How to run payroll in Australia

Payroll in Australia runs on a flexible cycle, with most employers choosing weekly, fortnightly, or monthly payments. Payment is typically due within one week of the end of the pay period.

Payment frequency and timing

Australian law doesn't mandate specific pay frequencies, but employees must be paid at least monthly. Most companies choose:

• Weekly: Common in retail, hospitality, and construction
• Fortnightly: Most popular across industries (every two weeks)
• Monthly: Typical for salaried professionals

Payment must occur within one week of the pay period ending. Many employers pay on Thursdays or Fridays to ensure funds clear before weekends.

Holiday and annual leave pay

Annual leave is calculated at 1/26th of ordinary wages for each completed week of service (4 weeks per year). Shift workers in certain industries receive 5 weeks annually.

Leave loading of 17.5% applies when taking annual leave, meaning employees receive their regular pay plus an additional 17.5%. This compensates for overtime and penalty rates they'd normally earn.

Long service leave varies by state but typically accrues after 7-10 years of continuous service. In most states, it's 8.67 weeks after 10 years.

Payment methods and currency

Bank transfers are the standard payment method in Australia. Employees provide BSB and account numbers for direct deposit.

Cash payments are legal but discouraged due to record-keeping requirements. If paying cash, you must provide written records and ensure proper tax withholding.

All payments must be in Australian dollars (AUD). International companies can't pay Australian employees in foreign currencies without specific agreements and currency conversion documentation.

Payslip requirements

Every employee must receive a payslip within one working day of payment. Payslips can be electronic or paper but must include:

• Employee and employer details
• Pay period dates
• Gross and net pay amounts
• Hours worked (if applicable)
• Hourly rates and allowances
• Deductions itemized (tax, super, union fees)
• Leave balances
• Superannuation contributions

Payslips must be in English or include English translations. Keep payslip records for seven years as the Australian Taxation Office may request them during audits.

Tax withholding reports in Australia are due by the 28th of each month. Late filing means penalties starting at A$330 for small businesses, with larger fines for repeat offenders.

Income tax brackets

Australia uses a progressive tax system with rates ranging from 0% to 45% for 2026. The tax-free threshold remains at A$18,200, meaning employees earning below this amount don't pay income tax.

Annual Income (A$)	Tax Rate	Tax on This Income
A$0 - A$18,200	0%	Nil
A$18,201 - A$45,000	19%	19c for each A$1 over A$18,200
A$45,001 - A$120,000	32.5%	32.5c for each A$1 over A$45,000
A$120,001 - A$180,000	37%	37c for each A$1 over A$120,000
A$180,001 and above	45%	45c for each A$1 over A$180,000

High-income earners also pay a Medicare Levy Surcharge of 1% to 1.5% if they don't have private health insurance and earn over A$97,000 (singles) or A$194,000 (families).

Withholding requirements

You're responsible for withholding Pay As You Go (PAYG) tax from every employee's salary. This includes income tax, Medicare levy (2%), and any applicable surcharges.

Register for PAYG withholding through the Australian Business Register before your first payroll run. You'll need your Australian Business Number (ABN) and business details.

Monthly obligations:

• Lodge Business Activity Statement (BAS) by the 28th
• Remit withheld amounts to the Australian Taxation Office (ATO)
• Report total wages and tax withheld

Annual reconciliation happens through PAYG withholding annual report, due by August 14th. This reconciles your monthly reports with actual employee payments.

Tax registration

New employers need three key registrations:

PAYG withholding registration - Required before first payroll. Apply online through the ATO Business Portal using your ABN.

Workers' compensation insurance - Mandatory in all states before hiring employees. Requirements vary by state, so check your specific location.

State payroll tax registration - Only required if annual wages exceed state thresholds (ranging from A$650,000 to A$1.5 million depending on state).

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Most registrations take 5-10 business days to process. Start early to avoid payroll delays.

Special tax considerations

Non-resident employees face different tax treatment. They don't get the A$18,200 tax-free threshold and pay tax from the first dollar earned at 32.5% up to A$120,000.

Working holiday makers from certain countries pay a flat 15% tax rate on income up to A$45,000, then standard resident rates apply.

Tax treaties can reduce withholding rates for some foreign employees. Check the ATO's treaty network before applying standard rates.

Fringe Benefits Tax (FBT) applies to non-cash benefits like company cars or health insurance. The rate is 47% and runs on an April 1 to March 31 tax year.

Common tax mistakes

Incorrect residency classification leads to wrong withholding rates. Use the ATO's residency tests, not just visa status. Penalty: Back taxes plus interest charges.

Missing monthly BAS deadlines triggers automatic penalties of A$330 minimum, escalating to A$1,650 for repeated failures. The ATO rarely waives these penalties.

Incorrect tax file number (TFN) handling causes problems. Employees without TFNs face 47% withholding rates. Never use invalid or made-up TFNs - it's a serious offense.

Superannuation guarantee confusion - While super isn't income tax, many employers incorrectly include it in PAYG calculations. Keep these separate in your payroll system.

State payroll tax oversights catch growing companies. Monitor your annual wages across all states. Once you hit thresholds, registration is immediate and penalties for late registration are severe.

Think your home country has high employer taxes? Australia's contributions total 14.5% on top of base salary.

The biggest cost? Superannuation at 11.5%, followed by payroll tax that varies by state. Here's what you'll actually pay for every employee.

Contribution breakdown

Contribution Type	Employer Rate	Employee Rate	Cap (if any)
Superannuation	11.5%	0%	A$68,490 quarterly base
Payroll Tax	4.85-6.85%*	0%	Applies after A$700K-A$1.2M threshold
Workers' Compensation	0.5-3%**	0%	Varies by industry

*Rate varies by state/territory
**Rate depends on industry risk level

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Total employer cost example

For a A$60,000 salary, here's your real cost:

• Base salary: A$60,000
• Superannuation: A$6,900
• Payroll tax: A$0 (below threshold)
• Workers' compensation: A$300-A$1,800
• Total employer cost: A$67,200-A$68,700
• Cost multiplier: 1.12-1.15 (you pay 12-15% more than base salary)

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Contribution caps and ceilings

Superannuation has a concessional cap of A$30,000 annually for 2026. You must pay super on ordinary time earnings up to A$68,490 per quarter (A$273,960 annually).

Payroll tax only kicks in once your total Australia payroll exceeds the state threshold - ranging from A$700,000 in Tasmania to A$1.2 million in Queensland and Western Australia.

High earners above the super salary cap still receive super contributions, but calculated on the capped amount, not their full salary.

Registration requirements

You'll need to register with multiple agencies:

• Australian Taxation Office (ATO) - for super guarantee and PAYG withholding
• State Revenue Office - for payroll tax (once you hit thresholds)
• Workers' compensation insurer - varies by state, some have state schemes

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Registration typically takes 5-10 business days. You'll need your Australian Business Number (ABN), business details, and estimated payroll figures.

Payment deadlines

Superannuation: Quarterly by 28th of January, April, July, and October. Late payments incur Superannuation Guarantee Charge - the original amount plus interest, administration fees, and penalties.

Payroll tax: Monthly by 7th of the following month in most states. Some smaller employers can pay annually.

Workers' compensation: Usually annual premiums, but payment terms vary by insurer and state.

Missing super deadlines means you can't claim it as a tax deduction either, making late payments cost you twice.

Sick leave in Australia is paid at 100% for up to 10 days annually by the employer. Your payroll system needs to track these entitlements carefully because they accumulate and carry over indefinitely.

Annual leave

Every employee gets 20 days of annual leave per year (4 weeks). Shift workers get an extra week, bringing their total to 25 days.

Annual leave accrues progressively throughout the year - roughly 1.67 days per month for standard employees. You can't cap the accrual, so employees can build up significant leave balances over time.

Calculating annual leave pay

Pay annual leave at the employee's ordinary rate of pay. For shift workers or those with penalty rates, use the higher of their ordinary rate or the rate they would've earned if working.

Leave loading

Most employees get 17.5% leave loading on top of their normal pay when taking annual leave. This doesn't apply to all workers - check the relevant award or enterprise agreement.

Termination payouts

You must pay out all accrued annual leave when an employee leaves. Include the 17.5% loading if it applies. This payout is subject to normal payroll taxes.

Sick leave

Employees accrue 10 days of personal/carer's leave each year. This covers both sick leave and time off to care for family members.

The leave accrues progressively - about 0.83 days per month. Unlike annual leave, unused sick leave doesn't get paid out when someone leaves.

Employer obligations

You pay 100% of the employee's ordinary rate for sick leave. No government scheme covers this - it's entirely employer-funded through your payroll.

Medical certificates

You can ask for a medical certificate if the absence is more than 3 consecutive days, or if you have reasonable grounds to request one for shorter absences.

Parental leave

Australia's parental leave system splits between government payments and employer obligations.

Government-funded leave

Eligible employees get up to 18 weeks of Parental Leave Pay at the national minimum wage ($915.90 per week in 2026). Plus 2 weeks of Dad and Partner Pay.

The government pays this directly to employees or through your payroll - you choose. If you pay it through payroll, you claim reimbursement from Services Australia.

Employer obligations

You don't have to pay employees during parental leave unless your award or contract requires it. However, you must hold their job open for up to 12 months.

*Unless required by award/contract

Public holidays 2026

Australia has 8 national public holidays, but states add their own. Here are the national ones:

Date	Holiday	Notes
January 1	New Year's Day
January 26	Australia Day
April 18	Good Friday
April 19	Easter Saturday	Some states only
April 21	Easter Monday
April 25	Anzac Day
December 25	Christmas Day
December 26	Boxing Day

Public holiday pay

Employees who work public holidays typically get penalty rates - often double time or time-and-a-half plus the base rate. Check the relevant award for exact rates.

If the public holiday falls on a weekend, it usually moves to the following Monday.

Mandatory benefits affecting payroll

Superannuation

You must contribute 11.5% of ordinary time earnings to your employee's super fund. This increases your total employment cost and requires monthly payments.

Workers' compensation

Premiums vary by state and industry but typically range from 0.5% to 4% of wages. You pay this to your workers' comp insurer, not through employee deductions.

Payroll tax

If your Australia-wide wages exceed $1.2 million annually, you'll pay payroll tax ranging from 4.75% to 6.85% depending on the state.

These aren't employee deductions - they're additional employer costs that affect your total payroll budget.

Miss the 28th monthly filing deadline in Australia and penalties start at A$280 per day. The Australian Taxation Office doesn't negotiate on payroll compliance, and with digital reporting now mandatory across all states, there's nowhere to hide incomplete filings.

What monthly reports do I need to file?

PAYG withholding statements

Submit your Pay As You Go (PAYG) withholding report through the ATO Business Portal by the 28th of each month. This covers all income tax withheld from employee wages during the previous month.

The report must include employee TFN details, gross wages, and exact withholding amounts. File electronically only - paper submissions aren't accepted for employers with more than 4 employees.

Late filing penalty: A$280 per day for the first 28 days, then A$1,400 per day after that.

Superannuation guarantee contributions

Report super contributions quarterly through SuperStream by the 28th of January, April, July, and October. Your super fund must receive both payment and data by these deadlines.

Minimum super rate for 2026 is 11.5% of ordinary time earnings for employees earning over A$450 per month.

What annual reporting is required?

Payment summaries and PAYG annual report

Issue payment summaries to all employees by July 14, 2026. Submit your annual PAYG withholding report to the ATO by August 14, 2026.

The annual report reconciles your monthly PAYG filings with actual wages paid. Any discrepancies trigger automatic ATO reviews, so accuracy matters more than speed.

Single Touch Payroll (STP) finalization

Complete your STP finalization by July 31, 2026. This finalizes all employee year-to-date amounts and enables the ATO to pre-fill employee tax returns.

You can't issue payment summaries until STP finalization is complete. The ATO blocks the process if any monthly reports are outstanding.

Fringe benefits tax return

If you provide fringe benefits worth more than A$30,000 annually, lodge your FBT return by May 21, 2026. FBT rate for 2026 is 47% of the grossed-up value.

What employee documentation must I maintain?

Employment records

Keep detailed records for seven years including employment contracts, timesheets, wage calculations, and leave balances. The Fair Work Ombudsman audits record-keeping compliance regularly.

Required contract elements include classification level, ordinary hours, overtime rates, and superannuation fund details. Contracts missing these elements aren't legally enforceable.

Payslip requirements

Issue payslips within one working day of wage payment. Each payslip must show gross wages, deductions, net pay, super contributions, and year-to-date totals.

Missing any required payslip element carries a penalty of A$1,110 per occurrence under Fair Work Act provisions.

What are the penalty amounts?

Violation	Penalty
Late PAYG filing (first 28 days)	A$280 per day
Late PAYG filing (after 28 days)	A$1,400 per day
Missing payslip elements	A$1,110 per occurrence
Late super guarantee payment	10% of unpaid amount + interest
Incorrect withholding	75% of underpayment
Missing employment records	A$13,320 per audit finding

Super guarantee charge

Pay super late and face the Super Guarantee Charge (SGC). This adds 10% penalty to the unpaid amount, plus interest calculated from the original due date.

The SGC isn't tax deductible, unlike regular super contributions. A A$1,000 late super payment becomes A$1,100 plus compounding interest.

Which agencies oversee payroll compliance?

Australian Taxation Office (ATO)

Handles all tax withholding, super guarantee, and STP compliance. Access the ATO Business Portal at ato.gov.au for all monthly and annual filings.

ATO audit rate for payroll compliance is approximately 15% of employers annually, focusing on super guarantee accuracy and PAYG withholding calculations.

Fair Work Ombudsman

Enforces minimum wage, overtime, and record-keeping requirements. Lodge disputes and access compliance tools at fairwork.gov.au.

The Ombudsman conducts proactive audits across high-risk industries including hospitality, retail, and construction.

Effective July 1, 2026, all employers in Australia must implement the new Fair Work Amendment (Secure Jobs, Better Pay) Act 2024 provisions that significantly impact payroll processing and employee classification.

National minimum wage increase

National Minimum Wage - Effective July 1, 2026

• Increased from A$24.10 to A$25.41 per hour (5.4% increase)
• Weekly rate now A$966.30 (up from A$915.80)
• Applies to all award-free employees and casual loading calculations

The increase affects your payroll calculations immediately. Update your systems before the first July pay run to avoid underpayment penalties.

Tax withholding updates

Personal Income Tax Brackets - Effective July 1, 2026

• Tax-free threshold remains A$18,200
• 19% bracket now applies to A$18,201 - A$47,000 (previously A$45,000)
• 32.5% bracket covers A$47,001 - A$120,000 (previously A$120,000)
• 37% and 45% brackets unchanged

Your payroll software needs updated tax tables. The ATO released new withholding schedules in May 2026 - ensure you're using Schedule 1 (2026-27) for all calculations.

Superannuation guarantee increase

Superannuation Guarantee Rate - Effective July 1, 2026

• Increased from 11.5% to 12.0% of ordinary time earnings
• This is the final increase in the gradual rise to 12%
• Applies to all employees earning over A$450 per month

Update your payroll calculations to ensure the additional 0.5% is contributed from the first pay period in July.

Long service leave portability

National Long Service Leave Portability Scheme - Effective January 1, 2026

• Extends beyond construction and cleaning industries
• Now includes security, hospitality, and retail sectors
• Employers must register and contribute 2.34% of ordinary wages

This change affects businesses with employees in covered industries. Register with the relevant state scheme administrator before your first 2026 pay run.

Upcoming changes

Industrial Relations Reform - Expected late 2026

• New "employee-like worker" classification under review
• Potential changes to casual conversion rights
• Draft legislation expected in Parliament by October 2026

Start reviewing your contractor arrangements now. The proposed changes could reclassify some independent contractors as employees, affecting your payroll obligations and costs.