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Payroll & Tax in Australia

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Australia payroll & taxation

There are specific rules for payroll and taxation in Australia. The primary concerns for a foreign company that needs to comply with tax laws in Australia are: individual income tax for employees, social security costs, payroll tax, sales tax, withholding tax, business tax, workers’ compensation and permanent establishment concerns.

Your Payroll Options in Australia

Remote Payroll

A remote payroll in Australia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Australia. One option for a non-resident company to payroll its employees (local and foreign) in Australia is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Australia under one of the forms available, but prefer to have another company administer its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Australia may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Australian payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Australian employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Australia to a GEO, like Shield GEO. This is possible for both foreign workers and Australian nationals. This is the easiest, fastest and safest way to payroll staff in Australia.

Shield GEO manages all aspects of payroll for workers in Australia including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

 

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Setting up payroll in Australia

Information Explanation
Currency ?

Australian Dollar - AUD

Employee Information Required ?

Locals may work at will. Expatriates / foreign workers must possess valid work visas prior to start of work.

Tax Registration Requirements ?

Tax is withheld via Payroll. Pay As You Go (PAYG).

Social Security Registration ?

Australia does not have “Social Security” as such but it does have welfare and socialised health which are primarily funded via the regular tax base. However, a deduction for Medicare (to partially fund socialised health) is required to be withheld from wages via payroll. This deduction (1.5% of gross wages) is built into the Pay-As-You-Go (PAYG) withholding and is not deducted separately.

Documentation Required for New Employees ?

Minimum employment conditions, for employees in the national workplace relations system, are covered by the National Employment Standards (NES). Further conditions can be set by awards, agreements, and other industrial instruments.

Corporate Income Tax Rate

Companies in Australia are generally taxed at a rate of 30% of their net income. This includes corporate limited partnerships, strata title bodies corporate, trustees of corporate unit trusts and public trading trusts.

Payroll Tax

Payroll tax rates and thresholds in Australia differ between states and territories. If a company meets the minimum threshold it is held to the following rate:

ACT – 6.85%

New South Wales – 5.45%

Northern Territory – 5.50%

Queensland – 4.75%

South Australia – 4.95%

Tasmania – 6.1%

Victoria – 4.85%

Western Australia – 5.5%

Sales Tax

The sales tax rate (Goods and Services Tax, or GST) is 10% on most goods and services sales.

Withholding Tax

10% for interest

30% for dividends

20% for royalties

Tax Figures

Information Explanation
Corporate Income Tax ?

Companies in Australia are generally taxed at a rate of 30% of their net income. This includes corporate limited partnerships, strata title bodies corporate, trustees of corporate unit trusts and public trading trusts.

Income Tax Rate ?
Grossed income Tax Rate (%)
0 – 18,200 AUD Nil
18,201 – 37,000 AUD 19c for each $1 over $18,200
37,001 – 80,000 AUD $3,572 plus 32.5c for each $1 over $37,000
80,001 – 180,000 AUD $17,547 plus 37c for each $1 over $80,000
180,001 AUD and over $54,547 plus 45c for each $1 over $180,000
Payroll Tax ?

Payroll tax rates and thresholds in Australia differ between states and territories. If a company meets the minimum threshold it is held to the following rate:

ACT – 6.85%

New South Wales – 5.45%

Northern Territory – 5.50%

Queensland – 4.75%

South Australia – 4.95%

Tasmania – 6.1%

Victoria – 4.85%

Western Australia – 5.5%

Sales Tax ?

The sales tax rate (Goods and Services Tax, or GST) is 10% on most goods and services sales.

Withholding Tax ?

10% for interest

30% for dividends

20% for royalties

Employee Social Security (EE SS)

Medicare levy of 2%

Employer Social Security (ER SS)

Employers are required to contribute 9.5% of an employee’s earnings base to a registered superannuation fund or retirement savings account on an employee’s behalf.

Payments

Information Explanation
Payment Mode ?

The majority of payments are made via bank transfer.

Frequency of Salary Payment ?

The most common pay cycles are 12, 26 and 52. 4 weekly or 24 pay periods a year are extremely rare.

Invoice / Payslips required ?

Yes and must be provided within one (1) working day of wages being paid. May be provided electronically to employees.

Minimum Wage ?

The current Federal Minimum adult wage is AUD 606.40 per week / 38 hours (as at 1 July 2012).
Each state has its own minimum wage to cover employees covered by that State’s Jurisdiction. Employees paid under Industrial Awards have their own minimum wage based on the type of work they do as classified by the Award.

Employee Entitlements

Information Explanation
Time Off Work ?

Holiday allowance: Paid days off on public holidays unless it’s reasonable to ask the employee to work.

Annual leave: 4 weeks paid leave per year, plus an extra week for some shift workers.

Community service leave: Up to 10 days paid leave for jury service (after 10 days is unpaid) and unpaid leave for voluntary emergency work.

Medical Leave ?

10 days paid personal (sick) / caregiver’s leave, 2 days unpaid caregiver’s leave and 2 days compassionate leave as needed.

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

A transitional entitlement for employees as outlined in an applicable pre-modernized award, pending the development of a uniform national long service leave standard

Termination of Employment ?

Tax File Number (TFN) forms.

Australia

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