes yourself, every quarter or whatever. At any rate, you will be reporting this income.
Double Taxation And Foreign Income Tax Offset (FITO)
What happens if your overseas employer withholds tax in their country? Has overseas recruited you? To avoid double taxation, Australia has signed double-taxation treaties with many countries such as New Zealand or the UK.
You can claim a credit for foreign tax paid when you file your income tax return through this offset called the Foreign Income Tax Offset, or FITO. This offset will reduce what you owe in Australian tax and help relieve some financial pressure. Timing can make things more complicated.
Each country has its own separate calendar; the tax year in Australia runs from July to June. When reporting overseas income, foreign earnings should be aligned with the Australian tax year. Failure to maintain detailed records of foreign tax paid will make claiming FITO on your income tax return nearly impossible.
Home Office Deductions For Remote Workers
Working from home opens opportunities for tax deductions. If your job requires you to work remotely, you can claim expenses like electricity, internet, and office supplies. The working from home tax rules allow two main methods to calculate these deductions.
The simplest option is the fixed-rate method, currently set at 67 cents per hour (as of 2025). It covers running costs like utilities and internet. You can also claim depreciation on equipment like computers or desks separately.
Alternatively, the actual cost method tracks exact expenses, but it’s more complex, requiring detailed logs. Whichever method you choose, accurate records are non-negotiable for the Australian tax office.
Occupancy costs—like rent or mortgage interest—are trickier. Only those running a home-based business with a dedicated workspace can claim these, and even then, restrictions apply. For most employees, these remain off-limits.
Freelancers And Contractors
If you’re a freelancer or contractor working for overseas clients, you’re effectively self-employed. You’ll need an ABN and may have to register for GST if your turnover exceeds $75,000 annually. Unlike employees, you handle your own tax payments.
This responsibility includes setting aside money for your tax return and paying superannuation if eligible. On the upside, you can claim a broader range of tax deductions, like equipment or travel costs tied to your work.
Working Across Australian States
Good news for those working remotely within Australia: tax laws don’t change across state lines. Federal taxation applies uniformly, whether you’re in Perth working for a Melbourne firm or vice versa.
Your taxation rate in Australia depends on your income bracket, not your location. This consistency simplifies reporting and deductions compared to international remote work.
Travel Expenses For Remote Workers
While working remotely often means fewer travel costs, some work-related trips may still be tax-deductible.
| Travel Expense | Deductible? |
|---|---|
| Flights for business meetings | Yes |
| Accommodation during work travel | Yes |
| Meals during work travel | Yes |
| Daily commute to office | No |
Employees required to travel for work should maintain detailed records, including receipts and travel logs, to support claims in their tax return.
Get Expert Tax Guidance For Remote Work
Understanding tax obligations while working remotely can be complex, but you don’t have to handle it alone. At KPG Taxation, our expert tax accountants ensure your income tax returns, GST, and BAS statements are filed accurately and on time. Whether you need help with TFN and ABN registration or maximising your tax refunds, we make the process simple and stress-free.
