Australia Payroll

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Australia Payroll Services 

Successful international expansion depends on making the right moves from day one. This is vital for foreign companies establishing a presence and operating payroll in Australia – one of the strongest Pacific Rim economic powers alongside China, South Korea and Japan and other nations in the Trans-Pacific Partnership.

Bradford Jacobs’ Professional Employer Organization (PEO) and Employer of Record (EOR) platforms provide complete answers to every question your company will face before your planned move into the Australian economy.

We aim to make business expansion easy. At Bradford Jacobs, we navigate the administration of the Australian payroll system for you, and we also make the returns and associated payments for income tax and social security contributions directly from our payroll system to the local tax authorities. We do the work, so you do not have to.

When expanding into a new country, you may encounter some challenges regarding payroll, but allow us to take the reins and answer any of your questions and concerns with our trusty guide on payroll for Australia.

What Australia Payroll Options are available for Companies?

  • Remote payroll - This option allows businesses to operate under a single payroll system, by adding employees in Australia to your parent company’s payroll. However, these employees must operate under different regulations, which is likely to cause problems.
  • Internal payroll - You may operate payroll for your subsidiary, especially if you are committed to growing your company’s presence in Australia. However, this does require hiring dedicated HR staff who understand Australian employment and compliance laws.
  • Australia payroll processing company - If you are considering outsourcing, then working with an Australian payroll company will help in processing your payroll – but not when it comes to compliance.
  • Australia payroll outsourcing - However, there is another option available that solves both concerns – by working with Bradford Jacobs. We can handle payroll and compliance for all your employees in Australia. We take the administrative stress off your shoulders so you can focus on what you do best.

Australia Payroll Services

Companies expanding their operations into Australia open up a wealth of opportunities for expansion throughout the Pacific Rim nations and worldwide – but challenges come alongside the potential benefits. Payroll management is among those challenges, whether your company is considering moving employees abroad or hiring new staff in-country. Employment laws, payroll and income tax regulations are areas where you cannot afford mistakes.

Bradford Jacobs’ Employer of Record (EOR) payroll solutions will navigate around these potential pitfalls effectively and efficiently by putting into action our comprehensive knowledge of tax and payroll rules.

Paying staff in Australia, either locals or foreigners, demands complete understanding of the employment and taxation regulations. This is complicated in Australia as they can vary between different states, in addition to the effect of ‘enterprise’ or collective agreements.

Outsourced payroll services in Australia will deal with the following:

  • Remitting payments for income tax via Pay As You Go (PAYG) and Fringe Benefits Tax (FBT) to the Australian Tax Office (ATO). Thresholds and rates may vary between states.
  • Employers paying a full-time, part-time, or casual employee more than AU$450 (€290, US$326) regular earnings per month must pay superannuation towards their pension. The minimum Super Guarantee (SG) is 10% of their earnings and is expected to be 12% by 2025. The SG contributions also apply to employees who are temporary residents of Australia. Employees can choose their own ‘super fund’ or take the employer’s default fund.
  • Registering with Centrelink for social security support, which is generally restricted to Australian citizens and long-term residents and funded from general revenue rather than by employer and employee contributions
  • Filing tax returns within four months of the end of the tax year, which runs from July 1 to June 30 of the following year
  • Remitting withheld taxes from employees’ salary to the Australian Tax Office (ATO)
  • Creating employment contracts
  • Creating pay slips and calculating monthly salary and income tax contributions to be remitted

Additional payroll support includes:

  • Reconciling federal, state, territorial and municipal taxes to assess for refunds or extra payments
  • Creating payment schedules for salaries
  • Ensuring accurate personal income tax returns are filed for your employees, where required

The above checklist highlights why the vast percentage of foreign companies expanding into Australia’s strictly regulated business environment hand their payroll to EOR providers such as Bradford Jacobs. By outsourcing payroll your company complies with tax and employment regulations without risking sanctions or financial penalties for late or incomplete filing. You focus on your goals and expansion, free of any concerns over payroll. Questions? We have the answers. Contact Bradford Jacobs now.

What is required to set up Payroll in Australia?

Foreign companies establishing their presence in Australia must satisfy strict legal requirements with running payroll, in addition to complying with minimum wage, overtime pay and other employee benefits and entitlements. Businesses looking to set up a legal entity in Australia to run their own payroll must take the following steps:

  • Select a company name that does not conflict with existing companies
  • Decide on which type of company to be incorporated, as a subsidiary or branch; a company limited by shares or by guarantee, an unlimited company or a no liability company (generally restricted to the mining sector)
  • Register with the Australian Securities and Investments Commission (ASIC)
  • Register with the Australian Tax Office (ATO)
  • Obtain a Tax File Number (TFN)
  • Register for Pay As You Go (PAYG) taxation and Goods and Services Tax (GST)
  • Register for an 11-digit Australian Business Number (ABN) to interact with the ATO and other legislative bodies

What Entitlement and Termination Terms apply to Australia Payroll?

  • National Minimum Wage: In July 2021, Australia’s Fair Work Commission’s annual review raised the basic minimum for full-time workers over 21 years old to AU$772.60 (€497, US$567) per week or AU$20.33 (€13, US$15) per hour. The rate applies till June 2022. Most employees’ minimum wages are set for the industry or sector where they work, which cannot undercut the statutory national minimum.

    The national minimum applies to most private companies in Australia that are regulated by the Fair Work Act, (2009) and whose employees are covered by the National Employment Relations System.

    Part-time employees are paid the same rate, adjusted pro rata for the hours they work. Casual workers are paid ‘casual loading’ above the minimum rate as they are not entitled to benefits such as sick leave or paid vacations.

  • Sick Leave: National Employment Standards regulations decree that all full-time employees are entitled to paid sick leave. Employees can take paid leave to support a member of their immediate family who is sick, injured or if they face a family emergency. The annual entitlement is 10 days (pro rata for part-timers) with unused days carried forward to the following year. Casual workers do not qualify for sick leave but are paid ‘casual loading’ above their basic pay to compensate. Medical certificates may be required by the employer.

  • Working Hours and Breaks: Based on 2009’s Fair Work Act, employees’ maximum working week comprises 38 hours, or 7.6 hours each day, unless asked by their employer to work reasonable extra hours.

    ‘Reasonable’ hours include considerations such as whether there is provision to pay overtime, or whether extra hours pose a risk to the employee’s health or personal circumstances. Maximum working hours come under National Employment Standards and apply to all employees covered by the National Workplace Relations System regardless of any awards, agreements, or contracts.

    The maximum period working hours can be ‘averaged out’ is 26 weeks, although employers or employees are not required to conclude an averaging out agreement. Working time fits into a ‘span of hours’.

    Legislation allows for the following work breaks:

    - Between 4 and 5 hours - 10-min break
    - Between 5 and 7 hours - 10-min break; 30-60 min meal break
    - Between 7 and 10 hours - 2 x 10-min breaks; 30-60 min meal break
    - Over 10 hours - 2 x 10-min breaks; 2 x 30-60 min meal breaks

  • Overtime: Employees can agree to an employer’s request to perform reasonable amounts of overtime, above their normal working hours of 38 a week or 7.6 hours per day.

    If employees are not covered by a ‘modern award’ or enterprise (collective) agreement detailing overtime entitlement, any overtime pay depends on their contract. Some award or enterprise agreements allow employees time off in lieu of working overtime, instead of extra pay.

    Typically, overtime pay may be 1.5 times normal salary for the first two or three hours and twice the normal hourly rate after this.

  • Paid Vacations: Under National Employment Standards (NES), full-time employees are entitled to four weeks’ annual leave each year. Employees classified as shift workers receive five weeks annual leave. Casual workers are not entitled to annual leave, but their salary is ‘casual loaded’ above their basic rate as compensation. Employees covered by award or enterprise agreements may receive additional leave; employees not covered by such agreements may ‘buy’ extra vacation by giving up equivalent pay.

  • Maternity Benefit: Parental Leave Pay (PLP) is AU$772.55 (€498.68, US$567.75) per week, AU$154.51 (€99.75, US$113.55) per day, before tax. The award is for 90 ‘payable days’ over 18 weeks, comprising 60 payable days and 30 Flexible Paid Parental Leave days.

    Fathers and partners may also be eligible for 10 payable days over two weeks, meaning families could be eligible for a total of 100 payable days over 20 weeks. Calculations are based on the national minimum wage weekly rate.

  • Maternity / Paternity / Parental Leave: Paid maternity leave is for a total of 18 weeks; fathers and partners may receive 10 days paid leave. On the birth or adoption of a child, parents are entitled to parental leave.

    Leave applies when an employee, their spouse or de facto partner gives birth, or when they adopt a child under 16 years of age. Employees are eligible if they have worked for their employer at least 12 months before the expected date of the birth or before the adoption date.

    Employees do not have to work another 12 months to take another period of parental leave if they are with the same employer – but, they will have to work for one year before taking parental leave with a new employer.

  • Discrimination: Employees are protected against discrimination by federal anti-discrimination laws through a combination of the Age Discrimination Act, Disability Discrimination Act, Racial Discrimination Act, and the Sex Discrimination Act. It is unlawful to discriminate for reasons including age, race, sex or inter-sex status, gender identity and sexual orientation.

  • Termination and Severance: These are covered by National Employment Standards (NES). Grounds for termination include mutual agreement, end of a fixed-term contract, termination with or without notice by the employer and resignation by the employee.

    Employers cannot terminate employment of individuals who have a ‘workplace right’ or take part in lawful ‘industrial activity’. Termination is prohibited on grounds such as race, gender, age, or disability or if the employee is absent due to illness or injury for less than three months in a 12-month period.

    In the case of 15 or more collective redundancies the relevant government agencies and trade unions must be informed.

    On termination, employees’ severance pay should include:
    - Outstanding salary or other remuneration
    - Pay in lieu of notice of termination
    - Accrued annual leave or long service entitlements
    - Balance of any time off taken instead of overtime pay
    - Redundancy pay, if eligible

    Termination due to redundancy entitles employees to severance pay based on years of service:

    - Less than 12 months: Zero
    - 12 months to less than 2 years: 4 weeks’ pay
    - 2 years to less than 3 years: 6 weeks’ pay
    - 3 years to less than 4 years: 7 weeks’ pay
    - 4 years to less than 5 years: 8 weeks’ pay
    - 5 years to less than 6 years: 10 weeks’ pay
    - 6 years to less than 7 years: 11 weeks’ pay
    - 7 years to less than 8 years: 13 weeks’ pay
    - 8 years to less than 9 years: 14 weeks’ pay
    - 9 years to less than 10 years: 16 weeks’ pay
    - 10 years and over: 12 weeks’ pay*

    * The reduction in entitlement assumes employee will be eligible for long service benefits after 10 years’ service.

    Employers risk penalties of AU$13,000 (€8,392, US$9,525) per breach for an employee and AU$66,000 (€42,611, US$48,358) per breach for a company if they ignore obligations under workplace legislation.

  • Notice Periods: These begin the day after the employer tells the employee they want to terminate employment and end on the final day of work. Minimum notice periods apply:

    - 1 year or less: 1 week
    - Between 1 year to 3 years: 2 weeks
    - Between 3 years to 5 years: 3 weeks
    - More than 5 years: 4 weeks

    Employees over 45 years old receive an extra week’s notice if they have been with the employer for at least two years. Awards, contracts, enterprise (collective) agreements may stipulate longer periods of notice, such as one month rather than one week.

  • Public Holidays: Public holidays for such as Labor Day or the Queen’s birthday are decided by individual states.

    - New Year’s Day - January 1
    - Australia Day - January 26
    - Good Friday - March / April
    - Easter Monday - March / April
    - Anzac Day - April 25
    - Christmas Day - December 25
    - Boxing Day - December 26

  • Health and Social Insurance: Australia’s social security income support system is entirely funded by central government, without contributions from either employer or employees. The system is restricted to Australian residents, as defined by the Social Security Act 1991. Migrants generally have no access to social security payments for four years after their arrival.

    Australia’s universal public healthcare system comes under Medicare, providing a wide range of services for Australian citizens, permanent residents, and some overseas visitors. The private healthcare system includes private hospitals and specialized clinics funded by premiums from individuals, corporations, or government incentives. Some employers may offer private healthcare as an employee benefit.

Australia 13th Month Salary

There is no legal requirement to pay a 13th month’s salary in Australia.

What Taxation Rules exist for Australia Payroll?

  • Employers withhold employees’ tax and remit to the Australian Tax Office (ATO)
  • Employers paying a full-time, part-time, or casual employee more than AU$450 (€290, US$326) regular earnings per month must pay superannuation towards their pension. The minimum Super Guarantee (SG) is 10% of their earnings and is expected to be 12% by 2025. The SG contributions also apply to employees who are temporary residents of Australia. Employees can choose their own ‘super fund’ or take the employer’s default fund
  • The tax year is from July 1 - June 30 of the following year, and individual returns must be filed by October 31 with the ATO, via a myGov link on their website
  • Australian citizens are taxed on their worldwide income and may be taxed both in Australia and other countries where they have income
  • There are no joint returns for married couples, but each must include information about their partner on their own return
  • Foreign workers do not receive any tax-free allowance and are taxed on their entire income
  • Categories of taxable income include salaries, professional fees, income from rentals and the sale or acquisition of assets, interest, and dividends

Before operating payroll, various procedures must be followed, including:

  • Remitting payments for income tax via Pay As You Go (PAYG) and Fringe Benefits Tax (FBT) to the Australian Tax Office (ATO). Thresholds and rates may vary between states
  • Registering with Centrelink for social security support, which is generally restricted to Australian citizens and long-term residents and funded from general revenue rather than by employer and employee contributions
  • Filing tax returns within four months of the end of the tax year, which runs from July 1 to June 30
  • Remitting withheld taxes from employees’ salary to the Australian Tax Office (ATO)
  • Creating employment contracts
  • Creating pay slips and calculating monthly salary and income tax contributions to be remitted

Income Tax

Australian citizens and residents are taxed on their worldwide income; non-residents and those living there only temporarily are generally liable for tax only on income earned in Australia. Individuals living in Australia for more than six months in a year are considered residents for tax purposes. A temporary resident can be an individual on a specific visa, while non-residents are individuals in Australia fewer than six months in a year. Rates for resident taxpayers range from 19% to 45%.

Rules on other taxes

  • Corporate Income Tax (CIT): Resident companies are subject to 30% tax on their worldwide income; non-resident companies only on their Australian-sourced income. Small and Medium Enterprises (SMEs) have a reduce rate of 25% for the 2021/22 tax year.
  • Withholding Tax (WHT): These apply at various rates on dividends paid to non-resident companies according to tax treaties and whether the dividends have been taxed in Australia.
  • Capital Gains Tax (CGT): These are treated as taxable income.
  • Indirect Taxes: The standard rate for Goods and Services Tax (GST) is 10%.
  • Customs and Excise Duties: Excisable goods include alcohol, tobacco, and petroleum; companies operating in these areas require a license from the Australian Tax Office.
  • Other Taxes: There are no state or municipal taxes on income in Australia.

Stress Free Global Expansion

Bradford Jacobs’ Employer of Record (EOR) solutions smooth your route into Australia and every new territory targeted for worldwide expansion. Registration procedures, tax laws and dealing with relevant authorities are potentially hazardous barriers to your expansion, risking severe fines for non-compliance or late returns. Bradford Jacobs is on call every step of the way to ensure your company clears all the hurdles to establishing a successful presence in Australia.

Contact us today for more information!