Payroll, Single Touch Payroll and super — the essentials for employers

Taking on your first employee changes your obligations overnight. You become responsible for paying the right wages under the right award or agreement, withholding tax, reporting every pay to the ATO, paying superannuation on time and keeping proper records. Getting payroll wrong is expensive: underpayments must be fixed with back pay, late super attracts a charge that costs more than the super itself, and penalties can apply. This guide covers the essentials so you know what good payroll looks like.

Before the first pay run

Employee or contractor?

Start by being sure the person is actually an employee. The distinction depends on the real working relationship, not on what the contract calls it or whether the person has an ABN. Getting it wrong can leave you liable for unpaid super, tax and entitlements. If there is any doubt, get advice before the person starts.

Paperwork for new employees

For each new employee, you will generally need to:

have them complete a TFN declaration, so you know how much tax to withhold
offer a choice of superannuation fund; if they do not choose, request their stapled fund details from the ATO before defaulting to your nominated fund
give them the Fair Work Information Statement, and the Casual Employment Information Statement for casual employees
record their pay rate, classification and the award or agreement that covers them
check any state-based requirements, such as workers' compensation insurance

Know which award applies

Most employees in Australia are covered by a modern award or an enterprise agreement that sets minimum pay rates, penalty rates, overtime, allowances and leave. Check which one applies to each role, and review rates each year, as minimum wages are usually adjusted from 1 July. The Fair Work Ombudsman's tools are a good starting point.

Running payroll each pay period

A pay run involves:

calculating gross pay from hours, salary, overtime, penalty rates and allowances
withholding PAYG tax using the ATO's tax tables, based on each employee's TFN declaration
making any authorised deductions, such as salary sacrifice
calculating superannuation owed
accruing leave entitlements
paying net wages to employees
issuing pay slips, which must be provided within one working day of payment
reporting the pay run to the ATO through Single Touch Payroll

Use payroll software that does these calculations and is kept up to date.

Single Touch Payroll

Single Touch Payroll (STP) is the system that sends each employee's payroll information to the ATO every time you pay them. Each STP report includes salary and wages, PAYG withholding and super information, broken down by type of payment.

What it means in practice

You report on or before each pay day, through STP-enabled payroll software.
Employees can see their year-to-date income, tax and super in their myGov account.
You no longer issue annual payment summaries. Instead, you make a finalisation declaration after the end of each financial year, generally by 14 July.
The ATO can compare your STP data with your BAS and super payments, so inconsistencies are easy to spot.

Getting STP right

Set each employee up correctly, including their employment basis (full-time, part-time, casual) and tax treatment.
Map pay items to the right STP categories, such as ordinary pay, overtime, allowances, bonuses, leave and salary sacrifice. Most software does this, but check the mapping when you add a new pay item.
Correct errors through your software in a later report or an update event, rather than leaving them.
Make sure your W1 and W2 figures on the BAS agree with what you have reported through STP. Our BAS preparation checklist covers that reconciliation.

Superannuation

How much to pay

Under the superannuation guarantee, employers must contribute a minimum percentage of each eligible employee's ordinary time earnings to a complying super fund. The rate is 12% from 1 July 2025.

As an example, an employee with ordinary time earnings of $5,000 in a month would be owed at least $600 in super for that month at the 12% rate.

Ordinary time earnings generally include ordinary hours pay and many allowances and bonuses, but usually not overtime. Getting the definition right for each pay item matters, and it is a common source of underpayment.

Who is eligible

Most employees are entitled to super guarantee, including part-time and casual employees. The former $450-a-month threshold was removed from 1 July 2022, so low earnings alone no longer exclude an employee. Employees under 18 are eligible if they work more than 30 hours in a week. Some contractors who are paid mainly for their labour can also be treated as employees for super purposes.

When to pay

Super must reach the employee's fund by the required due date. Until 30 June 2026 that meant at least quarterly, within 28 days of the end of each quarter. Under "payday super", from 1 July 2026 super is paid with each pay run and must generally reach the employee's fund within seven business days of payday, with a longer window for the first payment to a new employee's fund. Check the current rules and due dates with your accountant or registered tax agent, and with your payroll software provider, as the timing changes how you manage cash flow.

If super is paid late

If super is not paid in full and on time, the employer must lodge a superannuation guarantee charge statement and pay the superannuation guarantee charge. It includes the shortfall, interest and an administration fee, and it is not tax deductible. Paying late can cost considerably more than paying on time, so build super into your cash flow forecast and set the money aside each pay run.

Other obligations to keep in mind

Payroll tax is a state and territory tax that applies once total wages exceed a threshold. Thresholds, rates and grouping rules differ between states, so check where your business stands, especially as you grow or employ across borders.
Workers' compensation insurance is generally compulsory and is also managed at state level.
Leave entitlements, including annual leave, personal leave and long service leave, must be tracked and paid correctly. Unused leave is a liability on your balance sheet.
Record keeping: employee records must be kept for seven years under workplace law, and tax records generally for five years.
Fringe benefits: providing benefits such as a car for private use can create fringe benefits tax obligations.

Common payroll mistakes

applying the wrong award classification, or missing an annual rate increase
paying a flat rate that does not cover penalty rates and overtime
treating employees as contractors
leaving super calculations to a manual process
not reconciling payroll, STP, BAS and super payments with each other
setting up new pay items without checking their tax, super and STP treatment

Payroll is one of the few areas where small errors repeat every pay day. Set it up carefully once, reconcile it every month, and it will look after itself.

How we can help

We can review your payroll setup, check your award and super calculations, and reconcile payroll, STP and your BAS so the numbers agree. Find out more about our accounting services or contact us to talk about your business.

This article is general information only and does not take into account your circumstances. Speak to a qualified adviser before acting on it.