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5 Things to Consider When Employing in Australia

Employing workers in Australia may be very different from what you are used to in your own country, given the unique tax, payroll and leave rules that you will need to follow.  This can be a real burden to an HR department unfamiliar with Australian employment and labor laws, and you may want a third party with in-country experts to assist.

DIY Employment vs a GEO Service

You have two primary choices when it comes to hiring either residents or expats in Australia, 1) set up a local corporation and run payroll DIY or 2) use a GEO employer of record in Australia to administer all of your local employment.  The option that you choose will depend on whether you plan a long term commitment to the market (DIY), or are just entering Australia with a few employees (GEO).

Whichever method you choose, there are five things to be aware of when employing in Australia.

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Parental Leave in Australia

The first is parental leave, which differs depending on the type of visa that you have.

457 Visa

On a 457 visa parental leave can be taken for up to 12 months, but it is unpaid, and the leave can start the day of birth.

Non-457 Visa

This category will include Australian citizens, permanent residents, New Zealand Special Category visas, and temporary partner visas.  It does include both parents and same-sex partners, and the leave is paid for up to 2 weeks at the national minimum wage, with the remainder of the 12 months unpaid.

GST in Australia

Goods and Services Tax (GST) is a 10% tax imposed on most goods and services sold or consumed in Australia.  GST is already included in prices, which differs from countries like the US or Canada that add the tax at the point of sale.  Any business with a certain threshold of sales must register for GST within 21 days of crossing that threshold.  Then, all goods and services sold in Australia will be taxable, unless designated as GST-free.

Although the end customer pays GST within the sales price, the business is responsible for issuing tax invoices and collecting the tax.

Fringe Benefits in Australia

As in many countries, certain fringe benefits for employees are taxable.  There is a long list of taxable benefits, and each category has different valuation rules for taxability. 

Types of fringe benefits subject to tax include:

  • Car and parking expenses
  • Housing and food
  • Loans and debt waivers
  • Entertainment
  • Also taxable are any company assets used for personal enjoyment. 

The company pays the tax and the gross-up tax rate will be different for GST and non-GST benefits, ranging from 47-49%.  Some fringe benefits will have a different rate, such as car expenses.

Payroll and Tax in Australia

Income Tax: Taxes must be withheld from the paycheck of your employees under the Australian Pay as You Go (PAYG) system.  Tax rates range from 19% (over 18,201 AUD) up to 45% for annual earnings over 180,000 AUD.

Superannuation:  Superannuation (or ‘super’) is simply money paid to workers for retirement in a super fund.  In Australia, if you pay an employee more than AU$450 per month pre-tax, then you must also pay super on top of their wages.  This is true for both Australian residents and expats on work assignment, and cannot be avoided.

The amount of super required is a minimum of 9.5% of compensation, paid quarterly. 

Payroll Tax Rates:  Payroll tax rates in Australia depend on the state or territory where your company is located, and the range is from 4.75% to 6.85%.  This may be a different system than many foreign companies are used to, and it is necessary to confirm the rate prior to setting up Australian payroll for your employees.

Annual Leave in Australia

Holiday leave in Australia is generous compared to some countries like China or the US, and every employee is entitled to four weeks of paid annual leave.  Even if your home office employees receive less than this, the statutory minimum will apply to all of your employees in Australia, both locals and expats.

Need Help Employing in Australia?

If these unique Australian employment rules present a challenge for your company, then there may be an advantage in using a GEO employer of record to employ your workers.  The GEO offers an end-to-end solution for all immigration, payroll, tax and compliance tasks associated with hiring employees in Australia.

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