ATO 2026 and Offshore Workers — What Australian Businesses Need to Do Now

The Australian Taxation Office has made offshore worker arrangements a compliance priority in 2026. If your business pays workers in the Philippines — whether as contractors, direct employees, or through an informal arrangement — here’s what you need to understand.

What the ATO is looking at

The ATO’s 2026 compliance focus includes several areas directly relevant to businesses with offshore staff:

Payments to foreign contractors The ATO is examining whether payments to overseas contractors are correctly characterised for tax purposes. Payments that look like salary — regular, recurring, for ongoing work — attract scrutiny regardless of how the contract is worded.

Withholding obligations Australian businesses making payments to foreign workers may have withholding obligations under the PAYG withholding regime, particularly where the worker is considered an employee under the applicable tests.

Transfer pricing For businesses with related-party arrangements in the Philippines — such as a subsidiary or family trust — transfer pricing rules apply. Payments must be at arm’s length.

Permanent establishment risk If your Filipino workers are conducting business activities in the Philippines on your behalf, the ATO (and the BIR in the Philippines) may consider you to have a permanent establishment there — triggering local tax obligations.

What Fair Work adds to this

The ATO compliance picture doesn’t exist in isolation. The Fair Work Commission has ruled in multiple cases that offshore workers can be employees under Australian law — meaning wage theft laws, minimum wage obligations, and unfair dismissal protections can apply regardless of where the worker is based.

Criminal wage theft laws came into effect in January 2025. Misclassifying a worker — offshore or otherwise — is no longer just a civil compliance matter.

The structure that eliminates the risk

An Employer of Record (EOR) arrangement addresses both the ATO and Fair Work dimensions simultaneously.

Under an EOR structure:

• Team Up Now is the legal employer in the Philippines — not your Australian business
• Employment contracts, payroll, and statutory contributions are handled under Philippine law by our Philippine entity
• Your business pays Team Up Now a single monthly invoice — a straightforward commercial payment to an Australian service provider
• There is no direct employment relationship between your business and the Filipino worker for ATO or Fair Work purposes

This isn’t a workaround. It’s the legally recognised structure for Australian businesses that want to hire Filipino professionals compliantly, without establishing a Philippine entity or creating ATO exposure.

What to check in your current arrangement

Ask yourself:

1. Are you paying a Filipino worker directly — via bank transfer, PayPal, Wise, or similar?
2. Is the arrangement ongoing, regular, and for a defined role?
3. Does the worker work exclusively or primarily for you?
4. Do you direct how and when they work?

If you answered yes to two or more of these, your arrangement warrants a review before the ATO does it for you.

Next step

Book a free consultation with Team Up Now. We’ll review your current arrangement, identify any exposure, and walk you through what a compliant EOR structure would look like for your situation.

Or use our EOR cost calculator to see what a properly structured arrangement would cost — before you speak to anyone.