Australian Payroll: What Global Companies Need to know

Understanding Australian Payroll and requirements to set up a Payroll in Australia 

In Australia, payroll compliance laws cover everything from wages to hiring and firing, entitlements, bonuses and work arrangements just to name a few.

Before setting up a payroll in Australia, you will need to meet particular requirements. Whether establishing a subsidiary or setting up an Australian branch of your company, you need to ensure you are legally compliant. Before you start running an Australian Payroll, you’ll need an Australian Business Number (ABN) and a Tax File Number (TFN). In addition, you must register for Goods and Services Tax (GST) and a Pay as You Go withholding tax. (PAYGW). You will also need to pay your employees from a business bank account in Australia. To qualify for such an account, your business must be registered in Australia

Related: Starting a business in Australia for foreigners: Opening a Bank Account

Australian workforce 

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. Whilst Australia’s business landscape offers a myriad of opportunities for foreign companies, it is important that businesses understand their legal obligations, predominantly with respect to the Australian Payroll system.

The Australian Payroll system is one of the most rigorous in the world 

The Australian Payroll system 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. Before engaging in recruitment, global businesses setting up in Australia need to be aware of what their obligations are with regards to employment and the Australian Payroll system.

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

The ATO ensures that employees pay tax on their wages and salaries, and that this 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 Australian Payroll to the ATO.

Most accounting software in Australia 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 in Australia to a company that has expertise in this area. At Azure Group, we provide a range of outsourced accounting and payroll services. We uphold a reputation for being a proactive, hands-on firm that delivers smart, innovative and revolutionary accounting services to match the demanding needs of today's entrepreneurial business.

Employing staff in Australia 

When employing staff in Australia, you firstly need to ensure that they are legally allowed to work in Australia. Australian employees 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 legal obligations are upheld when employing staff in Australia. All workers eligible to work in Australia will have a Tax File Number (TFN) that is assigned to them by the ATO. This is a unique number that they use for tax and superannuation purposes.

Australian employers are required to make Super Guarantee contributions of 10.5% to their employees’ eligible super fund, regardless of their monthly pay. The Super Guarantee is a requirement of Australian 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 setup 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, then you may need to pay payroll tax in Australia. 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?

Get in touch 

There are several considerations to account for when employing staff in Australia. Even if you decide to do your payroll in-house it is recommended that you get some expert advice from an outsourced payroll provider in Australia initially to assist with setting up your payroll in Australia. There can be hefty fines for getting it wrong!

About Azure Group

At Azure Group we manage your employee’s needs from engagement to termination – ensuring all information is held in the strictest confidence. We utilise Australian standard software with the latest tax tables and keep you abreast of all legislative changes ensuring payroll data and systems comply.

Our Team

Our team of fully qualified accounting professionals use best practice accounting standards to integrate every aspect of the payroll process into your business, simplifying your payroll model, providing you with immediate reporting and ensuring compliance with regulatory bodies.

Contact Us

Get in touch with our team to discuss about outsourcing your payroll function. 

Have you noticed our #FridayExpertTips... here's one that relates to #Payroll

“Running Australian Payroll can be complicated and time-consuming. There are a lot of legal requirements, which means there are serious risks to getting things wrong. Many business owners prefer to leave it to the experts and outsource their payroll."