How to Run International Payroll for Employees in Australia (2024)

Step #1: Decide whether or not to create your own entity in Australia or use an Employer of Record (EOR)

To hire and pay employees in Australia, first you need to establish a business entity in Australia. You can do this by either creating your own local entity or by using what’s known as an “Employer of Record” (EOR).  EORs allow you to hire and pay employees through their own entities. They’re responsible for calculating and withholding the appropriate taxes (more on that below), and for paying your taxes to the Australian Taxation Office (ATO). 

When, why, and how do companies use an EOR? 

When companies expand their operations to Australia—and around the world—they typically use EORs like Deel, Papaya Global, and Rippling to run payroll, issue benefits, and navigate international compliance issues. This is because EORs can take more than a month to set up, depending on how you apply, and whether the Australian Securities and Investments Commission (ASIC) manually reviews your registration. It’s a significant administrative load, and most smaller companies don’t have the time or resources to spare.

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When, why, and how do companies create their own entity?

If you create your own entity, that replaces the EOR as the legal entity hiring employees and running payroll. Companies typically create their own entities once the costs of an EOR outweigh the costs of creating their own entities.

In most cases, you have to switch systems when you scale—except with Rippling. Rippling’s EOR is built on top of our native payroll rails, which means that when the time comes, you can move from our EOR to Global Payroll through your own entities—in minutes.  

Here are the steps to set up your own entity:

First, you should register your subsidiary with the Australian Securities & Investments Commission (ASIC), where you’ll get a Tax File Number (TFN) and Australian Business Number (ABN); you can do this online. This will ensure you can remit statutory deductions for your full-time employees. 

Once you have a Business Number, you can get a separate Australian Company Number (ACN) and apply for tax registrations including Pay as You Go (PAYG) withholdings, the Goods and Service Tax (GST), and the Fringe Benefits Tax (FBT).

With Rippling, you can hire and pay Australian employees with either method:

• Rippling offers a native global payroll system, which allows you to pay employees who work in Australia—and around the world—in a single pay run. 
• We also have our own native EOR service, which allows you to hire and pay employees in Australia even if you haven’t set up an entity there.

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Step #2: Pick a global payroll software solution

First, it’s vital to understand the two kinds of international payroll solutions: global payroll processors and global payroll aggregators. You can learn about both in our guide.

• Global payroll processors, like Rippling, actually process your payroll, transmit funds, and calculate and file taxes in every country through their own software. Put simply: global payroll processors allow you to pay your international employees just as easily as your local employees: together in a single pay run.
• Global payroll aggregators, like Deel and Papaya Global, aggregate local payroll providers in every country and manually transmit your payroll files to them. These come with many limitations: You’re forced to submit payroll up to 30 days in advance. You can’t track, and automatically sync, employees’ time in the same system.

Remember: Payroll aggregators can’t process payroll through companies that use their own entities. But with native global payroll providers, like Rippling, you won’t have to switch systems as you scale. You can move employees from our EOR to your own local entity, without ripping out and replacing systems to accomplish this.

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Step #3: Determine your workers’ 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 hires’ Australian 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 in 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 Australian dollars, in minutes, without waiting on transfers or conversion.

Step #6: Run payroll

You have an entity (either your own or via an EOR), you’ve set up your global payroll system, and you’ve ensured your employees are correctly classified under Australian law.

Time to run payroll! Here’s a preview of how Rippling’s global payroll system works:

Step #7: File your taxes in Australia

Once you’re up and running paying your employees in Australia, you have to withhold a certain amount of taxes to send the ATO. Employers are responsible for calculating and withholding:

• Income taxes
• Payroll taxes
• Superannuation
• Fringe benefits taxes
• Medicare levies

Employers determine income taxes with a process known as pay-as-you-go (PAYG) withholding, where Australian employers issue payment summaries to employees, detailing deductions. However, the ATO recently rolled out a single-touch payroll (STP) program, which automatically reports employees’ payroll information every time they’re compensated. When adopted, this initiative gets rid of an employer’s obligation to send annual summaries. 

Employers can also enter the PAYG installments program (and are automatically entered if they’ve surpassed AUD 2 million in business income). Under this method, quarterly payments are made to the ATO and then offset against a year-end tax return.

Rippling can reduce your busy work by automatically calculating and filing your taxes in Australia.

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Frequently asked questions about running payroll in Australia

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:

What is the average salary for employees in Australia?

As of the end of 2023, average weekly earnings for Australian adults is AUD 1,888.80, according to data from the Australian Bureau of Statistics—but this varies widely by industry and occupation. 

For example, in 2023 the average weekly earnings for employees in the financial services sector was AUD 2,004.30, while the average weekly earnings for employees in the accommodation and food services sector was AUD 750.50. Experience level also plays a significant role in employee pay rates.

What are the minimum wages in Australia?

Australia's national hourly minimum wage for employees aged 21 and older is AUD 23.23 (as of July 2023). 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. 

What information is needed from employees to run payroll in Australia?

Here’s the information you need from salaried employees to process their payroll:

• 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 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. 

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 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. But 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.

Rippling syncs all your business’s HR data with payroll so you never have to use a calculator or manually enter data, like hours and payroll deductions. Rippling also handles your tax and compliance work, from work authorization to tax returns, plus we’re an authorized payroll provider by the ATO. 

What are payroll taxes in Australia?

Employers are responsible for deducting certain costs from their full-time employees’ paychecks, including a payroll tax if your total monthly wages exceed a certain income threshold that varies by state. You also need to withhold a super guarantee, a Medicare levy (Australia’s public health system), and Workers’ Compensation. Some of these charges vary by province—see our employer cost tables. 

Rippling can automatically sync tax deductions to payroll, and handles your tax and compliance work for you.

What are the late tax filing penalties in Australia?

• Failure to lodge penalty: If you don’t fulfill your tax obligations, the ATO issues  “penalty units” currently at AUD 275), which start at 1 and increase by 1 for every 28 days a filing is late, up to 5 units. Mid-size entities (between AUD 1 million and AUD 20 million in taxable income) pay twice this amount in penalties, and larger entities are subject to fines five times steeper than the base penalty amount. 
• Failure to withhold: If you don’t withhold portions of employee payments as required, you’re subject to a penalty fee equal to the amount you withheld.
• Other tax penalties: The ATO issues penalties for violating other tax obligations as follows:

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 waiting on transfers or conversions.

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. But employers must still keep an accurate record of employment and payroll information for each worker. 

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