New revisions to the “economic employer” concept

The ATO has released a draft update to Taxation Ruling TR 2013/1 which addresses how an “employer” is identified for the purpose of the short-term visit exception in Double Tax Agreements (DTAs). While the terminology “economic employer” is not used in TR 2013/1, the concept of analysing substance over form and considering the indicia of employment was set out in detail in this ruling. The proposed amendments remove the extensive discussion of attributes of employment and instead link to TR 2023/4 Income tax and superannuation guarantee: who is an employee?

TR 2023/4 was released following the High Court decisions in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (ZG Operations). These cases reiterated the primacy of the contract and the contractual rights and obligations of both parties, as opposed to a checklist-style approach based on the indicia of employment.

The alignment of TR 2013/1 to TR 2023/4 indicates there may be scope to reconsider the analysis of “economic employer” in a cross-border context. The economic employer approach effectively bypassed contractual stipulations to focus on the totality of the relationship. The Commissioner maintains that the totality of the relationship is significant, but fundamentally, the determination of “employer” must be made in accordance with domestic law and the impact of the High Court cases has now been formally acknowledged.

What does this mean in practice? It remains important to consider the entirety of the arrangement. For example, in a secondment scenario, whether an Australian-based entity takes on the legal role and responsibilities of employer and the impact of secondment and intra-company agreements in creating a contractual overlay resulting in the Australian entity acting as an employer. It is advisable to revisit the fundamental principles when considering whether particular arrangements involving foreign workers in Australia may now qualify for the short term visit exception.

The amendments are at this stage in draft form and open for comment until 12 June 2026.