COUNTRY GUIDE
Known for its vibrant economy, diverse culture, and strong emphasis on work-life balance, Australia is an attractive destination for businesses and expatriates. Here’s what you need to know about Australian payroll and HR.
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To set up payroll in Australia, you need to have an Australian Business Number (ABN) and a Tax File Number (TFN). Companies must register for Goods and Services Tax (GST) and Pay As You Go (PAYG) withholding tax. Establishing a legal presence is also mandatory, either by registering as a foreign company (receiving an Australian Registered Body Number, ARBN) or incorporating a subsidiary (obtaining a company number, CAN). This process is overseen by the Australian Securities & Investment Commission (ASIC). Key requirements involve ASIC registration, having a local office, appointing resident agents or directors, and ensuring financial reporting compliance with ASIC.
Employers must register for PAYG, or Pay As You Go, before they can begin paying employees in Australia. This refers to the system for businesses and individuals to pay instalments towards their expected annual income tax liability. It’s designed to collect tax on income as it is earned rather than in a single lump sum at the end of the financial year. This system includes tax withheld from employees’ wages and payments made by businesses and individuals towards their own expected tax liabilities. As an employer, you’re responsible for withholding income tax from your employees and you must submit these funds to the Australian Taxation Office, or ATO.
Any company trading in Australia must have an active business account registered within the country. You also need to pay your employees from a business bank account in Australia. Your business must be registered in Australia to qualify for such an account, meaning that you cannot open an account without an Australian Business Number (ABN)—but you can start this process from overseas.
A standard Australian working week should be 38 hours, Monday to Friday. This breaks down as 7.6 hours per day. Unless specified in an employment contract, anything beyond this will be considered overtime.
There are no legal requirements to when an employee needs to be paid, however, it is common to pay employees by one of the following schedules:
There are a range of statutory pay requirements in Australia, governing minimum wage, sick pay, parental pay, redundancy pay. Let’s take a look at the core considerations for each:
As of July 1, 2023, the national minimum wage in Australia is $23.23 per hour, which equates to $882.80 per week based on a 38-hour workweek. This represents an 8.6% increase from the previous rate of $21.38 per hour.
Casual employees who are covered by the National Minimum Wage receive an additional 25% casual loading. This increase applies from the first full pay period starting on or after July 1, 2023.
Full-time employees are generally entitled to 10 days of paid sick leave per year, which can carry over to the next year if not used. This sick leave is included in the personal leave entitlement, which also covers carer’s leave. Part-time employees receive a pro-rata amount of this entitlement based on their hours worked.
If an employee exhausts their paid sick leave, they may take unpaid sick leave for up to three months, provided they can supply evidence of their illness or injury. Additionally, all employees are entitled to two days of compassionate and bereavement leave for each instance of a family or household member’s death or life-threatening illness or injury.
As of July 1st 2023, significant changes were made to the parental leave system in Australia. The Parental Leave Pay (PLP) and Dad and Partner Pay (DAPP) were combined into a single 20-week payment. This means both parents can claim an equal amount of parental leave entitlements and they can now choose to share the 20 weeks of leave, with both being able to take their leave simultaneously.
A new income threshold was also set at $156,647 for individuals and $350,000 for families. And in an attempt to improve the flexibility of the scheme, parents can take Parental Leave Pay in blocks as small as one day at a time, with periods of work in between, and this leave must be taken within 2 years of the child’s birth.
Starting from July 1st 2024, the duration of parental leave pay will increase by two weeks each year until July 1st 2026, reaching a total of 26 weeks.
In Australia, severance pay and redundancy pay are different forms of compensation provided to employees upon job termination. Severance pay is not legally required; it’s offered by employers as a goodwill gesture or in recognition of an employee’s service, especially in cases like restructuring. The amount varies based on employment contracts or enterprise agreements. Redundancy pay, however, is legally mandated when an employee’s job becomes redundant. It’s calculated based on length of service, age, and earnings, with minimum standards set by the National Employment Standards (NES). Generally, employees with at least one year of service are entitled to redundancy pay, which can range from 4 to 16 weeks of pay, depending on the duration of their employment.
In Australia, you’re responsible for making a number of deductions from an employee’s salary during payroll, as well as making your own contributions as an employer. Here, we’ll cover what you need to know about the Australian tax and social security system:
In Australia, the income tax rates for the 2023-24 financial year for residents are as follows:
Taxable income | Tax on this income |
0 – $18,200 | Nil |
$18,201 – $45,000 | 19c for each $1 over $18,200 |
$45,001 – $120,000 | $5,092 plus 32.5c for each $1 over $45,000 |
$120,001 – $180,000 | $29,467 plus 37c for each $1 over $120,000 |
$180,001 and over | $51,667 plus 45c for each $1 over $180,000 |
Note that these figures do not include the Medicare levy. Employees pay 2% in addition to their income tax, known as the Medicare levy, which funds Australia’s public health system known as Medicare.
The payment deadline for Income tax varies depending on the following:
In Australia, both employees and employers contribute to social security through the superannuation system rather than direct social security contributions. Employers are required to contribute a percentage of an employee’s earnings to a superannuation fund, which serves as a retirement savings plan. Employees may also make voluntary contributions to their superannuation. This system is distinct from social security in some other countries where direct contributions are made to fund specific social welfare programs.
As of 2024, the superannuation guarantee rate is set at 10.5%. Employers are required to contribute this percentage of an employee’s ordinary earnings to their superannuation fund. Employees are not mandated to make contributions; however, they can choose to contribute additional amounts through salary sacrifice or personal contributions to their superannuation account.
Student loan repayments are managed through the Higher Education Loan Program (HELP). Repayments are income-contingent and are collected by the Australian Taxation Office (ATO) through the tax system. Once an individual’s income reaches a certain threshold, HELP repayments are automatically deducted from their salary, similar to income tax, and employers facilitate this process through the payroll system.
In Australia, for the 2023-24 financial year, the repayment rates and income thresholds for student loans like the Higher Education Loan Program (HELP) are structured as follows:
Repayment income (RI) | Repayment rate |
Below $51,550 | Nil |
$51,550 – $59,518 | 1.0% |
$59,519 – $63,089 | 2.0% |
$63,090 – $66,875 | 2.5% |
$66,876 – $70,888 | 3.0% |
$70,889 – $75,140 | 3.5% |
$75,141 – $79,649 | 4.0% |
$79,650 – $84,429 | 4.5% |
$84,430 – $89,494 | 5.0% |
$89,495 – $94,865 | 5.5% |
$94,866 – $100,557 | 6.0% |
$100,558 – $106,590 | 6.5% |
$106,591 – $112,985 | 7.0% |
$112,986 – $119,764 | 7.5% |
$119,765 – $126,950 | 8.0% |
$126,951 – $134,568 | 8.5% |
$134,569 – $142,642 | 9.0% |
$142,643 – $151,200 | 9.5% |
$151,201 and above | 10% |
These rates ensure that repayments are scaled according to income, allowing for a manageable repayment process for borrowers.
Australia’s pension system includes three main types:
Moving onto to the key areas you need to consider to make sure you stay fully compliant with Australian employment law, now, we’ll cover the various rules and legislation governing payroll and HR compliance in Australia:
In Australia, payroll data requirements include providing employees with payslips within one working day of payment and ensuring data security. The Single Touch Payroll (STP) system, similar to the UK’s HMRC RTI, requires real-time salary reporting to the ATO but does not need year-end summaries for payrolled items. With the mandatory STP phase 2 reporting effective from 01/01/2022, more detailed employee data is reported. Additionally, payroll records must be retained for at least 7 years for legal compliance. For more details on STP phase 2, visit ATO’s website.
In Australia, compliance for new employees includes completing a New Hire Form, signing a Tax File Number (TFN) declaration, and choosing a superannuation fund via a completed superannuation choice form. If no fund is specified, employers should offer a default fund, typically common in the employee’s industry.
Under the Fair Work Act, there is no explicit mention of probation periods. Employees can claim unfair dismissal after 6 months of employment (or 12 months for small businesses). Employers may set longer probation periods, provided they are reasonable.
The Fair Work Ombudsman sets minimum notice periods for employment termination based on service length:
Note that an employee that aged 45 or older with in excess of 2 years’ service is automatically entitled to an additional week of notice. The notice period required of an individual choosing to terminate their employment can be negotiated in a contract.
Leavers should receive their final payment no later than in the subsequent payroll following their leave date or at a date agreed between the employer and employee, pending local/industry bargaining agreements.
Employment cannot be terminated at will; the Fair Work Ombudsman and the Fair Work Commission determine whether the termination was unlawful or unfair.
Employee rights and termination process varies based on size of company and length of employment.
The employee must be given written notice of the last day of employment and the employer must pay out all entitlement due.
Australia offers various types of work visas and permits, including:
The rights of employees are protected under the Fair Work Act of 2009. The following statutory rights apply to Australian citizens and foreign nationals alike:
Further non-salaried benefits are also recommended, though these are discretionary. The use of a company-paid mobile phone for business calls is common in Australia, while many businesses also offer financial bonuses for high performance, loyalty rewards for lengthy service, and employee well-being benefits.
Payroll tax in Australia is a state or territory-based tax assessed on your monthly total wage bill. It’s only payable if your wages exceed the state-specific tax-free threshold, which differs across regions. Depending on your wage bill’s size and location, registration for payroll tax in each applicable state may be necessary. The current thresholds are as follows:
| Territory | Tax rate | Threshold |
|---|---|---|
| ACT – Australian Capital Territory | 6.85% |
Annual $2,000,000 Monthly $166,666.66 |
| NT – Nothern Territory | 5.5% |
Annual $1,500,000 Monthly $125,000 Weekly $28,846 |
| NSW – New South Wales | 5.45% | $1,200,000 per year |
| QLD – Queensland |
4.75% $6,500,000 or less 4.95% more than $6,500,000 |
Annual $1,300,00 Monthly $108,333 |
| South Australia |
Variable from 0% to 4.95% exceeds $1,500,00 4.95% exceeds $1,700,00 |
Annual $1,500,00 Monthly $125,000 Weekly $28,846 |
| Tasmania |
4% $1,250,001 - $2,000,000 6.1% $2,000,001 or more |
Annual $1,250,000 Weekly $24,038 |
| Victoria | 4.85% |
Annual $700,000 Monthly $58,333 |
| Western Australia | 5.5% |
Annual $1,000,000 Monthly $83,333 |
For comprehensive guidelines, visit your state’s revenue office website via the following links:
Australia is known for offering comprehensive statutory benefits, which are generous by global standards. The benefits you must offer employees in Australia are:
Benefits vary from business to business and will be outlines in an employment contract. Overall, the following are considered common employment benefits in Australia:
In Australia, employees are entitled to a minimum of 20 paid holiday days per year, plus 7 public holidays, varying by state. Some employers, particularly for shift work, may offer more than the statutory minimum to prevent burnout. The holiday entitlement accrues weekly, including during annual, sick, and long service leave, and starts from the first day of employment. Unused annual leave is carried over to the next year and paid out upon termination. Public holidays depend on the employee’s primary work location, which is usually stipulated in their employment contract.
The people of Australia celebrate 7 national holidays:
In addition to the national holidays there are holidays individually declared by the state and territory governments.
Legally, employees are eligible for up to 12 months of unpaid maternity leave if they have worked for their employer for at least 12 months before the expected birth. They can also request an additional 12 months of leave, and this can only be refused on reasonable business grounds. Employers must keep the job available for the employee’s return.
Additionally, Australia offers a government-funded Paid Parental Leave scheme—covered earlier in “Australian Wages and Pay”—providing financial support for up to 20 weeks. This scheme is separate from an employer’s leave provisions and it is down to you as the employer to decide if you offer your teams more than the statutory minimum requirements.
Casual employees employed on a regular and systemic basis for at least 12 months are also entitled to unpaid parental leave.
Pregnant employees can also have rights to be provided with a safe job or unpaid special maternity leave in certain circumstances.
The leave must start and end within 24 months of the birth of the child.
As mentioned earlier, Parental Leave Pay (PLP) and Dad and Partner Pay (DAPP) have now been combined into a single payment, giving fathers greater access to paid time off following the birth of a child.
They can take up to 12 months of unpaid parental leave, with the possibility to request an additional 12 months. Eligibility requires a minimum of 12 months’ employment before the child’s birth or adoption.
The leave must start and end within 24 months of the birth of the child.
Surrogacy rights
If a surrogate has responsibility for the care of the child, she is entitled to the same maternity rights set out above. However, when this responsibility for the child ends then her entitlement to unpaid leave also ends. The parents of a child conceived via surrogacy are only entitled to parental leave if they adopt the child.
Adoption rights
Employees that adopt a child under 16 years of age are entitled to parental leave. They are also entitled to up to two days of unpaid pre-adoption leave to attend interviews or examinations required for the adoption.
NES extends the parental leave provisions to apply to same-sex couples.
Circumstances in which leave can be paid:
Additional types of leave include:
When setting up your business in Australia, you have two choices. You can open a branch of your existing business. This means that, while the practices of your branch must comply with Australian law, your company will still be recognised as an international business based elsewhere. Alternatively, you create a subsidiary company.
An Australian branch of your business will require more administrative work. You’ll need to provide significant financial data that proves solvency and legal compliance. You will not automatically be subjected to an audit by the Australian Securities Investment Commission, but this may be requested. Once approved, you will be provided with an Australian Registered Body Number (ARBN).
A subsidiary company will be an entirely new company that trades exclusively in Australia. Typically, your existing business will own the shares of this company. A subsidiary company can be owned by an overseas business, but at least one director position must be held by an Australian national.
It’s the tax implications that really separate a branch from a subsidiary company. If you open an Australian branch of an overseas business, you will only pay business tax on profits generated in the country. However, any losses to the bottom line of an Australian branch will be absorbed by the overseas business. This can impact profit margins.
If you create a subsidiary company, your global profits will be assessed by the Australian tax authorities. This, naturally, can lead to greater tax repayments. However, there’s also an element of security to this approach. Losses incurred by an Australian subsidiary business are the sole reserve of this company.
Weigh up these pros and cons and decide whether an Australian branch of your existing company or a new subsidiary business will meet your needs best.
There is no minimum share capital required to set up a business in Australia, as long as you provide something. This could be as little as AU$1.
We recommend allowing 10 weeks for a fully managed incorporation of a local entity. The exception to this is when the Australian Securities Investment Commission needs to review your application. If you are opening a branch of an overseas business, you will also be asked to provide more data to the ASIC.
Australian law protects employees from unfair dismissal. Underperformance or undesirable behaviour are rarely grounds for instant termination of employment. The employee will need to be considered guilty of serious misconduct. Examples of this include:
• Theft
• Fraud
• Physical or verbal assault on colleagues, customers or clients
• Intoxication at the workplace
• Wilful refusal to follow instruction
Serious misconduct must be proved to be deliberate, harm the reputation or profitability of the employer, risk the health or security of others, and make continuing employment untenable. If a misdemeanour does not meet these criteria, an employer could be sued for unfair dismissal.
For an international business to open an Australian branch, it must first register as a foreign company, as per the Corporations Act of 2001. This is achieved by supplying legal and financial data to the Australian Securities Investment Commission (ASIC). Once this branch has been registered, at least one Australian resident must be employed as a local agent. This individual will be responsible to ensuring the branch complies with the Corporations Act.
If your business is a proprietary company, at least one Australian resident must act as a director. For a public company, a minimum of three directors are required, no less than two of which must be Australian residents.
Want to find out more about Cintra Global? We’d love to hear about your global expansion plans and tell you about how we can support you with your international payroll, HR, and expansion needs.
Maling Exchange, Hoults Yard
Walker Road, Newcastle upon Tyne
NE6 2HL
Phone: 0191 4787000
Email: info@cintra.co.uk
Registered in England and Wales
Company No. 03248469
