

The Ultimate Guide to Payroll Management for Small Businesses in Australia
Managing payroll is a crucial responsibility for small businesses in Australia.
From calculating wages and withholding taxes to meeting superannuation requirements, payroll management ensures compliance with Australian regulations and keeps employees satisfied.
This comprehensive guide will walk you through setting up payroll, meeting legal obligations, and streamlining processes using modern tools.



1. Setting Up Payroll for Your Business
Setting up payroll correctly from the beginning helps avoid errors and compliance issues.
Step 1: Register for PAYG Withholding
-
Obtain an Australian Business Number (ABN) and Tax File Number (TFN) for your business.
-
Apply for Pay As You Go (PAYG) withholding with the Australian Taxation Office (ATO).
Step 2: Collect Employee Details
-
Gather Tax File Number Declarations.
-
Record superannuation fund details.
-
Track bank account information for salary payments.
Step 3: Choose a Payroll System
-
Cloud-Based Software: Options like Xero, MYOB, or KeyPay simplify compliance and reporting.
-
In-House Payroll: Suitable for businesses with few employees.
-
Outsourcing: Ideal for businesses wanting to minimise administrative tasks.
Pro Tip: Automate tax calculations, payslip generation, and super payments using payroll software to save time and reduce errors.


2. Single Touch Payroll (STP) Reporting
Single Touch Payroll (STP) reporting lets businesses report employee wages, tax withholdings, and superannuation contributions every time they pay employees. This reporting goes directly to the Australian Taxation Office (ATO) in real time. It streamlines payroll processes, improves compliance, and ensures transparency for both employers and employees.
What is STP?
-
A system introduced by the ATO to report wages, tax, and superannuation in real time.
-
Applies to all businesses, including those with only one employee.
STP Compliance Checklist:
-
Ensure your payroll software is STP-enabled.
-
Report payments to the ATO every time you pay employees.
-
Include salary, wages, PAYG withholding, and superannuation information.
-
Submit reports through software linked to the ATO portal.
​​
Pro Tip: Use STP Phase 2, which expands reporting requirements, for greater compliance and transparency.


3. Calculating Wages and Overtime
Calculating wages and overtime correctly is important. This ensures that businesses pay employees correctly and that they follow Fair Work rules. By understanding award rates, penalty rates, and overtime rules, businesses can avoid disputes and maintain fair workplace practices.
Award Rates and Minimum Wage:
-
Check the Fair Work Ombudsman website for industry-specific award rates and minimum wage requirements.
-
Update rates annually in line with government announcements.
Overtime and Penalty Rates:
-
Understand obligations for overtime pay, public holidays, and weekend work.
-
Track hours using time-tracking software like Deputy or Tanda.
​​
Pro Tip: Automate award rate calculations in your payroll system to ensure compliance with Fair Work standards.


4. Superannuation Contributions
Employers must pay Superannuation Guarantee Contributions (SGC) for eligible employees. SGCs are payments that employers must make to their employees' super funds. These payments help employees save for retirement.
Employers calculate super as a percentage of an employee's Ordinary Time Earnings (OTE). OTE includes wages, salaries, commissions, bonuses, and allowances earned during regular working hours. However, it does not include overtime payments.
Key Superannuation Rules:
-
Minimum contribution: 11.5% of ordinary time earnings (2024–25).
-
Payments due quarterly— 28 January, April, July, and October.
-
You must make payments through SuperStream, an ATO-approved system.
Penalties for Non-Compliance:
-
Interest charges and fines.
-
Additional Superannuation Guarantee Charge (SGC) if payments are late.
​Pro Tip: Automate super payments through payroll software to avoid penalties and meet deadlines.


5. Leave Entitlements and Tracking
Employees are entitled to various forms of leave under the National Employment Standards (NES).
Types of Leave:
-
Annual Leave: 4 weeks paid leave per year.
-
Personal/Carer’s Leave: 10 days paid leave for illness or caring responsibilities.
-
Parental Leave: Up to 12 months unpaid leave with an option for extension.
-
Long Service Leave: Varies by state and industry.
-
Family & Domestic Violence Leave:
Managing Leave with Payroll Systems:
-
Track leave balances automatically.
-
Generate leave accrual reports.
-
Integrate leave approvals with payroll processing.
Pro Tip: Update records regularly to avoid underpaying or overpaying leave entitlements.


6. Payroll Tax Compliance
Payroll tax compliance is a key obligation for businesses that exceed state or territory wage thresholds in Australia. Understanding registration requirements, calculation methods, and reporting deadlines ensures businesses meet their obligations and avoid penalties.
What is Payroll Tax?
-
A state-based tax on wages if total payroll exceeds thresholds set by each state or territory.
Key Requirements:
-
Thresholds Vary: For example, NSW has a threshold of $1.2 million (2024–25).
-
Rate Differences: Rates vary by state (e.g., 5.45% in NSW).
-
Lodgement and Payments: Report and pay monthly, quarterly, or annually, depending on your business size.
Pro Tip: Use your payroll software to calculate liabilities and track reporting deadlines.


7. Payslips and Record-Keeping
Employers are legally required to provide payslips each pay period to all employees and maintain accurate payroll records.
Payslip Requirements:
-
Include gross and net pay.
-
Record tax withheld and super contributions.
-
Provide details of hours worked and penalty rates.
Record-Keeping Rules:
-
Keep records for 7 years.
-
Store digital backups to prevent data loss.
-
Maintain compliance with Fair Work Ombudsman standards.
Pro Tip: Work with a registered tax agent like HelloLedger to review compliance and avoid penalties.


8. Outsourcing vs. In-House Payroll
Deciding between outsourcing and in-house payroll depends on a business’s size, complexity, and resources. Outsourcing gives you expert help and saves time. However, managing payroll in-house allows for more control and customisation to meet your business needs.
Benefits of Outsourcing Payroll:
-
Saves time on administration.
-
Reduces compliance risks.
-
Provides access to payroll experts and advanced software.
Benefits of In-House Payroll:
-
Full control over payroll data.
-
Lower costs for very small businesses.
-
Better flexibility for custom requirements
Pro Tip: Assess your business size and resources before deciding whether to outsource or manage payroll in-house.
Final Thoughts
Payroll management is a vital part of running a successful small business in Australia.
By using automated tools and following legal rules, you can make payroll easier and let you focus on growth.
​
Need assistance with payroll? Contact HelloLedger today for expert payroll solutions tailored to your business needs!
Get in Touch
Ready to simplify payroll management and keep your team happy and compliant?
​
At HelloLedger, we streamline payroll processes, from Single Touch Payroll (STP) reporting to superannuation compliance, ensuring accuracy and peace of mind. Let’s say Hello to efficient payroll solutions and Goodbye to time-consuming manual tasks. Contact us today to elevate your payroll management experience!