Australia

Registrations and Establishing an Entity

Foreign companies may operate in Australia by registering a branch or incorporating a local subsidiary. The subsidiary route is common, requiring at least one Australian-resident director and an Australian Company Number (ACN). All companies must register with the Australian Securities and Investments Commission (ASIC) and nominate a public officer for tax purposes. Additionally, they must obtain a Tax File Number (TFN) and an Australian Business Number (ABN), and if eligible, register for Goods and Services Tax (GST).

Branches must appoint a local agent and are required to file audited financial statements. While there are no minimum capital requirements, incorporation is subject to compliance with the Corporations Act 2001.

Banking

While it is not mandatory to make employee and authority payments from an Australian bank account, it is customary and simplifies compliance. Businesses must hold local bank accounts for operations involving payroll tax, superannuation, and BAS reporting. Banking hours generally run from 09:00 to 16:00 on weekdays.

Working Week

The standard working week in Australia is Monday to Friday, totalling 38 hours, although this may vary depending on award agreements or enterprise contracts. Business hours for most commercial offices run from 08:30 to 17:00, with lunch breaks ranging from 30 minutes to one hour.

Employment Law

Holiday Accrual

All employees are entitled to 4 weeks of paid annual leave per year of service, or 5 weeks for certain shift workers. Annual leave accrues progressively and may carry over year to year. Additional leave loading (typically 17.5%) may apply under awards or agreements.

Maternity Leave

Eligible employees are entitled to 12 months of unpaid parental leave, with the option to request an additional 12 months. The government funds paid parental leave for up to 18 weeks at the national minimum wage, subject to eligibility criteria. Employers are not obliged to provide paid leave but must administer government payments through payroll where nominated.

Paternity Leave

Fathers or secondary carers are eligible for 2 weeks of government-funded unpaid parental leave at minimum wage, with a potential extension to unpaid leave under Fair Work provisions.

Sick Leave

Employees receive 10 days of paid personal/carer’s leave per year. Unused leave accumulates year to year. Additional unpaid leave is available in specific situations including compassionate grounds.

National Service

Australia does not operate a system of compulsory national service. However, employees may take community service leave, such as for jury duty or emergency volunteer work.

Tax & Social Security

The Australian Taxation Office (ATO) oversees national taxation. The tax year runs from 1 July to 30 June. Companies must file annual tax returns, and eligible entities may adopt a Substituted Accounting Period to align with foreign parent timelines.

Income Tax

Resident individuals are taxed on worldwide income; non-residents are taxed only on Australian-sourced income. From 1 July 2024, the marginal tax rates for residents are:

• 0% on income up to $18,200
• 19% from $18,201–$45,000
• 30% from $45,001–$200,000
• 45% above $200,000

Employers must withhold Pay-As-You-Go (PAYG) income tax and remit it monthly or quarterly, depending on their size.

Social Security (Superannuation)

Australia’s retirement system is based on compulsory superannuation contributions. From 1 July 2024, employers must contribute 11.5% of Ordinary Time Earnings (OTE) to a complying super fund. Contributions must be paid quarterly by specific cut-off dates.

Employees do not contribute to social security but may make voluntary super contributions. Super is not assessable as employee income unless thresholds are exceeded.

Payroll

Australia uses the Single Touch Payroll (STP) system, which requires employers to report employee wages, PAYG, and superannuation in real time at each pay cycle. This eliminates the need for year-end payment summaries. STP compliance is mandatory for all employers.

Reports

Employers must retain payroll records for at least 7 years. These include payslips, leave balances, payment summaries, and superannuation contributions. Records may be stored electronically but must be printable on request.

Payslip Example

Payslips must include gross and net pay, PAYG withheld, super contributions, and leave balances. These can be provided electronically or in hard copy within 1 business day of pay date.

Reporting

Key monthly and quarterly reports include:

• BAS for GST and PAYG
• Superannuation Guarantee reports (due quarterly)
• STP file submission with each pay run
• Annual reconciliations and summaries must be submitted to ATO by 14 July.

New Employees

Employers must collect a completed Tax File Number (TFN) declaration and a Superannuation Standard Choice form. Employees must be registered within 14 days of starting to avoid penalties. Expatriates must hold the appropriate work visa before employment commences.

New hires must provide:

• Name, DOB, address, TFN
• Bank details
• Super fund information
• Signed employment contract
  
  

Leavers

Final payments must be made in the next regular pay cycle or earlier if stipulated in the contract. Employers must report termination through STP, and any outstanding leave or entitlements must be paid in line with National Employment Standards.

Employee Benefits

In addition to superannuation, common benefits include:

• Salary packaging (pre-tax benefits)
• Bonus or incentive plans
• Health insurance contributions
• Car allowances or novated leases
• Paid parental or study leave (in some sectors)
  
  

Most fringe benefits attract Fringe Benefits Tax (FBT) at 47%, with certain exemptions or reductions.

Expenses

Reimbursed expenses may be processed through payroll or accounts payable. Allowances (e.g. for travel or meals) may be taxable depending on purpose. FBT applies to non-cash benefits such as entertainment and personal use of company cars.

Australia operates a points-based immigration system. Most non-citizens require a valid visa to work in Australia. Key visa types include:

• Temporary Skill Shortage Visa (subclass 482): Employer-sponsored for specific occupations.
• Working Holiday Visa (subclass 417): Temporary work for eligible young nationals.
• Permanent Skilled Visas (e.g. subclass 186): Employer-nominated pathways to permanent residency.
  
  

Employers must be registered as sponsors and ensure visa holders are working in compliance with the visa terms. Expatriates may qualify for a Departing Australia Superannuation Payment (DASP) upon leaving the country.

• Each state and territory applies its own Payroll Tax, with thresholds and rates varying.
• Employers must hold workers’ compensation insurance in each state where employees are based.
• Australia uses electronic payroll filing via STP, which synchronises tax and super data.
• Fringe Benefits Tax applies to non-cash benefits provided to employees or associates.
• Non-residents are subject to a different tax scale, starting at 32.5% from the first dollar earned.
  
  

Further Information

For more information, or assistance with Australian Tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.