Payroll in Australia: Complete guide on how to pay employees (2024)

Running payroll in Australia requires a deep understanding of specific regulations and compliance obligations, including wage minimums, tax withholding, and superannuation contributions. Following the proper payroll steps can help avoid penalties and legal risks, ensuring smooth, compliant payments for your workforce. This guide will walk you through the payroll essentials for Australia so you can manage payments confidently.

Salary and wages

As of May 2024, average weekly earnings for Australian adults is AUD 1,923.40, according to data from the Australian Bureau of Statistics—but this varies widely by industry and occupation. 

For example, in 2024, the average weekly earnings for employees in the financial services sector was AUD 2,283.20, while the average weekly earnings for employees in the accommodation and food services sector was AUD 1,421.00. Experience level also plays a significant role in employee pay rates.

Average weekly earnings in Australia’s major industries

Minimum wage in Australia

As of 2024, the minimum hourly wage in Australia for employees aged 21 and older is AUD 24.10. Casual employees, who often work irregular hours and don't receive the same benefits as permanent workers, get an additional 25% as compensation for not having an entitlement to personal and vacation leave. 

If an employee is covered by a Modern Award, their minimum wage is specified in that award and is typically dependent on their particular job level and job type. You can discover Award-specific minimum wages using the Australian government’s Pay and Conditions Tool.

Payroll cycle in Australia

In Australia, payroll cycles are typically weekly, bi-weekly, or monthly. Weekly and bi-weekly pay cycles are popular in many industries, especially for hourly workers. Monthly pay cycles are common for salaried positions. Employers should ensure pay cycles align with both employee agreements and regulatory requirements to streamline payroll processing.

How to set up payroll in Australia: 5 payroll steps

Step 1: Create your own entity or use EOR

To pay employees in Australia, you need either a local entity or an Employer of Record (EOR). An EOR, like Rippling, Deel, or Papaya Global, lets you quickly hire and pay employees by handling tax withholdings and payments to the Australian Taxation Office (ATO) on your behalf. EORs are particularly useful for companies expanding to Australia, saving setup time and administrative work.

For companies planning to scale, creating a local entity may eventually be more cost-effective. This process involves registering with the Australian Securities & Investments Commission (ASIC) to obtain a Tax File Number (TFN) and Australian Business Number (ABN), followed by applications for additional tax registrations like PAYG, GST, and FBT.

Rippling’s EOR allows you to transition seamlessly to managing payroll through your own entity when needed.

Hire and pay Australian employees easily with Rippling

Rippling supports both methods: whether through our native global payroll system for companies with entities or our EOR service for streamlined hiring without an established entity. Run payroll in Australia—and worldwide—in one single pay run.

Step 2: Create a payroll policy 

Creating a clear payroll policy is essential to ensure employees in Australia are paid accurately and on time while complying with local regulations. A payroll policy sets the standards for payroll processing and communicates critical information to your employees.

Key elements to include in your payroll policy

• Payroll schedule and frequency: Define the payroll cycle, such as weekly, bi-weekly, or monthly, and specify the payday. Outline any conditions that might affect payday, like public holidays, and clarify when adjustments will be made.

• Payment method: Specify how employees will be paid, whether by direct deposit to their Australian bank account or another method. If there are alternative payment options, outline the process for employees to select their preferences.

• Deductions and contributions: Include details on statutory deductions like income tax, superannuation (retirement fund contributions), and other withholdings required by Australian law. Also, mention optional deductions, such as health insurance premiums or voluntary retirement contributions.

• Overtime, holiday, and leave pay: Define how overtime, holiday, and leave pay are calculated. Include rates for overtime pay and policies around public holiday entitlements, annual leave, and personal or sick leave, according to Australia’s National Employment Standards (NES).

• Superannuation contributions: Describe the superannuation contribution requirements for retirement, including the mandatory employer contribution rate, currently set at 11%, and any additional voluntary contributions employees can make.

• Payroll compliance and updates: Explain how the payroll department will handle updates to comply with Australian employment and tax laws. This includes annual reviews of minimum wage adjustments, tax thresholds, and other legal requirements to ensure accuracy and compliance.

Step 3: Determine your worker’s employment status

Before onboarding your workers, and certainly, before you run payroll, it’s crucial to understand who you’re paying in the eyes of Australian law: Are your workers employees or contractors? 

It’s essential to classify them correctly to avoid big fines. Also, if they’re employees, there are payroll deductions you’re responsible for, including tax obligations and superannuation contributions—see the tables below for the full list.

While no single factor is determinative, the Australian authorities use certain criteria to decide whether a worker is an employee or a contractor, including:

• The level of control the employer has over the worker's activities
• Who owns their tools and equipment
• Whether they work on an ongoing or per-project basis
• Exclusivity of service
• Degree of integration into your company

Step 4: Capture your new hire’s payroll information

Once you’ve decided whether to use an EOR or your own entity, picked a payroll solution, and ensured that your employees are correctly classified, you should be able to automatically collect (and then pay) your team in Australia. Just make sure you’re adhering to statutory requirements when calculating each full-time employee’s payroll deductions.

Here’s the information you need to collect:

• Name (matching the account where you’ll deposit their pay)
• Date of birth and date of hire
• Contact information, including their mailing address in Australia
• Bank account information
• Amount to be paid in AUD (including any bonuses)
• Completed Tax File Number (TFN) declaration forms, which every full-time employee needs to fill out to determine withholdings

A superannuation standard choice form provides details of the superannuation fund employees have chosen for retirement contributions. You should also include information on your default fund in case an employee decides not to choose a fund on their own.

Step 5: Choose to pay in your local currency or Australian dollars (AUD)

You have to pay Australia-based employees in Australian dollars (AUD) unless you’ve specifically obtained their written permission to pay them in another currency.

Of course, there are challenges for companies based outside Australia that need to pay Australia-based employees in AUD: The exchange rate between your local currency and AUD can vary (see exchange rates here). If the rate is unfavorable, you’ll end up paying more USD to cover your employee’s wages. You may also need to account for fluctuations in the exchange rate when calculating your financial statements, which can create accounting complexities.

With Rippling, you can pay everyone in their local currency.

Payroll taxes in Australia

Employers in Australia must deduct payroll taxes and contributions from employee paychecks, with specific obligations based on wage thresholds and state regulations. Core deductions include payroll tax (for companies exceeding a state-specific monthly wage threshold), the superannuation guarantee for retirement, Medicare levy for public health, and Workers’ Compensation. Rates and obligations may vary by region, so check employer cost tables to ensure compliance.

Failure to meet payroll tax obligations can result in significant penalties. The Australian Taxation Office (ATO) applies “penalty units” for late filings, starting at AUD 275 and increasing every 28 days the filing remains overdue, up to five units. Mid-size entities pay double the base amount, and larger entities incur penalties five times the base rate. If employers fail to withhold required deductions, penalties can equal the amount not withheld.

The ATO issues penalties for violating other tax obligations as follows:

Payroll contributions

In Australia, employers must cover several payroll contributions to ensure compliance with legal requirements and to support employee welfare. Here are the primary contributions that employers should account for:

• Superannuation guarantee: Employers are required to contribute a minimum of 11% of an employee's regular earnings to a superannuation (retirement) fund. This contribution helps employees save for retirement, and rates are reviewed annually by the Australian government. Contributions should be made quarterly to employees' chosen superannuation funds.

• Overtime pay: Under Australia’s National Employment Standards (NES), eligible employees receive overtime pay when they work beyond their standard hours. Overtime is generally calculated at a higher rate, often 1.5 to 2 times the regular pay rate, depending on the award, employment contract, or industry standards.

• Workers’ compensation insurance: Workers’ compensation insurance provides wage and medical benefits to employees who suffer work-related injuries or illnesses. Employers must register for coverage in each state or territory where they have employees, as rates and policies vary by region.

• Medicare levy: Employers deduct a Medicare levy from employees’ wages, which funds Australia’s public healthcare system. The levy is typically 2% of taxable income, although low-income earners and certain others may qualify for reduced rates or exemptions.

• Payroll tax: Payroll tax is a state-imposed tax that applies once an employer’s total wages exceed a threshold, which varies by state. This tax rate is determined by the state or territory where the employee is based and is usually calculated as a percentage of total wages.

• Fringe benefits tax (FBT): If employers provide non-cash benefits (like a company car, housing, or other perks), they must pay Fringe Benefits Tax on these items. FBT rates and regulations are set by the Australian Taxation Office, and compliance requires accurate reporting of the benefits’ monetary value.

By ensuring these contributions are calculated and processed correctly, employers help meet both regulatory requirements and employee welfare expectations.

How do you pay contractors in Australia?

• First, ensure you’re correctly classifying your workers as a contractor (you can use Rippling’s free Worker Classification Analyzer).
• Next, agree on the payment terms with the contractor: the hourly or project rate, the payment cadence, and the method of payment. 
• Collect their payroll information, including their name, date of birth, contact information, and bank account information.
• Use your chosen payroll software to pay the contractor in AUD. With Rippling, you can pay both contractors and employees in Australian dollars in a single pay run without handling the complexity of currency conversion yourself.

Remember, when hiring Australian contractors, employers are not responsible for deducting taxes from their paychecks. Instead, the contractor is responsible for tax remittance to the ATO. However, employers must still keep an accurate record of employment and payroll information for each worker.

Easily run payroll in Australia with Rippling

Ready to streamline payroll in Australia? With Rippling, managing payroll is simple, compliant, and efficient—whether you’re paying a local team or a global workforce. Rippling’s all-in-one global payroll platform makes it easy to pay employees in Australia, calculate and withhold taxes, and helps you comply with Australian regulations, all from a single, integrated dashboard.

Why Rippling?

• Global and local compliance: Rippling stays up-to-date with Australia’s payroll laws, helping you navigate tax deductions, superannuation contributions, and reporting requirements with ease.
• Unified payroll solution: Pay employees across multiple countries—including Australia—in a single pay run, with funds distributed accurately and on time.
• Flexibility as you grow: Whether you’re hiring through your own entity or using Rippling as your Employer of Record (EOR), you can seamlessly transition from EOR to full in-house payroll whenever you’re ready without switching platforms.

Experience the ease and security of Rippling’s payroll system, where you can hire, onboard, and pay employees in Australia (and around the world) with confidence. Let Rippling handle the compliance and admin, so you can focus on growing your business.

Payroll in Australia FAQs

What are the employer costs for full-time employees in Australia?

Employers are responsible for deducting the following from their full-time employees’ paychecks. Along with super guarantees and workers’ compensation premiums, payroll taxes apply to companies exceeding a certain wage threshold. Find the details below:

Payroll Tax by Territory 

How much does it cost to run payroll in Australia?

Most payroll software is priced on a per-employee basis or per pay run. Payroll service pricing generally varies according to:

• Payroll frequency
• The number of employees on your payroll
• The number of provinces and territories where you employ Australian workers
• How often you add and remove payees
• Any additional services you need, such as year-end processing or mailing out pay stubs

Can I manually run payroll for workers in Australia?

Some small business owners choose to run payroll themselves, using a payroll calculator and making a direct deposit to employee accounts in an attempt to cut costs. However, running payroll can be a time-consuming process, especially as your business grows. If you go this route, there are potential risks to keep in mind:

• Compliance: Running payroll manually in Australia, without using native global payroll software, puts you at risk of manual errors and omissions. Rippling handles your compliance work for you—enforcing Australian minimum wages and overtime rules, which can save you from heavy fines.
• Security: Processing payroll manually can pose security risks, especially if you are using spreadsheets or paper records. This increases the risk of sensitive employee information being lost, stolen, or misused.

This blog is based on information available to Rippling as of December 11, 2024.

Disclaimer: People Center, Inc.’s (“Rippling’s”) payroll payment rails for funds originating in Australia are powered by Airwallex Pty Ltd (ABN 37 609 653 312, AFSL No. 487221).  Your access to these services is arranged by People Center, Inc. as Airwallex’s authorised representative (No. 001303936).

This information doesn’t take into account your objectives, financial situation, or needs. It is important for you to consider these matters and read Airwallex's Product Disclosure Statement (PDS), available here before you make a decision regarding these services. You can also obtain a copy of the Financial Service Guide (FSG) here.

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.