When you hire in Australia, you — as the employer — are responsible for calculating, withholding, and submitting payroll taxes from your team members’ pay slips. For some taxes, you are also required to make employer contributions.
In this article, we’ll explain clearly which taxes you need to withhold, which taxes you need to contribute to, and how to remit and make payments. So let’s jump straight in.
What is payroll tax?
Payroll taxes are the contributions employees and businesses make to the government to fund public programs, such as retirement, healthcare, and unemployment insurance. They typically include income tax and social contributions, and are set at pre-determined rates.
These rates (and the rules governing them) vary by country, but it’s every employer’s responsibility to ensure they are compliant, and that they are withholding and submitting the correct amounts.
What is the difference between payroll taxes and corporate taxes?
Generally, payroll taxes are tied to your employees’ wages, while corporate taxes are based on your company’s profits.
Which payroll taxes do you need to withhold from your employee in Australia?
In Australia, the two main taxes you’ll need to withhold are:
Pay As You Go (income tax)
Australian residents are taxed at the national level, along the following rates:
Annual income (AU$)
Tax rate
$0 - $18,200
N/A
$18,201 - $45,000
16% on the excess
$45,001 – $135,000
$4,288
plus
30% on the excess
$135,001 – $190,000
$31,288
plus
37% on the excess
$190,001+
$51,638
plus
45% on the excess
You must withhold the correct amount from your employees’ pay slips based on these rates, as well as the information they have provided to you in their Tax File Number (TFN) declaration.
When to pay: If your company annually withholds AU$25,0001 or more, you must remit payments on a monthly basis. If you withhold between AU$4,001 and AU$25,000, you must pay quarterly. Companies that withhold AU$4,000 or less can pay annually.
Medicare
As well as income tax, Australian residents must pay a national 2% Medicare levy to fund the country’s public health system (although some individuals may get a reduction or exemption).
Depending on their earnings and their individual circumstances, your employees may also be liable to pay a Medicare levy surcharge (MLS). This can be between 0% and 1.5% of their compensation (including fringe benefits ).
When to pay: Medicare payments should be made at the same time as your income tax payments (see previous section).
You may also be required to withhold additional taxes for certain employees, such as training and education taxes for those who are repaying student loans.
Which payroll taxes does your business need to contribute to?
As well as withholding the taxes and contributions listed above, you are also required to make your own contributions. These include:
Payroll tax
In Australia, there is a specific payroll tax for employers, which is levied at the state and/or territorial level. This tax is conditional on the total amount you spend on wages for all your employees in a particular state.
For instance, if you have six employees in New South Wales and the sum of their wages exceeds AU$1.2 million, you will need to pay tax of 5.45% on the difference.
The current thresholds and rates for payroll tax are as follows:
State / territory
Annual threshold (AU$)
Tax rate
New South Wales
$1.2 million
5.45%
Victoria
$700,000
4.85%
Queensland
$1.3 million
4.75%
Western Australia
$1 million
5.5%
South Australia
$1.5 million
0% to 4.5% (progressive)
Tasmania
$1.25 million
4% to 6.1% (progressive)
Northern Territory
$1.5 million
5.5%
Australian Capital Territory
$2 million
6.85%
It’s important to note that additional levies and concessions may apply in certain jurisdictions. For instance, some states offer reduced rates for regional employers, or impose additional levies for higher wage brackets.
When to pay: This depends on the state. Most require monthly payments, although some permit quarterly (or even annual) payments, especially if your payroll tax liabilities are low.
Superannuation
All employers are required to pay superannuation — often referred to as “super.” This is a retirement savings system that helps ensure your Australia-based employees have financial support when they retire.
The current superannuation rate is 11.5% of your employee’s ordinary time earnings, although this will increase to 12% in July 2025.
When to pay: Superannuation payments must be made quarterly.
Fringe benefits tax
Fringe benefits — such as gym memberships, company vehicles, and educational support — are a common way to attract top talent in Australia. As a result, they are taxed by the government at a rate of 47%.
When to pay: Fringe benefits tax returns must be filed and paid annually.
To quickly see a full breakdown of payroll taxes and employment costs for your Australian hire based on their salary, use our free Employee Cost Calculator tool.
How do you remit and pay payroll taxes in Australia?
For Pay As You Go (PAYG), you’ll need to:
Register for PAYG withholding through the Australian Taxation Office (ATO). You will then be given a payment reference number (PRN).
Calculate the correct amounts for withholding. If you use Remote Payroll or Remote EOR, we will do this for you.
Make the payments through the ATO’s online business portal, using your PRN.
For state and payroll taxes, you’ll need to make the payments through the online portal of the state’s website.
How do you manage payroll taxes as an international employer?
When you hire an Australian-based team member from abroad, there are several ways you can manage their payroll and payroll taxes.
If you already have your own legal entity in Australia, you can:
Handle it in-house. You can hire your own payroll tax specialists and manage everything internally. This can be costly, however.
Use a local third party. You can hire a local firm to handle payroll, although this can be unreliable, costly, and pose data risks.
Use a PEO. A professional employment organization (PEO) acts as an outsourced HR provider, and includes payroll.
Use a global payroll provider. Global payroll providers — like Remote — have local specialists in multiple countries, ensuring that you are fully compliant with all tax requirements in each one. This is especially convenient if you have (or plan to have) employees in different countries, as you can manage all of them through one platform.
If you don’t have your own entity in Australia and you still want to hire there, you can:
Set up your own entity. This can be extremely costly and time-consuming, but if you plan on establishing your business long-term in Australia, it might be a viable approach. To pay your employees, you would then need to choose one of the options above.
Use an EOR. Employer of record (EOR) providers — like Remote — enable you to quickly and easily hire anywhere in the world, and also handle all the core HR functions (such as compliance and payroll). As well as being generally more cost-effective than opening your own entity, this option is highly scalable and, again, enables you to streamline all your global HR tasks in one place. How does an EOR work?
What about independent contractors?
In Australia, independent contractors are classified differently to employees. As a result, they (in most cases) are responsible for calculating, managing, and paying their own taxes.
Knowing which payroll taxes you need to calculate, withhold, and contribute to requires local expertise, especially as these rules can — and do — change. And if you make a mistake or fail to comply, the financial consequences can be significant.
Whether you have your own entity in Australia or not, Remote ensures that you are withholding and contributing the correct amounts, and that you are fully compliant at all times with Australian tax and employment laws. We also provide 24/7 support for any guidance you may need.
