Payroll in Australia: A Comprehensive Guide for 2026

Introduction

Payroll in Australia runs on two obligations: income tax withheld from wages under the pay as you go (PAYG) system, and superannuation paid by the employer on top of that.

Both are reported to the Australian Taxation Office (ATO) through Single Touch Payroll (STP), and since 1 July 2026 the Payday Super reform has replaced the quarterly superannuation schedule with a payday one. A second regulator, the Fair Work Ombudsman, covers pay slips and record keeping.

Foreign employers underestimate how much of this is set by geography rather than by the contract. Public holidays are declared state by state, so a national leave calendar will be wrong for part of the team. State payroll tax is charged where the work is performed, at a rate and threshold each state sets. A distributed team can carry several tax obligations and several holiday calendars under one set of national standards.

In this guide, we walk through the payroll process in Australia, compliance duties, statutory pay and leave, 2026 tax rates, termination and redundancy, and how to outsource payroll in Australia.

What is the payroll process in Australia?

If you're unfamiliar with the payroll process in Australia, or even with international payroll as a whole, the process is straightforward. Two obligations run in parallel: income tax withheld from the employee's pay, and superannuation paid by the employer on top of it.

Both are reported to the Australian Taxation Office (ATO) in the same submission, and since 1 July 2026 both fall due on every payday.

The components of a payroll workflow include:

• Collecting data and setting up the employee: Your new employees need to submit payroll information, including tax numbers, banking info, and citizenship status. In Australia, new employees complete their online commencement forms within 28 days of starting, which replaces the paper Tax file number declaration and Superannuation standard choice form. Where an employee has applied for a tax file number but not yet received it, they have 28 days to provide it, after which the employer must withhold at the top rate. Registration matters too, since you must register for Pay As You Go (PAYG) withholding before you need to make a payment that is subject to withholding.
• Calculating pay: Employers in Australia withhold income tax from employees' wages under the pay as you go (PAYG) system. Superannuation works differently and is calculated as 12% of qualifying earnings, paid by the employer on top of wages rather than deducted from them. Qualifying earnings is a term introduced on 1 July 2026 that brings together ordinary time earnings, all commissions, salary sacrifice contributions, and other amounts that were previously included in an employee's salary or wages for super guarantee.
• Issuing payments: In Australia, wages are paid by direct deposit, rather than paper paychecks. Since 1 July 2026, contributions must be received by your employees' super funds within 7 business days after paying your employees, replacing the quarterly cycle that applied before. The fund is the employee's choice, and where no choice is made, the employer must request the stapled super fund from the ATO. Paying into the wrong fund is expensive: contributing to a fund the employee did not choose without making a stapled fund request makes the employer liable to pay the super guarantee charge, including a choice loading.
• Reporting and paying taxes: As an employer, you must report your tax withholdings to the ATO through Single Touch Payroll, and the same submission now carries the super position, since employers report both qualifying earnings and super liability through STP. Reporting in your own country depends on where your business is based, so check that separately. Then you forward the taxes to the taxing authorities and superannuation funds.

Two changes from 1 July 2026 affect how this step runs in practice.

1. The Small Business Superannuation Clearing House is no longer accessible, so anyone who relied on it needs a commercial clearing house or payroll software
2. STP reporting removes the need to provide employees with a payment summary for the information reported.

This is applicable whether you're hiring a full-time employee or a part-time worker. Contractors are treated differently for tax purposes, though the super position can still apply to them, since independent contractors who are paid mainly for their labour are eligible employees for super guarantee purposes.

What is payroll compliance in Australia?

Most businesses in Australia pay their employees every two weeks, though there's no set rule. You can pay weekly or monthly if that's how your company already operates. Compliance attaches to the payday itself rather than to a monthly calendar.

A pay event has to be reported to the ATO on or before the payday, and since 1 July 2026, super has to reach the employee's fund within 7 business days after paying your employees. Choosing a shorter pay cycle multiplies both obligations.

Two regulators are involved. The ATO covers reporting, withholding, and super, while the Fair Work Ombudsman covers pay slips and record keeping. They carry separate penalties.

What is Single Touch Payroll in Australia?

The Australian Taxation Office introduced Single Touch Payroll (STP), which replaced manual year-end reporting. Rather than having to manually report every employee's payroll information to the government, STP software does it automatically each time you run payroll.

STP is now a mandatory obligation, no matter the size of your business. The payroll info given to the ATO includes:

1. Salaries and wages
2. Pay-as-you-go tax withholdings
3. Super liability, and from 1 July 2026 also qualifying earnings

Three points decide whether you are compliant rather than merely reporting.

• Timing is tied to the payment, since the pay day is the payment date stipulated in the electronic transaction to your financial institution or, where no date is specified, the date you intend to make the payment.
• Software has to be on the current version, since employers should be reporting expanded information through STP Phase 2 enabled software unless granted a deferral.
• The year closes with a declaration. You need to make an end-of-year finalisation declaration through STP by 14 July each year, and where you cannot meet that date you need to apply for a deferral. Reporting through STP does remove one job, since it means you do not need to provide your employees with a payment summary for the information reported.

What are the pay slip and record-keeping rules in Australia?

Companies must give employees a payslip within one working day of getting paid, detailing gross pay, tax withheld, superannuation, and net pay. The duty holds even if an employee is on leave, and payslips can be issued in either electronic form or hard copy.

Records run far longer than the pay cycle. Employers have to keep time and wages records for 7 years, and those records must be in a form that is readily accessible to a Fair Work Inspector, in a legible form and in English, and not altered unless for the purposes of correcting an error.

What are the penalties for payroll non-compliance in Australia?

Exposure comes from both regulators.

• On the Fair Work side, inspectors may issue an employer with an infringement notice for failing to meet their record-keeping and pay slip obligations, which works like an on-the-spot fine. Matters can also go to court, and a court may find that record-keeping contraventions are 'serious contraventions', attracting higher penalties, if they occurred knowingly or recklessly.
• On the ATO side, employers that have not started STP reporting, or have not transitioned to STP Phase 2 and are not covered by a deferral or exemption, may be subject to failure to lodge penalties.

The cadence is what makes this hard to run at a distance. A pay event reported on or before every payday, super reaching the fund within 7 business days of each pay run, payslips out within one working day, records held for 7 years, and two regulators with separate penalties watching different parts of it. A fortnightly cycle doubles the first two against a monthly one.

Skuad helps teams carry that reporting load through a single global payroll platform.

Here is what Skuad helps with:

• Supports payroll processing in 70+ currencies, with tax withholding and statutory deductions applied at the point of calculation
• Helps generate and issue payslips for every pay cycle across supported markets
• Facilitates statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Assists with payroll record keeping and year-end documentation across supported markets
• Helps payroll teams stay aligned with local filing requirements as those requirements change across 160+ countries

What are the main payroll components in Australia?

Below are the components that make up an Australian payroll calculation. Most are set by the National Employment Standards, which apply as a floor regardless of what a contract says.

What is the minimum wage in Australia?

Employees in Australia are paid in Australian dollars AUD. The national minimum wage applies to employees who aren't covered by an award, and from 1 July 2026 it is $26.44 per hour or $1,004.90 per week, the first time it has passed $1,000 a week.

Most employees are covered by an award rather than the national minimum wage, and modern award minimum rates increased by 4.75% from 1 July 2026. Two floors apply underneath that:

Timing catches employers out. The increase applies from the first full pay period starting on or after 1 July 2026, so a pay cycle that straddles 1 July runs on the old rate until the next one begins. Rates are reviewed every year and change each July, meaning any cost model dates within twelve months.

What are the working hours in Australia?

Ordinary hours cannot exceed 38 hours in a week under the National Employment Standards, which is the basis for the weekly minimum wage figures above and for leave accrual. Awards set overtime and penalty rates above that, and those vary by industry.

How much annual leave do employees get in Australia?

Full-time employees are given a minimum of 4 weeks of paid leave every year, plus an additional week for some shiftworkers. If an employee's holiday leave isn't all used in a calendar year, the days usually roll over to the next year.

Three mechanics affect the payroll calculation:

• Leave accumulates continuously based on the number of ordinary hours worked rather than vesting on an anniversary.
• It is paid at the employee's base rate of pay for all ordinary hours worked, which excludes overtime, penalty rates, loadings, allowances, and bonuses.
• And where a public holiday falls within a week of annual leave, the public holiday is not counted as annual leave, and the balance is not reduced for that day.

How much sick leave do employees get in Australia?

Full-time employees are entitled to ten sick leave days per year, and the same entitlement covers caring responsibilities, since the National Employment Standards provide 10 days of paid sick and carer's leave, pro rata for part-time employees.

The accrual is calculated as 1/26 of an employee's ordinary hours of work in a year, so a full-time employee on 38 hours accumulates 76 hours a year.

What parental leave applies in Australia?

Two separate schemes run alongside each other, and the employer's cost falls under only one of them.

Under the National Employment Standards, employees get up to 12 months of unpaid leave and the right to ask for an extra 12 months of unpaid leave, which also includes adoption-related leave.

Payment comes from the government rather than the employer. Eligible employees who are the carer of a child born or adopted from 1 July 2026 can get up to 26 weeks' Parental Leave Pay to share as a family, paid in line with the National Minimum Wage, which is $1,004.70 per week before tax from that date.

Superannuation on that payment is also covered, since the ATO pays a 12% contribution directly to the employee's superannuation fund and the employer does not need to calculate or pay it.

Many employers top the government payment up to full salary as a benefit. That is a commercial decision rather than a statutory one.

What other leave entitlements apply in Australia?

Employees in Australia are also entitled to:

• Family and domestic violence leave: 10 days of paid leave per year
• Compassionate leave: 2 days as required, paid
• Unpaid carer's leave: 2 days as required
• Community service leave: unpaid for voluntary emergency activities, with an entitlement to be paid for up to 10 days for jury service
• Long service leave, which varies by state and by award
• Public holidays: a paid day off, unpaid for casuals, except where reasonably requested to work

Family and domestic violence leave is the one most often missed on a first Australian hire, since it is paid, available to all employees including casuals, and separate from sick leave.

What are the Australian public holidays in 2026?

There are seven public holidays (which vary by state), which are also taken as non-working days. The seven apply nationally, and everything beyond them is declared on a state and territory basis, so two employees on the same salary in different states will not have the same paid days off.

Under the National Employment Standards, employees get a paid day off on a public holiday, unpaid for casuals, except where reasonably requested to work. Penalty rates for working one come from the relevant award rather than from statute, so they vary by industry.

A public holiday that falls within a period of annual leave is not counted as annual leave. These seven apply across the country:

Three variations change what a payroll calendar looks like from one state to the next. Each one is worth checking against your team's locations before the year is set:

A single national holiday policy will be wrong for most of the team, so confirm the full list for each employee's state before setting the payroll calendar.

What are the payroll taxes in Australia?

Payroll taxes in Australia split three ways: income tax withheld from the employee, superannuation paid by the employer on top of wages, and a state payroll tax that applies once the wage bill passes a threshold. There are no local taxes on personal income, so the income tax rates are the same in every state.

What are the income tax rates in Australia?

Australia works on a pay-as-you-go tax system. Employers withhold employee taxes, which are then paid directly to the Australian Taxation Office (ATO). These rates apply to residents for the 2026-27 financial year, which runs from 1 July 2026 to 30 June 2027:

From 1 July 2026, the 16% marginal rate reduces to 15%, and from 1 July 2027 it reduces again to 14%, so withholding tables shift each July.

Two additions fall outside the table. Most residents pay the Medicare levy of an additional 2% of taxable income, and residents may also qualify for the Low Income Tax Offset, a maximum of AUD 700 for those earning up to AUD 37,500.

Residency status changes the calculation more than most employers expect. Non-residents get no tax-free threshold and are taxed at 30% up to 135,000, 37% to 190,000, and 45% above that, and they are not required to pay the Medicare levy.

Working holiday makers have their own scale, where the first AUD 45,000 is taxed at 15%, with the balance taxed at ordinary rates.

How much superannuation do employers pay in Australia?

Employers are mandated to contribute to their employees' pension funds, which in Australia is called superannuation. When hiring, you will need to be clear whether an employee's salary includes superannuation or whether it will be added to the base salary. The rate is 12%, and it is an employer cost paid above the wage rather than a deduction from it.

Since 1 July 2026, the payment rhythm has changed. Contributions must be received by your employees' super funds within 7 business days after paying your employees, replacing the previous quarterly cycle.

Missing that deadline is expensive. The super guarantee charge is now assessed by the ATO rather than self-assessed, calculated on qualifying earnings, and includes interest that compounds daily at the general interest charge rate plus an administrative uplift amount. Penalties on top run at 25% or 50% of the unpaid super guarantee charge, depending on any prior penalties.

What is state payroll tax in Australia?

This is the cost most foreign employers miss, because it is not federal and it is not withheld from anyone. States and territories impose a tax on employers, payable once the annual wage bill passes a threshold.

The various jurisdictions have harmonised their payroll tax legislation, but some differences remain, particularly tax rates and the thresholds for exempting employers whose annual payroll is below a certain level. Two examples show the spread:

Three practical points follow:

• The tax applies in the state where the work is performed, so a distributed team can trigger obligations in several jurisdictions at once.
• Thresholds are assessed on total Australian wages rather than wages in that state alone.
• And a small first hire will usually fall under every threshold, which means payroll tax becomes a cost only as the team grows.

Check the current rate and threshold with the revenue office in each state where you employ people, since these change more often than federal rates.

Superannuation at 12% is added to the wage rather than inside it, and state payroll tax arrives once the wage bill passes a threshold, at a rate set by the state where the work is performed. A distributed team can trigger obligations in several jurisdictions at once, and thresholds are assessed on total Australian wages rather than wages in that state alone. Neither cost appears anywhere on the offer letter.

Skuad's employee cost calculator helps you model that gap before an offer goes out. It estimates total employment cost across 160+ countries, covering gross salary and applicable employer contributions, and supports cost comparison between markets in 70+ currencies while the salary number is still moving.

Estimate the cost of an Australian hire.

What are the termination and redundancy rules in Australia?

Ending employment in Australia carries two separate payments, and they stack. Notice applies to every termination other than serious misconduct, and redundancy pay applies where the job itself goes. Each runs on its own scale, and each is calculated on a different pay rate, which is where most costing errors come from.

How much notice do employers have to give in Australia?

An employer must not dismiss an employee unless they have either given the minimum period of notice or paid the employee instead of giving notice. Notice must be in writing, stating the day of termination.

Employees over 45 years old who have completed at least 2 years of service when they receive notice are given an additional week of notice.

Payment instead of notice is calculated generously. It is paid at the employee's full pay rate as if they had worked the minimum notice period, and full pay rate includes incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates, and any other separately identifiable amounts.

Notice is not required for employees who are casual, are employed for a set period of time or a season, or are fired because of serious misconduct.

How much is redundancy pay in Australia?

Redundancy pay applies where an employer decides they no longer need an employee's job to be done by anyone, or the employer becomes insolvent or bankrupt. The job becomes redundant rather than the employee, which matters because a performance-related exit does not trigger it.

There is a reduction in redundancy pay from 16 weeks to 12 weeks for employees with at least 10 years continuous service, consistent with the 2004 Redundancy Case decision.

Redundancy pay uses a narrower rate than notice. It is paid at the employee's base pay rate for ordinary hours worked, which does not include incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates, or any other separately identifiable amounts.

For an employee on penalty rates or a commission structure, the notice week and the redundancy week are different amounts.

Who does not get redundancy pay in Australia?

Four exclusions matter for a foreign employer:

• Employees whose period of continuous service with the employer is less than 12 months
• Employees who are employed for a set period of time, or a season
• Employees who are dismissed because of serious misconduct, and most casual employees
• Most employees of a small business

The small business test is worth reading closely, since a small business employer for the purpose of determining redundancy pay is an employer who employs fewer than 15 employees at the time when notice is given.

Counting is done on a global basis rather than an Australian one, because associated entities are taken to be one entity, and the employee being dismissed and any other employees being dismissed at that time are counted. A foreign company with two people in Australia and 200 elsewhere in the group is not a small business.

One override takes precedence over all of this. An award or enterprise agreement may have different redundancy provisions which could apply instead, and industry-specific redundancy schemes can override the exclusions above, so check the applicable award before relying on an exemption.

Ending employment in Australia is priced in two parts, each on its own scale and each on a different pay rate, and the exclusions that look like they cover a small team usually do not cover a foreign group. An award or enterprise agreement can override any of it. The cost of an exit is rarely the figure a first calculation produces.

Skuad helps reduce that exposure through the Shield platform, a compliance layer covering employer obligations across supported markets.

Here is what Skuad helps with:

• Assists with termination and offboarding aligned with local labor requirements across supported markets
• Helps calculate notice periods and severance in line with local statutory minimums
• Supports employment contract generation across 160+ countries, so terms are documented from the start
• Helps flag worker classification risk before it turns into a compliance issue
• Helps keep employment records and documentation in order across the full employment lifecycle

How to outsource payroll in Australia?

Payroll in Australia can be outsourced four ways: an in-house team inside an Australian entity, remote payroll run by the parent company, a local payroll bureau, or an employer of record. They differ in who carries the obligations, since those follow the legal employer rather than whoever runs the payroll.

• One option is in-house payroll through an Australian entity: You incorporate, register for PAYG withholding before making any payment subject to withholding, buy STP-enabled software, and build a team to run the cycle. Full control, and the slowest and most expensive route to a first hire.
• A second option is remote payroll: Here, your parent company pays the Australian employee from outside Australia. Cheaper to start, though none of the obligations move with it: the pay event still has to reach the ATO on or before payday, superannuation still has to reach the employee's fund within 7 business days, and records still have to be kept for 7 years. Australia's two-regulator structure makes this harder to run at a distance than most markets.
• A third option is an Australian payroll bureau: They know the STP cadence and the Payday Super deadline, and the employment relationship stays yours, along with everything priced into it: superannuation at 12%, the state payroll tax once the wage bill passes a threshold, and the redundancy scale if a role goes. One point catches foreign groups out here, since associated entities are taken to be one entity for the small business test, so a global headcount can pull a two-person Australian team into full redundancy obligations. A bureau processes the payroll, and it does not become the employer.

All three routes leave the obligations where they started. The entity, the registrations, the reporting on every payday, and the employer-side costs stay with your business, and so does the redundancy exposure if a role goes.

A fourth option moves the employment relationship itself. Skuad acts as the legal employer across 160+ countries, so your company can hire, onboard, and pay people without setting up a local entity.

Here is what Skuad helps with:

• Supports employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Supports payroll processing in 70+ currencies, with tax withholding and statutory deductions
• Facilitates statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Helps administer statutory benefits, paid leave, and parental entitlements in line with local requirements
• Assists with termination and offboarding, including notice periods and severance calculations as required locally
• Supports work permit and visa applications for foreign nationals joining your team

Get the full employment picture beyond payroll in Skuad's Australia hiring guide.

Start running payroll in Australia the right way

Payroll in Australia is tied to the payday rather than to a monthly close. The rates, thresholds, and award rates behind it reset each July, so a cost model dates within twelve months. A late or miscalculated superannuation payment now compounds daily until it is corrected, and pay slip and record-keeping breaches are enforced separately from anything the tax office does.

None of that shifts based on who processes the payroll. Software, a bureau, or a finance team at your head office each cover part of the work, and the obligations stay with the legal employer, along with the termination exposure and the costs that never appear on an offer letter. The fourth outsourcing route moves the employment relationship itself.

Skuad supports the operational side of employing people internationally, covering employment contracts, payroll processing in 70+ currencies, statutory contribution workflows, benefits administration, and offboarding, all from one platform.

Book a demo to see how Skuad supports payroll for a Australian hire without entity setup.

FAQs

1. How does payroll in Australia work?

Payroll in Australia runs two obligations at once: income tax withheld from wages under the pay as you go (PAYG) system, and superannuation paid by the employer on top. Both are reported to the Australian Taxation Office through Single Touch Payroll on or before every payday.

2. What is Single Touch Payroll and is it mandatory?

Single Touch Payroll (STP) is the ATO system that reports payroll data, including wages, PAYG withholding, and super liability, electronically each time you pay employees. It is mandatory for all employers regardless of size, and reporting must reach the ATO on or before each payday, not annually.

3. How much superannuation do employers pay in Australia?

Superannuation is currently 12% of qualifying earnings, paid by the employer on top of wages rather than deducted from them. Since 1 July 2026, under Payday Super, contributions must reach the employee's fund shortly after each pay run, replacing the old quarterly cycle, so the deadline is now tighter.

4. What is state payroll tax and when does it apply in Australia?

State payroll tax is a tax on employers, charged by the state where the work is performed once the annual wage bill passes a threshold. Rates and thresholds differ by state, and thresholds are assessed on total Australian wages, so a distributed team can trigger obligations in several jurisdictions.

5. What are the penalties for getting Australian payroll wrong?

Exposure comes from two regulators. The ATO can apply failure-to-lodge penalties and the super guarantee charge, now assessed by the ATO with compounding interest, for late super. The Fair Work Ombudsman can issue infringement notices for pay slip and record-keeping breaches, which can escalate to court.

6. Can a company run Australian payroll without a local entity?

Running payroll directly generally requires an Australian entity and PAYG registration, since obligations follow the legal employer. Options like remote payroll or a payroll bureau do not move those duties; the pay event, super, and record-keeping still apply. An Employer of Record becomes the legal employer, shifting the obligations across.