Hiring in Australia without a local entity: Employer of Record (EOR) vs legal entity

An Australian candidate has accepted the offer and wants to start next month, and the company making it has no Australian company, no Australian Business Number (ABN), and no payroll. The route it picks decides who employs that person, who sponsors a visa if one is needed, and which tax questions stay with the foreign parent. It’s a big decision to make on a deadline, and we get it.

For most first hires, an Employer of Record (EOR) is the right call. The EOR’s Australian entity already exists, so it can employ the worker straight away and run payroll, tax withholding, and superannuation (Australia’s mandatory employer contribution to employee retirement savings). An Australian proprietary company suits a durable team with local revenue or sponsorship needs. A registered foreign-company branch suits a parent that wants to operate in Australia in its own name. Direct contracting suits genuinely independent project work.

The routes differ most in who holds the employer obligations and how long the setup takes.

These lead times are planning estimates as at October 2026. Banking, beneficial-owner checks and document certification are often what holds things up.

Yes, and for most first hires it’s the fastest route. The one exception is visas, covered below. The EOR’s Australian entity is responsible for payroll, PAYG withholding (Australia’s employee income-tax withholding), superannuation, workers’ compensation and the employment documents, while the client agreement allocates the commercial responsibilities.

As an EOR, we at Boundless also classify each role under the right modern award, working with you on duties and hours. Your customer contracts stay with your company.

Choose it if: The plan covers one or a few hires on a short or uncertain time horizon, and no Australian customer needs a local invoice. If the role needs a visa, ask the provider to confirm it can sponsor for that exact arrangement before you go any further.

Rule it out if: Customers require an Australian contracting party, or the company wants direct employment and its own control of employment administration.

A proprietary company limited by shares needs at least one director who ordinarily resides in Australia, plus a registered office and principal place of business in Australia. It can employ, contract, and invoice in its own name, which gives clearer operational separation from the foreign parent.

The implementation work follows a set order:

• Select the company name and register with ASIC.
• Appoint the resident director and issue shares to the foreign parent.
• Obtain an Australian Company Number, an ABN and a tax file number.
• Register for PAYG withholding before paying employees, and for GST if required.
• Set up payroll, banking and superannuation processes.
• Obtain workers’ compensation cover in each relevant state or territory and test payroll-tax registration against total Australian group wages.
• Confirm modern-award coverage and prepare compliant employment documents.

ASIC incorporation can be quick if your identity, governance and ownership information is complete. But you can’t employ anyone until every step is done, so plan your go-live date from the last step, not the first.

Choose it if: the Australian operation is intended to be permanent, headcount is growing, or local customers, premises or management make a local contracting party useful.

Rule it out if: the plan is one or two hires on a time-limited test, where resident-director, accounting and filing costs outweigh what the hires are testing.

A branch fits a foreign company that wants to contract and bear liabilities in Australia directly, without a separate subsidiary. A foreign corporation carrying on business in Australia may need to register with ASIC, which issues an Australian Registered Body Number rather than incorporating a new company.

The branch must appoint a local agent resident in Australia, who is responsible for the foreign company’s compliance. Registration normally needs certified constitutional and incorporation documents, director details, an Australian registered office, and English translations where needed. The branch then needs substantially the same employer setup as a subsidiary, from tax registrations and payroll to award compliance.

Choose it if: Customers or regulators require a registered Australian presence, and the group has analysed the treaty, transfer-pricing and reporting consequences of operating directly.

Rule it out if: Liability separation from the parent is the reason for setting up locally.

Only where the relationship is genuinely business-to-business. For businesses in the national Fair Work system, the Fair Work Act’s whole-of-relationship test looks at the substance, practical reality and true nature of the engagement, including control, financial risk, equipment, delegation, hours and whether continuing work is expected. An ABN or a contractor label does not decide the outcome.

Workers’ compensation schemes can treat some contractors as workers. Knowingly presenting an employee as a contractor is sham contracting, which is prohibited, and even honest misclassification can leave you liable for employee entitlements, record-keeping, tax and superannuation. If the relationship really is business-to-business, an Agent of Record (AOR) can handle the contract, classification checks and payments, without becoming the employer.

Choose it if: The supplier operates an independent business with other clients, controls how and when the work is done, can delegate, and charges for agreed outputs on a defined project.

Rule it out if: The role is an ongoing internal position managed like a job.

An Australian subsidiary with sponsor approval offers the most direct route, because the sponsor, legal employer and beneficiary of the work are the same entity. Sponsorship for the subclass 482 Skills in Demand visa has three stages: sponsor approval, nomination of the position and worker, and the worker’s visa application.

For nominations lodged from 1 July 2026 through 30 June 2027, the income thresholds are AUD 79,423 for Core Skills and AUD 146,576 for Specialist Skills. Below AUD 250,000, both the annual market salary rate and the worker’s guaranteed pay must ordinarily meet the relevant threshold.

To sponsor, an EOR must itself hold the appropriate sponsor approval, and the working arrangement must comply with visa conditions. Those conditions generally require the holder to work for the sponsor, the nominator or, in specified cases, an associated entity. An unrelated client is not ordinarily an associated entity, so using an EOR’s sponsorship when the EOR isn’t the genuine sponsor and employer can breach the visa conditions.

The exception is the On-hire Industry Labour Agreement from Home Affairs, which lets an eligible on-hire business sponsor skilled workers and place them with clients. Whether an EOR can sponsor therefore depends on the provider and the worker, so always ask. A registered branch may also sponsor where the sponsor identity, Australian operations and the entity the employee works for match the approval and visa conditions.

Superannuation, payroll tax and workers’ compensation are Australian employer costs that fall on the employing entity on every route, with payroll tax depending on thresholds and grouping. The superannuation guarantee rate is 12% and, from 1 July 2026 under Payday Super, employers generally must pay it for each payday rather than quarterly.

Payroll tax is a state and territory tax, generally assessed by reference to the employer’s or group’s total Australian taxable wages. The 2026–27 headline figures are:

Workers’ compensation premiums depend on wages, industry classification and claims history in each scheme, so no single national rate applies.

Australian domestic law treats a permanent establishment (PE) broadly as a place through or at which a person carries on business. If the foreign company is resident in a country that has a tax treaty with Australia, the treaty applies too, and it has the force of law in Australia. A typical treaty starts with a fixed place of business through which the enterprise’s business is wholly or partly carried on, such as an office, branch or place of management.

Treaties also contain a dependent-agent rule, and the wording varies. Newer treaties may create a PE where a person habitually concludes contracts or habitually plays the principal role leading to substantially finalised contracts. Older treaties focus on habitual authority to conclude contracts. Australia hasn’t adopted the broader “principal role” test across the board, so it only applies where your country’s treaty with Australia includes it.

Where a treaty protects the foreign company, Australia generally taxes its business profits only to the extent they are attributable to an Australian PE. That can mean an Australian company tax return, profit attribution and transfer-pricing records. Where there’s no treaty, the ATO can still look at whether the arrangement creates an Australian PE.

As of October 2026, the ATO’s 2025–26 company rates are 25% for qualifying base-rate entities and 30% otherwise. Residency has a separate test. A foreign-incorporated company carrying on business in Australia can be treated as Australian resident if its central management and control is in Australia.

PE risk depends on what your people do in Australia, not how long you use an EOR. Sales roles that negotiate or sign contracts raise the most questions, and we’ll flag those early. Get your own tax and legal advice on the specific arrangement before your first hire starts.

When it’s time to set up your own entity, moving your team across should be gloriously uneventful. It needs either a legally managed transfer or a termination-and-rehire process, and done right, your team will notice little more than a new employer name on their payslip.

Before the transfer date, map the following:

• Accrued leave and service recognition.
• Redundancy exposure and consultation obligations.
• Award obligations and sponsorship status.
• End of employment obligations on the EOR side.

An Australian EOR agreement should name the jurisdiction behind each employer obligation, because Australia splits them between federal law and separate state and territory schemes. Ask each provider on the shortlist to confirm in writing:

• Which Australian entity employs the worker, and which modern award and classification apply.
• Which state or territory workers’ compensation policy covers the worker, including remote or mobile staff.
• How payroll tax is priced, and whether grouping affects the charge.
• Whether the provider holds sponsor approval and an on-hire labour agreement covering the occupation, if a visa is involved.
• The termination, offboarding, and transfer fees.

Boundless, as an Employer of Record, can help you employ your first hire. Your visa needs, customer contracts, and how long you plan to stay will determine when an entity makes sense, and we’ll help you move across when it does. Whichever route you choose, the modern award still sets minimum pay, hours and entitlements wherever one applies.