Australian Payroll: What Global Companies Need to know

Australian Payroll

Australia has a highly educated and multicultural workforce, making it an extremely attractive place to set up and operate a business. In Australia 40% of the workforce has a tertiary education, an education that has been gained by an internationally recognised education system and specialised training services. For global company expansion they can capitalise on the diversity of our workforce, with 30% of workers born overseas, and 2.1 million speaking an Asian language.

Australia has one of the most rigorous payroll systems in the world

However, we do have a fairly rigorous payroll system that is governed by both the Fair Work Ombudsman and the Australian Taxation Office (ATO). The Fair Work Ombudsman ensures that people are paid minimum wages, awards for different industries and entitlements. They also set the workplace rights and obligations of the employers. Global companies setting up in Australia need to be aware of what the rules of employment are before engaging in recruitment.

Related: Challenges Foreign Companies face when Setting up business in Australia

The ATO ensures that employees pay tax on their wages and salaries, and is properly administrated by the company. The company is expected to withhold the relevant amount of tax each pay cycle and forward this to the ATO along with accurate reporting. Many companies underestimate the specialist knowledge and skills required to accurately record, monitor and report on payroll to the ATO.

Most accounting software has a payroll function that allows businesses to pay employees and will also help with the reporting requirements to the ATO. Alternatively you can outsource your payroll function to a company that has expertise in this area. At Azure Group we offer Payroll Management as one our our Services to International Business.

Employing staff in Australia

When employing staff in Australia, your firstly need to ensure that they are legally allowed to work in Australia. Those that can work here legally are Australian citizens, permanent residents and New Zealand citizens. If they are a visitor they need to have the appropriate working visa (make sure you check and monitor the expiry date). It is your responsibility to ensure that you are taking reasonable steps to ensure that your workers are legal. All workers eligible to work in Australia will have a Tax File Number that is assigned to them by the ATO. This is a unique number that they use for tax and superannuation purposes.

For all employees earning over $450 a month you will need to pay 9.5% of their income (including bonuses, commissions and loadings) to them in the form of superannuation. This is called the Super Guarantee and is a requirement of employers on behalf of their employees. This payment can be made into the super fund of the employees choice. You also need to provide regular reporting to the ATO electronically to identify super payments that have been made on behalf of the employee.

Recently the ATO has introduced new regulation called Single Touch Payroll (STP) which is simplifying reporting to the ATO but is adding an initial administration burden to businesses in ensuring the set up is done properly. Employers need to ensure they have processes in place in order to satisfy their STP requirements for Australian employees, on Australian payroll regardless of how many employees they have. The ATO has the power to impose significant penalties where these requirements are not met, and deny deductions for payments made to employees where employers have failed to meet the PAYG withholding obligations. 

Related: Advantages of outsourcing your Payroll

There are minimum wages and awards for employees in Australia and you can find more details for your industry at Fair Work Australia.

If you are employing workers in Australia you need to have workers compensation. This is an insurance that employers pay in case the employee is injured at work or becomes sick as a result of their work. It covers wages while they are unfit for work and medical expenses.

If you have a larger operation here in Australia, then you may need to pay payroll tax. This is an additional tax that you need to pay. It is calculated on the total wages paid by employers and is paid once you reach the threshold that applies to the state in which you are operating.

You need to be mindful of additional benefits that you give employees such as private use of a work car, or paying private expenses such as school fees or health insurance costs. These are considered as fringe benefits and can incur Fringe Benefits Tax or FBT.

Related: ATO Hot spots: FBT Year End is here. Are you FBT ready?

There are a number of things you need to consider when employing staff in Australia. Even if you decide to do your payroll in-house it is recommended that you get some expert advice initially and to help in the set up of your payroll operations. There can be hefty fines for getting it wrong!

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About Author

Kelly Morgan
Kelly Morgan

Kelly Morgan has over 32 years’ experience as a Chartered Accountant and is the Managing Partner of Azure Group heading up the Business Accounting, Technology & International divisions. Kelly is passionate about working with business owners. By working closely with her clients, Kelly helps them to maximise the opportunities in their business and assist them to achieve their goals.

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