Do You Pay Payroll Tax on an Offshore Virtual Assistant in Australia?

The short answer

Generally, you do not pay Australian payroll tax on an offshore virtual assistant who works wholly overseas. And when you engage that VA through a managed agency, there is usually no wage relationship for payroll tax to attach to in the first place.

Payroll tax is a state and territory tax on wages connected to services performed in Australia. A Manila-based VA performs all of their work in the Philippines, so in the typical case their pay is not Australian taxable wages in any state. Because a managed agency engages the VA as its own contractor, you pay the agency a single service invoice, not wages, which sits outside the wage rules.

This article is general information, not legal or tax advice. Your facts matter, so confirm your position with your accountant, the ATO, your state revenue office, or the Fair Work Ombudsman before you act.

What payroll tax actually taxes

Each state and territory levies payroll tax, and the rules are largely harmonised under the model Payroll Tax Act 2007 (the NSW and Victorian Acts are the template most states follow). Payroll tax applies once an employer’s total Australian wages cross a state threshold. The key word is “Australian”.

The harmonised nexus provisions decide whether wages are connected to a particular state, and underneath that sits a more basic point: whether the services are performed in Australia at all. Revenue NSW’s nexus guidance says that wages paid for services performed wholly outside Australia for a continuous period of more than six months are exempt from the start of the engagement (once the six-month mark is passed, the earlier months are exempted too).

For a VA who performs all of their work in the Philippines on an ongoing basis, the wages are generally not Australian taxable wages. There is nothing to add to your payroll tax base.

One honest timing catch: that wholly-offshore exemption hinges on the engagement running more than six continuous months. For a genuinely ongoing VA arrangement that is met easily. For a very short engagement, the first months can be a point worth checking, which is another reason the agency service-invoice model is cleaner.

Does it differ by state?

In practice, mostly no. Because the nexus rules are harmonised, the offshore-services position is broadly the same across the country:

State / Territory	Payroll tax on a wholly-offshore VA?
New South Wales	Generally no, services performed wholly outside Australia
Victoria	Generally no, harmonised nexus rules
Queensland	Generally no, harmonised nexus rules
South Australia	Generally no, harmonised nexus rules
Tasmania	Generally no, harmonised nexus rules
ACT / NT	Generally no, harmonised nexus rules
Western Australia	Generally no, but WA uses its own Pay-roll Tax Assessment Act 2002 (not the 2007 model) with different contractor provisions, so confirm

Thresholds and rates differ between states, but none of that is reached, because the offshore VA’s pay generally never enters the taxable wages calculation. The location of the work settles it. WA is the one to double-check, because it never adopted the harmonised Payroll Tax Act 2007 and runs its own Pay-roll Tax Assessment Act 2002 with its own contractor provisions, though the wholly-offshore-services outcome is generally the same.

What about the contractor and “deemed employee” rules?

State payroll tax has contractor provisions that can sweep certain payments to contractors into the wage base, and that is often where owners get nervous. The important point is that those provisions generally only reach payments connected to services performed in Australia. A VA working entirely offshore does not perform services in Australia, so how the relationship is characterised does not usually change the answer.

Through a managed agency the analysis is cleaner again. Your contract is with the agency for a service, and you pay a GST/service invoice. You are buying a supply, not paying a worker, so the wages and contractor-payment rules do not engage with you. That said, the protection depends on the agency genuinely being the engaging party, not just an invoicing pass-through, so the structure has to be real.

The same logic usually removes super and PAYG

Super guarantee. The ATO states an employer is not required to make super contributions for a worker who is a “foreign resident for tax purposes who is paid to do work outside Australia”. There is a wrinkle: under section 12(3) of the Superannuation Guarantee (Administration) Act 1992, a contractor working under a contract “wholly or principally for their labour” can be deemed an employee for super. But even where that test is met, the separate residency-and-location exclusion still removes the liability for a foreign resident working outside Australia. So the labour test does not generally create a super obligation for an offshore non-resident VA.

PAYG withholding. The ATO’s guidance is that withholding is “unlikely to be required” for payments to a foreign resident for services performed outside Australia, unless the work falls into special categories (entertainment, sport, construction or gaming junkets) or the income is Australian-sourced under a treaty. General admin and support work performed and sourced in the Philippines does not, so there is usually no withholding obligation.

GST and deductibility

Buying services from an offshore supplier can trigger the GST reverse charge (self-assessing 10% GST). But it does not create a net cost where the purchase is for a fully creditable business purpose. For an ordinary business buying VA services for its taxable operations, either the reverse charge does not apply, or the 10% is fully offset by an input tax credit, so net GST is nil. It only becomes a real cost for businesses making input-taxed supplies, such as some financial services or residential rent.

On the upside, the whole service invoice is an ordinary deductible business expense under section 8-1 of the ITAA 1997, because it is incurred in producing your assessable income. One invoice, fully deductible, with no wages/super/PAYG split to administer.

Where to confirm

For authoritative detail, see Revenue NSW’s payroll tax nexus provisions, the ATO pages on super for employees working overseas and PAYG withholding, and your own state revenue office (especially in WA). For workplace status, the Fair Work Ombudsman is the right starting point.

For the full picture on super, PAYG, payroll tax and GST in one place, read our pillar guide, Do you pay super and tax on a virtual assistant in Australia?. And if you would like us to walk through how DotVA structures a compliant, agency-engaged VA for your business, book a discovery call and we will map it out with you.

Frequently asked questions

Does any Australian state charge payroll tax on a wholly offshore VA?

Generally no. Payroll tax is state-based, but the nexus rules are largely harmonised across NSW, Victoria, Queensland, SA, Tasmania, the ACT and the NT under the Payroll Tax Act 2007 model. WA runs its own Pay-roll Tax Assessment Act 2002 with different contractor provisions, but reaches a similar position for wholly-offshore services. Because the VA's services are performed in the Philippines, those wages are generally not taxable wages in any state. When you engage through a managed agency you pay a service invoice rather than wages, so there is no wage figure to test against a threshold. Confirm with your state revenue office.

Could the contractor or deemed-employee rules drag an offshore VA into payroll tax?

State payroll tax has contractor provisions that can capture some payments to contractors, but they generally only reach payments connected to services performed in Australia. A VA working entirely in the Philippines does not perform services in Australia, so the wages are generally not Australian taxable wages regardless of how the relationship is characterised. Where you use a managed agency, your contract is with the agency for a service and you pay a GST/service invoice, which sits outside the wages and contractor-payment rules. This is general information only.

Is there a timing catch with the six-month exemption?

Yes, worth knowing. The exemption for services performed wholly outside Australia applies once the engagement runs for a continuous period of more than six months, at which point the earlier months are also exempted. For a genuinely ongoing offshore VA arrangement this is met comfortably. For a very short engagement the first months can be a point to check with your state revenue office or accountant, which is a further reason the agency service-invoice model is cleaner.

What about super and PAYG withholding on an offshore VA?

In the typical case neither applies. The ATO states an employer is not required to make super contributions for a foreign resident for tax purposes who is paid to do work outside Australia, so even if the super 'wholly or principally for labour' test were met, the residency-and-location exclusion removes the liability. PAYG withholding is also unlikely to be required for a foreign resident performing services outside Australia, unless the work falls into special categories like entertainment, sport, construction or gaming junkets, which general admin support does not.