A foreign company can employ people in Australia without an Australian company in two ways: register for PAYG withholding with a withholding payer number (WPN) and run payroll, super and workers compensation itself, or use an employer of record. Once the business is carrying on business in Australia, or the team grows, a Pty Ltd subsidiary is usually simpler and safer.
Many overseas companies hire their first Australian employee before they have an Australian company: a country manager, a salesperson or an engineer who happens to live here. That is allowed, but the employer obligations are the same as for any Australian employer, and the hire can create tax exposure for the parent. This guide compares the three ways to do it.
The three options at a glance
| Withholding payer number (WPN) | Employer of record (EOR) | Pty Ltd subsidiary | |
|---|---|---|---|
| Who is the legal employer | Your foreign company | The EOR's Australian company | Your Australian company |
| Australian entity needed | No | No | Yes |
| You run payroll, super and workers compensation | Yes | No, the EOR does | Yes (or outsource payroll) |
| Permanent establishment risk for the parent | Can arise, depending on the role | Reduced, but not removed by the contract alone | Contained in the subsidiary |
| Time to first payday | Weeks (ATO registration) | Days | 1 to 3 days to register, then ABN and payroll setup |
| Best for | One or two staff doing non-sales work, where you have payroll capability | Testing the market, fast hires, up to about 4 or 5 staff | A lasting business in Australia |
Option 1: a withholding payer number (WPN)
An entity that has to withhold tax from wages but is not entitled to an ABN can register for PAYG withholding and receive a withholding payer number. The ATO says a WPN "is only offered to entities who are not eligible for an ABN, have PAYG withholding obligations and are required to pay super for eligible employees", and lists international entities among WPN holders. You apply on the ATO's PAYG withholding registration form for entities without an ABN (NAT 3377).
With a WPN, your foreign company becomes an Australian employer in its own right:
- PAYG withholding: withhold tax from wages, pay it to the ATO and give employees payment summaries. WPN holders are exempt from Single Touch Payroll reporting until 30 June 2033; if they choose to use it, from 1 July 2026 they must report through a registered tax or BAS agent.
- Superannuation: pay the super guarantee (12% of qualifying earnings), which under Payday Super must reach the employee's fund within 7 business days of each payday.
- Workers compensation: hold a policy in each state where staff work. In NSW, for example, most employers need a policy unless they pay $7,500 or less in wages a year.
- Payroll tax: only above the state threshold ($1.2 million a year in NSW from 1 July 2026; $1 million in Victoria), counted across the group.
- Employment law: the Fair Work Act, the National Employment Standards and modern awards apply to employees working in Australia, including those of foreign corporations. See our minimum wage guide.
A WPN is only for entities that are not entitled to an ABN. Once your company is carrying on an enterprise in Australia it is generally entitled to an ABN, and should register for one instead.
Option 2: an employer of record
An employer of record employs your people through its own Australian company and charges you a monthly fee. It handles the employment contract, payroll, withholding, super, workers compensation and Fair Work compliance, while you direct the day-to-day work. It is the fastest route and avoids registering anything in Australia. Our EOR service starts at $500 per employee per month. For the cost comparison, see EOR vs direct hiring.
Option 3: set up a Pty Ltd
A Pty Ltd subsidiary can be registered in 1 to 3 business days once director IDs are in place. It employs the staff, gets its own ABN and runs payroll like any Australian business. Because the Australian operations sit in a separate company, the parent is not usually exposed to Australian tax on its own profits. It needs at least one director who lives in Australia; we provide resident directors.
The risk with options 1 and 2: permanent establishment
Having an employee in Australia can create a permanent establishment of the foreign company here, and then the profits attributable to it are taxed in Australia. The ATO's guidance says a permanent establishment includes the place of business of dependent agents who have authority to conclude contracts on behalf of the enterprise and habitually exercise it. A salesperson who negotiates and signs deals in Australia is the classic example. An EOR arrangement does not change what the person actually does, so the same analysis applies. If the role involves selling, take advice or use a subsidiary.
When the foreign company must register with ASIC
Separately from tax, a foreign company that carries on business in Australia must register with ASIC as a foreign company (s601CD Corporations Act), unless it operates only through an Australian subsidiary. Having a place of business in Australia counts as carrying on business (s21). Some activities do not, such as holding meetings, keeping a bank account, selling through an independent contractor, or an isolated transaction completed within 31 days. An employee working from a home office for a foreign company is a grey area; the more the role looks like running the business here, the stronger the case for registration or a subsidiary. See representative offices and branch registration.
Which to choose
- One hire, fast, while you test the market: an employer of record.
- A small team doing support or engineering, with your own payroll capability: a WPN can work, with advice on permanent establishment.
- Sales staff, several employees, or a long-term commitment: a Pty Ltd subsidiary. Many clients start with an EOR and move staff across once the company is set up.
Frequently asked questions
Can a foreign company employ someone in Australia without an ABN?
Yes. A foreign company that is not entitled to an ABN can register for PAYG withholding and get a withholding payer number (WPN). It must then withhold tax, pay super and meet the other employer obligations, or it can use an employer of record instead.
What is a withholding payer number?
A number the ATO issues to entities that must withhold tax from payments, such as wages, but are not eligible for an ABN. International entities that employ staff in Australia are among the entities that can hold one.
Do WPN holders have to use Single Touch Payroll?
Not yet. The ATO has exempted WPN holders from Single Touch Payroll until 30 June 2033. They give employees payment summaries and lodge an annual report instead. If they choose to report through Single Touch Payroll, from 1 July 2026 they must do so through a registered tax or BAS agent.
Does a foreign employer have to pay superannuation?
Usually, yes. The ATO says a foreign resident employer will usually have to pay super for employees who work in Australia. The main exception is an employee temporarily seconded here who holds a certificate of coverage under a bilateral social security agreement.
Does using an employer of record remove permanent establishment risk?
Not by itself. The permanent establishment test looks at what the person does for your business, such as habitually concluding contracts. An employer of record changes who the legal employer is, not the nature of the role.
This content is general information only and is not legal, financial or tax advice. Laws and regulations change often. For advice on your circumstances, speak to a qualified adviser.