Updated ATO guidance on “employer” definition under TR 2013/1 – key court findings on employment status and tax treaty rules

The Australian Taxation Office has released a draft Addendum to TR 2013/1, updating how the term “employer” is interpreted for the short-term visit exemption under Australia’s tax treaties. The update aligns the ruling with TR 2023/4 and recent High Court and Full Federal Court decisions on the meaning of “employee” and “employer” for tax and superannuation purposes.

The main change comes from how the courts now determine employment status. The key finding is that the written contract is the primary factor in deciding whether someone is an employee or contractor. The legal rights and obligations in the contract take priority over how the arrangement operates in practice.

The courts also confirmed that job titles or labels such as “contractor” or “employee” are not decisive on their own. What matters is the substance of the contractual terms, including control, responsibility, and the nature of the engagement. A genuine contractor arrangement can still exist even where the work is ongoing or structured.

For TR 2013/1, this reinforces a more contract-focused approach to identifying the “employer” under tax treaties. The key question is which entity has the legal employment responsibility under the agreement, rather than which entity manages or supervises the work in practice.

This update is particularly relevant for the short-term visit exemption, where the treatment of employment income depends on whether a formal employment relationship exists and who is contractually responsible for it.

The practical effect is a stronger focus on documentation. Businesses can no longer rely on how arrangements operate in practice alone. Instead, employment and secondment agreements need to clearly reflect the intended legal relationship, as this will directly impact tax treaty outcomes.

Overall, the draft Addendum confirms a clear direction in Australian tax law: employment status and treaty outcomes are now driven mainly by the contract, not day-to-day working arrangements.