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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Looking to hire an employee in Australia? Get in touch.
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