Australia Payroll and Tax Overview

Australia is one of the largest countries in the world by landmass and is located in the southern hemisphere between the Indian Ocean and the South Pacific Ocean. Australia’s closest neighbours are New Zealand to the southeast, Papua New Guinea to the north, and Indonesia to the northwest. A highly developed, wealthy, and democratic country, Australia had a 2019 GDP of around $1.89 trillion and one of the highest incomes per capita in the world. While it has been historically reliant on its agricultural industry, the Australian economy diversified in the 20th century and key industries now include energy, healthcare, and financial services. Mining has also become extremely important to the Australian economy: the country is rich in natural resources and, in 2010, the mining industry was estimated to be contributing 8.4% to Australia’s GDP. Australia has strong political and trade connections to Asia and the rest of the world and is a member of the UN, G20, the OECD, APEC, and the Commonwealth of Nations. In 2019, the World Bank ranked Australia 14 on its Ease of Doing Business Survey.

Foreign Direct Investment in Australia

The Australian Government proactively encourages inward investment, with a wide array of incentives to encourage investment in the national economy. In recent years, the government has tried to put measures in place to encourage employers to hire Australian nationals where possible, and to only use expatriate work force where skill shortages exist.

Registering a Company and Establishing an Entity in Australia

An entity wishing to conduct business in Australia must have a legal presence in Australia. There are a number of common structures used in Australia, however the most common entities for foreign companies wishing to conduct business in Australia are either registering the foreign company in Australia (commonly referred to as a ‘branch’) or incorporating an Australian subsidiary company. Companies in Australia are bound by the provisions in the Corporations Act 2001 which are regulated and administered by the Australian Securities and Investment Commission (‘ASIC’).

Some key requirements of branches and subsidiaries are highlighted below:

Australian branch

• Must register as a foreign company with ASIC and will be issued with an Australian Registered Body Number (‘ARBN’). When applying for an ARBN, non-resident individuals and shareholders will be required to provide certified copies of certain proof of identity documents.
• Must have a registered office in Australia.
• Must appoint an Australian resident individual or company as local agent.
• Must have an Australian resident public officer for tax purposes.
• Must prepare audited financial reports and lodge them with ASIC.

Australian subsidiary company

• Australian companies are incorporated and regulated by ASIC. On incorporation, the company will be issued with an Australian Company Number (‘ACN’)
• Must have at least one shareholder.
• Must have at least 1 director who is ordinarily resident in Australia (two for public companies).
• Must have a registered office in Australia.
• Must have an Australian resident public officer for tax purposes.
• Foreign owned Australian companies must prepare audited financial reports and lodge them with ASIC. However small private companies may be able to apply for relief from this requirement.
• Provided all relevant information is available, an Australian company can generally be incorporated within one business day.

Australian Business Number

An Australian Business Number (‘ABN’) is a unique 11-digit number that identifies your business. Entities carrying out business in Australia should apply for an ABN. If you carry out business in Australia and fail to quote an ABN, customers may be required to withhold a 47 percent withholding tax from payments.

When applying for an ABN, non-resident individuals and companies will be required to provide certified copies of certain proof of identity documents.

Tax File Number

A Tax File Number (‘TFN’) is a unique identifier issued by the ATO to taxpayer’s in Australia and is generally used for taxation and superannuation purposes.

A business in Australia will have both an ABN and TFN.

Business Banking in Australia

It is not mandatory to make payments to employees or the authorities from an in-country bank account.

Working Days and Working Hours in Australia

A standard working week in Australia is typically Monday to Friday totalling 38 hours. The working day for commercial offices is typically from 8:30AM to 5:00PM. Lunch breaks range from 30 minutes to one hour.

General Information about Australia

Full Name: Commonwealth of Australia

Population: 25.36 million (World Bank, 2019)

Capital: Canberra

Largest City: Sydney

Major Language: English

Monetary Unit: 1 Australian dollar = 100 cents

Main Exports: Ores and metals, wool, food and live animals, fuels and transport machinery

GNI per Capita: US $51,760 (World Bank, 2019)

Internet Domain: .au

International Dialling Code: +61

Please download our Australia Payroll & Tax Overview (PDF) for information on taxes and social security.

Single Touch Payroll in Australia

The Australian Government has legislated to simplify business reporting obligations via a concept known as single touch payroll (‘STP’).

Businesses familiar with the United Kingdom RTI (Real Time Information) process for reporting employee wages and taxes will note that the STP system will be very similar. The most significant difference will be the lack of Tax Code adjustments in STP.

The salient points to note are:

• STP requires electronic reporting of the employee salary, PAYG (pay as you go) withholding and superannuation to the ATO at the time the salary is paid to the employee.
• When the superannuation obligation is paid by the employer – the relevant fund will notify the ATO. This will prevent employers from delaying in remitting superannuation for the employees as is an issue at present.
• No year-end payment summaries will be required if all income has been reported through STP.
• The employer can choose to remit the PAYG at the same time as paying the salary but is able to continue to pay as they are currently doing.

New Employees in Australia

Employers are required to register a new start by sending a TFN declaration form to the ATO – this is done electronically through the payroll software. The employee must provide the employer with their TFN declaration within 14 days of starting to avoid paying increased tax of 47.5%. If an employee does not provide this declaration within 14 days, the employer is required to lodge one on the employee’s behalf and withhold tax at the highest rate.

When employing a new start, an employer should request/file the employee’s personal information. The information you should request should include, but is not limited to the following:

• Name
• Residential address (Australian)
• Email address
• Phone number
• Date of birth
• Start date
• Completed and signed TFN Declaration Form
• Completed superannuation choice form - this form identifies the employees nominated superannuation fund. If no fund is nominated by the employee, a ‘default’ fund should be offered to the employee. This ‘default’ fund is normally the fund utilised by a large number of workers in the same industry.

Expat employees must be registered within 14 days of receipt of document.

Leavers in Australia

Leavers must receive their final payment within the following payment cycle at the latest or at a date mutually agreed between the employer and employee. This can vary and may be stated in the award or EBA specific to that employer or industry.

It is legally acceptable in Australia to provide employees with online payslips. Payslips must be issued to each employee within one working day of pay day in electronic or hard copy.

Payroll reports must be kept for at least seven years. The records can be kept electronically as long as the records can be printed out on request.