Australia payroll and benefits guide

What global businesses need to know about payroll in Australia

Australia is perhaps best known for its huge size and the diversity of its landscape: modern cities, deep tropical jungles, golden sandy beaches and the arid outback. And while it might be a long way away from the traditional Western economic giants of Europe and the US, it’s a strong, successful, highly-developed nation in its own right.

Australia is the 13th-biggest economy in the world by GDP, but with a population of only 27 million, it moves into the top ten when measured by GDP per capita—ahead of the likes of the Netherlands, Canada, Germany and the United Kingdom. More than 60% of its economy is services, although mining and agriculture in more rural areas are still major financial drivers away from the financial centers of Sydney and Melbourne. Add in a well-educated, English-speaking population and strong trade links with China and Japan, and Australia is a country more connected than most on the world stage of trade.

From a payroll and employment perspective, Australia is very strong on employee rights, with recent legislation further boosting protections and entitlements in this area. This guide covers these changes, and everything else you need to know about running payroll in Australia.

Getting Started

Foreign businesses can be set up in Australia as foreign branches or as Australian subsidiary companies. Which is more suitable will vary from business to business, and there are different tax implications: for example, branch offices may not necessarily be subject to Australian tax, depending on whether it constitutes a ‘permanent establishment’.

If you’re setting up a company in Australia, then at least one registered Director and one registered Secretary must be residents within the country.

In any case, companies must register and incorporate with the Australian Securities and Investments Commission (ASIC), and obtain:

An Australian Business Number (ABN)
A Tax File Number (TFN)
Registration for Goods & Services Tax (GST) and Pay As You Go (PAYG)

You can go through these functions online through the Business Registration Service. You’ll also be required to pay an annual fee to ASIC for their yearly review, and it’s worth searching for business permits on the Australian Government’s website to see if there are any licenses you need to operate legally.

Employment Considerations in Australia

Australia gives its own workers preference in the job market, so recruiting Australians is easy but hiring foreign workers can be difficult. To bring in a foreign worker, an employer must sponsor an employee, who must also have a valid visa for work. Generally speaking, overseas workers are only allowed to fill job roles on the Australian government’s skills shortage list. It’s also important to note that certain visas can only be administered upon the issuance of a job offer or the express notification of an individual’s intent to develop, manage, or invest in a business.

Australia has long had a strong approach to employee rights, many of which are enshrined in the Fair Work Act 2009. More recently, Australia has followed France’s lead in introducing the ‘Right to Disconnect’, whereby employees have the right to refuse any work or contact outside of their agreed working hours. This was introduced for larger employers in August 2024, and will be extended to all Australian businesses in August 2025.

Additionally, the Fair Work Commission adjusted classifications around casual employment, and made deliberate underpayments or late payments of wages or entitlements a criminal offence.

The maximum working week in Australia is 38 hours, although an employer can make ‘reasonable’ requests to employees to work hours in excess of this, or to allow the 38-hour weekly limit to be applied as a rolling average across a longer period.

Overtime is generally paid for any work beyond 38 hours in a week, and/or beyond ten hours in a day, as long as they are covered by ‘Industrial Award’ agreements. Furthermore, employers are required to conduct assessments before granting any overtime around whether it would be reasonable for an employee to work the extra hours.

The rates of overtime pay are agreed upon in employment contracts or in Industrial Awards. The most common rate is 200% of normal salary for the first three extra hours, and 150% for any hours on top of that. The higher rate is generally applied at weekends, nights or on public holidays.

Notice periods are progressive, depending on the length of service, starting at one week during the first year of service, and with extra weeks added after one, three, and five years of service. An additional week is added if an employee is over 45 and has at least two years’ service. Despite these statutory minimums, providing four weeks’ notice in employment contracts or Industrial Awards is commonplace. The standard probation period is between three and six months, but can be extended by written agreement in the employment contract.

Employers in Australia are required to cover their employees with workers’ compensation insurance in case of accidents in the workplace, and they must have coverage in each state and territory in which they hire workers. Premiums are based on factors such as the type of industry, remuneration, and claims history.

Compensation and Severance

The Australian government’s Fair Work Commission reviews the federal minimum wage rate annually, with changes usually implemented on July 1^st each year. For 2025/26, the rate is AUD 24.95 per hour (approx. £12.10; $16.40; €14.00) or AUD 948.10 per week (approx. £460; $620; €530). Different rates apply to employees under 21, on apprenticeships or with disabilities. Additionally, other minimum pay rates are required for certain jobs in certain states.

The payment of bonuses in Australia is common as a reward for good performance, and can be either contractual or discretionary in nature.

Severance pay should be paid to employees made redundant who have at least one year of service. Rates vary between four and 12 weeks of salary, depending on length of service and generally increasing; however, for employees with ten years’ service or more, the entitlement drops from 16 weeks back to 12.

Tax and Social Security Considerations in Australia

Income tax rates are progressive in Australia, but different rates apply to residents and foreign residents. These rates were revised, effective from July 1^st 2024.

For residents, the first AU$18,200 (approx. £8,700; $11,600; €10,200) is untaxed before the first band of 16% is introduced. Further bands of 30% and 37% apply, before the top rate of 45% kicks in for earnings over AU$190,000 (approx. £91,000; $121,000; €106,000).

Foreign residents receive no exemption and pay an initial 30% on their earnings. Higher rates of 37% and 45% kick in at AU$135,000 (approx. £64,500; $86,000; €75,500) and AU$190,000 respectively.

Goods & Services Tax is a broad tax of 10% on most goods, services, and other items sold in Australia. Businesses can claim credits for GST that’s included in the price of the goods and services they sell from the Australian Taxation Office, but must also account for and pay GST monthly, quarterly, or through an annual return.

There are four main types of social security contribution in Australia:

Payroll tax: 5.45% employer
Accident insurance: 1.5% employer
Medicare levy: 2% employee
Superannuation: 11.5% employer

The superannuation rate has been consistently increased in recent years, and will go up to 12% from July 1^st, 2025. However, according to the Australian Taxation Office, the 12% rate will remain in place for at least the following three years without any further increases.

All employers are now required to use the Single Touch Payroll (STP) system for reporting superannuation, tax, and payroll information to the Australian Taxation Office (ATO).

Any non-cash benefits provided to employees (for example, private health insurance or company cars), are considered ‘fringe benefits’ and are subject to a high tax rate of 47%.

Holiday and Leave Considerations in Australia

The public holiday system is complex in Australia. There are only six days per year that are observed in every state, but there are dozens of further days that are observed in some states but not others, or are only observed in one state. Paid leave entitlement is a minimum of four weeks, increasing to five weeks for shift workers.

Paid sick leave entitlement is ten days per year, covered by employers, but it can also be used either as compassionate leave, or if they or someone they care for is unfit for work. Beyond this, employees can take up to three further months of sick leave and two days of carer’s leave on an unpaid basis.

Australia is unusual in offering Long Service Leave (LSL) to encourage employee loyalty. Rates vary from state to state, but most offer 2-3 months of paid leave to employees who reach a fixed threshold usually between seven and ten years of service. Employers should note that LSL is payable upon termination if unused.

Australia’s already-generous parental leave entitlement is increasing once again. From July 1^st 2025, both parents of a newborn child (including partners of birth mothers/fathers, and those adopting) can take 24 weeks paid leave if they work five days a week. This has been increased from 20 weeks, while the authorities will also make a 12% superannuation contribution on the parental leave pay. Employers make these payments to employees and can then claim them back from social security.

Parents also have the right to a further 12 months of unpaid parental leave each; thanks to new legislation introduced in 2023, one partner can now apply to take the full 24-month allocation of both parents.

Payroll in Australia: A summary

From minimum wage through superannuation to parental leave, there have been plenty of changes in recent years in how payroll and employment work in Australia. Keeping up with these new requirements is essential for compliance, but can be difficult if your payroll teams have to keep track of similar movements in many different territories around the world. It’s in this situation that a global payroll partner with a network of country-specific payroll experts really comes into its own.

This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.

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