Key Offshore Tax Challenges for Australian Accounting Firms in 2025

In the past year alone, 63% of Australian accounting firms expanded their offshore operations by more than 40%, according to the 2024 Accounting Industry Report. This shift reflects more than just changing workflows. It signals how quickly the profession is adapting to rising costs, staffing shortages, and the mounting pressure to stay compliant.

New figures from the 2025 Australian Tax Practitioners Board show that 47% of firms are now using offshore resources, a number that’s expected to keep climbing. The appeal is clear. Australian firms have seen an average 28% increase in operational expenses, forcing many to re-evaluate how and where their services are delivered.

Among the preferred destinations, the Philippines stands out. Ranked #1 in the Asia-Pacific for accounting outsourcing by the 2024 Global Services Location Index, it’s become the region’s top hub for firms seeking quality talent and long-term support. Rather than outsourcing on a project basis, more Australian firms are now establishing dedicated offshore teams in the Philippines, embedding them into core operations.

As this model becomes standard, the need to understand offshore tax implications is growing fast. Firms face complex compliance requirements across jurisdictions, along with risks tied to data privacy, security, and tax regulation. These challenges can’t be handled as afterthoughts—they need to be addressed from the start.

This guide breaks down the key tax hurdles facing firms in 2025, while outlining the practical strategies that make offshoring work—legally, financially, and operationally.

Advantages of Offshore Tax Services for Australian Firms

For many Australian accounting firms, offshoring has become more than a cost-cutting tactic. It’s helping businesses stay competitive, expand their capabilities, and respond faster to client needs. With access to highly skilled professionals and operational flexibility, offshore tax services—particularly in the Philippines—are proving their value in both day-to-day efficiency and long-term strategy.

Cost Efficiency Through Philippines-Based Teams

The 2024 Deloitte Accounting Services Report found that firms working with teams in the Philippines are cutting staffing costs by 40% to 60% compared to hiring locally. The numbers are even more striking when you factor in other overheads.

A national survey by the Australian Accounting Association revealed firms save between $85,000 and $120,000 per year when they maintain a team of five offshore accountants. Office-related costs drop sharply too—68% less on workspace, 42% on tech equipment, and 55% on benefits and insurance.

Hansen & Partners, a firm based in Sydney, shifted a portion of its tax processing operations to the Philippines. Within a year, they reported a 37% increase in profit margins, driven largely by the reduced costs and smoother workflows that came with their offshore setup.

Access to Specialised Offshore Tax Expertise

The Philippines has built a strong pipeline of accounting talent, and many of these professionals bring direct experience in Australian tax. To qualify as a CPA in the Philippines, candidates need to pass exams with at least an 85% average, compared to 75% in Australia. That higher benchmark has contributed to a skilled and standards-driven workforce.

According to the 2024 Filipino Talent Pool Survey, there are now more than 40,000 licensed CPAs in the country. A significant number have specialised training in IFRS, as well as direct exposure to Australian tax compliance. This is particularly valuable in areas where Australian firms struggle to hire locally, such as R&D claims, international tax planning, and transfer pricing.

For example, one Melbourne-based firm struggled to manage its transfer pricing documentation. Rather than waiting months to fill the position domestically, they leveraged offshoring in the Philippines and hired a Filipino tax specialist with the relevant experience. The result? A smooth onboarding process and a 45% cost saving compared to hiring locally.

Scalability of Dedicated Offshore Teams in the Philippines

Offshoring gives firms breathing room to grow. During peak months—especially the March to June tax season—many firms scale their teams in the Philippines by around 35% without having to set up new workstations or lease extra office space.

Costs tied to technology are also more manageable. Where an Australian hire might require about $8,000 worth of IT setup, firms report spending closer to $3,200 for a fully-equipped offshore accountant.

Retention plays a big role here too. According to data from the Philippines BPO Association, accounting firms working with Filipino teams enjoy a 92% retention rate, compared to 76% in Australia. That consistency helps firms avoid the cycle of rehiring and retraining. For many, the model supports steady growth—with average offshore teams expanding by just over four full-time staff each year.

Offshore Tax Challenges Facing Australian Accounting Firms

While the benefits of offshore tax services are clear, they don’t come without challenges. Navigating regulations, protecting sensitive data, maintaining service quality, and building strong working relationships across cultures require a well-thought-out approach. Australian firms looking to succeed with offshore models need to be proactive in addressing these hurdles from day one.

Transfer Pricing and Related-Party Risks When an offshore team acts as an extension of your Australian firm, especially under a captive or shared services model, transfer pricing rules apply. These rules govern how services and costs are charged between related entities in different countries.

From what I’ve seen, many firms unintentionally overlook this. They operate as if the offshore unit is simply “part of the team,” without documenting the arrangement as a related-party transaction. But under ATO standards, these must be priced at arm’s length and supported by proper documentation.

Even if you’re using a third-party provider, problems can still arise if your firm has significant operational control over offshore workflows. This can blur the lines and invite scrutiny under Australia’s transfer pricing or BEPS (base erosion and profit shifting) provisions, particularly for firms where the value of services is less tangible and more easily shifted.

Permanent Establishment Exposure One of the most overlooked tax risks when offshoring is permanent establishments (PE).. It occurs when your offshore operations are seen as a “fixed place of business,” creating tax obligations in that foreign country.

For Australian accounting firms outsourcing to the Philippines through a BPO or third-party partner, PE exposure is usually low. But risks emerge when firms gradually assume more control — leasing office space, hiring locally, or managing day-to-day operations directly.

In my experience, this often happens unintentionally. A firm starts with a basic offshoring setup, then slowly expands its oversight, from directing team outputs to signing off on expenses. Over time, these actions can resemble a permanent establishment in the eyes of the BIR or ATO, raising the risk of double taxation or non-compliance with local tax laws.

Misclassification of Employees vs Contractors One of the most overlooked tax and compliance risks in offshore arrangements is how staff are classified: are they truly independent contractors or effectively employees under the law? When it comes to dedicated offshore teams in the Philippines, this distinction isn’t just technical — it has serious legal consequences. A 2023 report by PwC Philippines highlighted that misclassification cases in the BPO and professional services sectors have increased by over 18% in the last two years, largely due to aggressive enforcement by the Department of Labour and Employment (DOLE). Misclassifying workers can result in penalties, retroactive benefits, and reputational damage.

Australian firms often assume that engaging offshore talent through a provider shields them from these risks. But based on what I’ve seen in practice, this protection only holds if operational control is clearly delegated. I’ve worked with firms that — unintentionally — manage dedicated offshore teams in the Philippines as if they’re direct hires: setting schedules, conducting performance reviews, or approving bonuses. Even with a contractor agreement in place, these behaviours can trigger reclassification under Philippine labour law.

The ATO takes a similar view. According to the Australian Taxation Office’s guidance on International Related Party Dealings (IRPDs), firms with functional control over offshore teams may attract withholding tax obligations and other employer liabilities. Missteps here can also complicate your firm’s transfer pricing documentation and overall tax position.

Double Taxation and Treaty Misunderstandings

Double taxation is a significant concern for Australian accounting firms offshoring to the Philippines, especially when businesses assume the Australia–Philippines tax treaty will automatically shield them from this risk. In reality, misunderstandings about “permanent establishment” (PE) often arise. The 2022 OECD commentary clarified that a PE can be established even without a physical presence if a firm has significant control or influence over offshore operations. I’ve seen firms surprised by the Philippine Bureau of Internal Revenue (BIR) designating their setup as a PE, which triggers additional tax liabilities.

Many firms also underestimate the importance of tax treaty documentation. As highlighted in a 2023 Deloitte report, without properly filing a Certificate of Residence and proving beneficial ownership, firms may face hefty withholding taxes, sometimes as high as 30%. The BIR has stepped up enforcement of these requirements, particularly for service-based sectors like accounting.

The issue is further complicated by firms’ reliance on general treaty assumptions, which may not align with specific tax regulations in the Philippines. To avoid double taxation, firms must carefully structure their operations and ensure compliance with both Australian and Filipino tax laws, incorporating solid documentation practices. Without this, the risk of unexpected tax obligations multiplies.

Implementing Offshore Tax Services Effectively

Offshoring tax functions works best when it’s treated as a strategic shift rather than a simple handoff. For Australian firms, the real advantage comes from making thoughtful choices—partnering with the right provider, ensuring workflows are aligned, and setting clear, trackable goals. Result-driven work speaks for itself when done with care.

Choosing the Right Offshore Partner in the Philippines

You choose the provider who will shape the direction and reliability of your offshore setup. In 2024, three standout firms are consistently recommended for their performance, compliance, and deep familiarity with Australian tax workflows:

• Shore360 – Based in Clark, this firm continues to raise the bar for offshore accounting support. Their commitment to workforce development earned them the HR Asia Best Companies to Work for in Asia Award, and it shows in their staff retention and service consistency. Shore360 has built a strong reputation among mid-sized firms looking for reliable, high-quality tax support grounded in Australian standards.

• TOA Global – With a wide client base and 98% CPA-certified workforce, TOA remains a popular option for firms focused on scalability. Their specialised training programs are well regarded, particularly for onboarding junior tax staff.

• Hammerjack – Known for integrating automation into tax workflows, Hammerjack is often selected by firms needing strong tech infrastructure combined with finance experience.
  

Australian firms exploring partnerships often start with a structured review. The 2024 Offshoring Best Practices Handbook includes a detailed checklist that covers team certifications, data security protocols, legal documentation, and client feedback from similar-sized practices.

In terms of commercial terms, most contracts reviewed across a sample of mid-tier firms span 6 to 12 months, with built-in KPIs, performance reviews every quarter, and clear disengagement clauses.

Firms also benefit from using the site assessment framework recommended by the Australian Accounting Standards Board, which evaluates potential partners across ten operational areas. It’s become a trusted tool for firms wanting more than just a slide deck before committing to a partnership.

Creating Seamless Workflows Between Onshore and Offshore Teams

Strong offshore performance doesn’t happen on its own. It requires well-defined processes that eliminate ambiguity and ensure both sides of the team stay in sync. Recent studies show that firms using documented process mapping see a 54% jump in workflow efficiency within the first six months.

Among the most adopted tools are Karbon, Xero Practice Manager, and Jetpack Workflow—all chosen for their real-time collaboration features and ability to align work queues across different time zones. Adoption data from 2024 reveals that over 70% of accounting firms with offshore teams integrate at least two of these platforms into their tech stack.

Documentation remains the cornerstone. Firms adhering to ISO 9001 process standards tend to report fewer rework cycles and stronger internal accountability. Rather than relying on informal knowledge sharing, these teams maintain SOP libraries, client-specific cheat sheets, and real-time communication protocols.

As Australian firms look to enhance offshore tax planning strategies, the integration of these systems helps streamline operations and improve accuracy. Change doesn’t always come easily, but the results speak for themselves. In firms that adopted structured implementation strategies, staff alignment reached 86% within the first quarter. Clear expectations and consistent follow-through reduced friction and increased ownership across departments.

Training and Knowledge Transfer Strategies

A high-performing offshore team reflects the training it receives. Australian firms that take the time to build strong learning pathways often see measurable results within the first year. The 2024 Philippines–Australia Knowledge Transfer Framework revealed that structured onboarding programs not only shorten ramp-up time but also deepen technical accuracy across complex tax categories.

Investment in learning has proven to pay off. For every dollar allocated to offshore training, firms recorded an average return of $4.70 within 12 months, according to post-implementation reviews across 20 mid-tier practices.

One of the most effective strategies involves mentorship. A 1:4 mentor-to-mentee ratio allowed onshore leads to guide offshore talent through real client scenarios while building trust across both teams. These relationships accelerated upskilling and strengthened confidence during peak compliance periods.

Firms that integrated certification tracks into their offshore model saw tangible improvements in delivery. After implementing structured training with third-party CPA prep programs and tax update workshops, service quality rose by 92%, based on internal audit reviews from 2024.

Measuring ROI of Offshore Tax Services

Understanding the return on offshore investment requires a clear and consistent measurement approach. The most effective firms use balanced scorecard frameworks to track both financial and operational indicators. Metrics include turnaround time, staff utilisation, error rates, and client retention.

Cost-benefit analysis remains one of the most requested benchmarks. As an example, a practice saving $100,000 annually on staffing while increasing billable output by 18% achieved a break-even point within five months. These figures reflect a growing trend of pairing cost reduction with improved service capacity.

For firms tapping into offshore finance Philippines solutions, client loyalty is another telling metric. According to the 2024 Client Retention Study, firms with mature offshore programs improved client retention rates by 22%, often due to quicker turnaround times and consistent delivery during high-volume seasons.

A long-term lens helps quantify the broader impact. The 5-year value creation model, used by a number of Big Four pilot programs, showed profit gains of up to 38% when offshore teams were fully integrated into delivery pipelines. These outcomes weren’t just tied to cost. They reflected smarter delegation, greater focus from senior staff, and a more agile workforce overall.

Conclusion

Offshoring presents Australian accounting firms with a valuable opportunity to enhance efficiency, reduce operational costs, and access specialised expertise. With the right strategy, your firm can tap into a highly skilled workforce, streamline workflows, and maintain top-tier service quality—all while achieving substantial cost savings. The Philippines, in particular, remains a leading destination for offshoring tax services, offering a robust talent pool and proven cost-effective solutions.

Now is the perfect time to explore how offshoring can benefit your firm. Embrace this powerful strategy to stay competitive, improve your service delivery, and position your business for long-term success in the evolving accounting landscape.