Australia Payroll Compliance Guide: Taxes and Best Practices

Expanding your business to Australia opens the door to a thriving, highly skilled workforce and seamless access to major global markets through robust trade agreements, but navigating the country’s unique payroll tax system presents significant challenges for even the most seasoned global businesses.

Complexities like state-by-state payroll tax thresholds, multifaceted withholding obligations, and the steep rates of fringe benefits tax can create compliance headaches and administrative burden.

In this article, we break down the must-know Australia payroll tax rules and provide best practices for maintaining compliance. With our proven support, your team can operate confidently in Australia, enjoying the market’s strategic advantages while keeping payroll risk at bay.

Why hire in Australia?

Australia may be on a far corner of the globe, but it’s hardly isolated. In fact, they’re highly connected with many major economies through free-trade agreements, including the UK, India, China, Japan, Chile, Malaysia, Singapore, Thailand, South Korea, Hong Kong, and more—paving the way for businesses to tap into streamlined trade and investment channels.

Australia also boasts of a deeply skilled workforce and low unemployment, standing at an impressive 4.3% unemployment rate as of September 2025.

Their economy is anchored by a robust services sector and includes surges in MedTech and FinTech while nationally pushing toward net‑zero carbon and clean energy. For expanding companies, having a presence in Australia isn’t just smart, but it also enhances sustainability credentials and corporate reputation.

Navigating Australia payroll tax

Hiring talent in Australia is a strong move for growth, but it comes with its own set of challenges. A new government and a new set of cultural norms mean you’ll need to learn new rules and regulations.

Australia payroll tax is a state- and territory-level tax based on total wages paid by employers, and it’s managed differently by each jurisdiction. It is self-assessed, meaning employers are responsible for determining whether or not they are required to register for payroll taxes.

The minimum thresholds and rates for Australia payroll tax vary depending on the state or territory your business operates in. At a glance, here are the thresholds for each state and territory in Australian dollars.

• Australian Capital Territory: $166,666 monthly threshold
• New South Wales: $1,200,000 annual threshold
• Northern Territory: $208,333 monthly threshold
• Queensland: $108,333 monthly threshold
• South Australia: $125,000 monthly threshold
• Tasmania: $1,250,000 annual threshold
• Victoria: $83,333 monthly threshold
• Western Australia: $83,333 monthly threshold

Employers must register for Australia payroll tax if their total wages paid exceed these thresholds in the respective state or territory. These payroll taxes fund services like health, public safety, education, and law and order.

Regardless of the state or territory, employers in Australia are required to:

• Register for payroll tax online if liable
• Calculate, pay, and report payroll tax on a monthly, quarterly, or annual cycle (frequency depends on the state or territory)
• Conduct an annual reconciliation to verify you’ve paid the correct tax liability and submit it by the deadline in July (exact due date varies based on state or territory)
• Pay penalty taxes if you’ve underreported payroll taxes or failed to maintain compliance

Types of Australia payroll tax

In addition to Australia’s payroll tax scheme, employers are also responsible for pay-as-you-go (PAYG) withholding, superannuation, and fringe benefits tax.

PAYG withholding

Australia uses a familiar, Pay As You Go (PAYG) tax structure to assess individual income tax. Employers are required to withhold tax from employee paychecks and pay those withholdings to the Australian Taxation Office (ATO) by the quarterly due date (generally 28 days after the end of the quarter). This system ensures that individuals fulfill their tax obligations throughout the year instead of in one lump sum.

With this PAYG system, it’s common for individuals to receive a tax refund each year, which acts as a nice incentive for people to complete their tax return.

To conduct PAYG withholding compliantly, employers must register for withholding, provide employees with details about withholding amounts in pay slips and payment summaries, and report all withheld amounts. Refer to these tax tables from the Australian Taxation Office to determine how much to withhold.

Superannuation

Superannuation (or ‘super’ for short) is Australia’s retirement fund. Similar to social security systems in other countries, compulsory withholding is taken for every payroll cycle during an individual's working years.

The money is saved in a super account (known as the ‘super guarantee’) to provide financial support when you retire or turn 65 years old.

As of July 2022, superannuation withholdings apply to all employees aged 18 or older, regardless of how much they are paid. Super also applies to any working individual below the age of 18 who works more than 30 hours per week.

Super payments must be submitted quarterly. In 2025, the due dates follow the below schedule:

• Q1 (July 1 - Sept 30): October 28
• Q2 (Oct 1 - Dec 31): January 28
• Q3 (Jan 1 - March 31): April 28
• Q4 (April 1 - June 30): July 28

You also have the option to make payments more frequently (such as fortnightly or monthly), but you must ensure that you pay your total super contribution by the quarterly due date.

Fringe benefits tax

Fringe benefits are perks given to employees in a different form than salary or wages, and these benefits are taxable in Australia.

Definitions can get confusing when it comes to who can receive a fringe benefit and what constitutes a fringe benefit.

For example, the definition of an employee is broad under fringe benefits tax regulations. It can cover anyone receiving a fringe benefit, including current, future, or past employees as well as company directors and trust beneficiaries working in the company.

However, sole traders and partners in a partnership are not classified as employees, and benefits they provide to themselves are not subject to fringe benefit tax.

Here are common examples of fringe benefits:

• Driving a company car for personal use
• Employee discounts on loans
• Gym memberships, event tickets, and other leisure perks
• Tuition or education-related reimbursements
• Salary sacrifice arrangements

Here are examples of what is not considered a fringe benefit:

• Salary and wages
• Employer contributions to superannuation funds
• Shares or rights provided under approved acquisition schemes
• Employment termination payments
• Dividends
• Benefits given to volunteers and contractors

The fringe benefits tax rate is an astounding 47% of the gross value of the fringe benefits. Considering the tax burden, these job perks come at quite the cost. However, employers can claim an income tax deduction for the fringe benefit taxes they’re required to pay.

Best practices for maintaining Australia payroll compliance

Staying compliant with Australia’s payroll requirements demands more than knowing the tax thresholds and types of payroll taxes. It requires strong processes, clear documentation, and constant awareness of local updates. Here are several best practices for HR, finance, and payroll leaders to ensure compliance and streamline payroll operations in Australia.

1. Stay updated on changing payroll tax thresholds and rates

Payroll tax in Australia is regulated at the state and territory level, which means rates and thresholds can change independently across jurisdictions. Payroll managers should review the latest guidance from each state’s revenue office at least quarterly and update payroll systems to avoid costly penalties. Between 2024-2025, the Australian Taxation Office collected a total of $1.16 billion in penalties from businesses.

Automated alerts or subscriptions to ATO, state revenue bulletins, and partnering with a global payroll provider can help you stay ahead of the latest regulation changes.

2. Invest in payroll automation software

Australia allows for various pay frequencies (weekly, fortnightly, or monthly), but reporting obligations like PAYG withholding and superannuation must align with unique deadlines. Establishing a standardized pay period across your Australian workforce introduces administrative complexity and opportunity for errors, creating challenges when submitting payments and reports to the ATO.

Investing in payroll automation software eliminates manual tasks while ensuring accuracy, leading to faster payments to your employees and streamlined documentation.

3. Integrate payroll, accounting, and HR systems

A common source of compliance errors in Australia payroll arises from inconsistent or outdated data. Discrepancies between payroll, accounting, and HR systems causes inaccuracies in tax withholding, superannuation contributions, and employee classifications—increasing the risk of non-compliance and costly penalties.

Integrating your payroll, accounting, and HR systems not only ensures data accuracy and consistency, but it also increases operational efficiency by helping each department collaborate seamlessly without roadblocks caused by varying numbers and confusing spreadsheets.

4. Keep meticulous employee records

Employers must retain payroll and employment records for five to seven years, including details of wages, superannuation payments, leave entitlements, and PAYG withholding. Using cloud-based payroll software with audit-ready data trails helps minimize the risk of missing or inconsistent records, particularly for distributed or hybrid teams.

Maintain compliance in Australia with Deel Global Payroll

Hiring in Australia can offer significant benefits to global businesses. The challenge is figuring out the rates that apply to each employee and who to pay the liabilities to, all while staying compliant with evolving local requirements.

Deel Global Payroll streamlines international payroll with local experts in 100+ countries and automated payroll compliance monitoring, so you can expand your business to new countries like Australia with peace of mind.

Request a free, 30-minute demo to learn more about how our solutions can help your business expand while maintaining compliance.