The ATO has not extended its approach to permanent establishment (PE) risk beyond 31 December 2021. Prior to 31 December 2021, the ATO indicated that it would not apply compliance resources to determine whether a PE existed in certain circumstances due to travel restrictions arising from COVID-19.
From 1 January 2022, this approach ceased to apply, and foreign employers will need to consider whether ongoing arrangements give rise to a PE in Australia. This is understandable given that some international flights have resumed. If employees have been in Australia for a significant period of time, foreign employers need to consider more broadly what the employees are doing and whether they are actually endeavoring to depart.
The ATO has updated Taxation Ruling TR 2002/5 with an addendum to formally recognise the ongoing COVID-19 pandemic as an “extraordinary circumstance” where a forced presence of employees in Australia for more than six months may be considered “temporary” for the purposes of satisfying the temporal permanence requirement for foreign entities to have a PE in Australia.3 Accordingly, this should provide foreign employers with some assurance that the Commissioner will continue to consider the impacts of the COVID-19 global pandemic and travel restrictions where relevant when determining whether a PE exists.