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    TaxKiln Australia
    TaxKilnAustralia tax guidance

    Employing Staff: PAYG, Super, and STP

    Everything an Australian employer needs to know about PAYG withholding under Division 12, the 12% Superannuation Guarantee from first dollar of OTE, Single Touch Payroll reporting, Fair Work obligations, FBT exposure, and the transition to Payday Super from 1 July 2026.

    Australian employers must register for PAYG withholding before their first payment to an employee under Division 12 of Schedule 1 to the Tax Administration Act 1953. The Superannuation Guarantee rate is 12% of Ordinary Time Earnings from 1 July 2025 under SGAA 1992, paid quarterly by the 28th day after each quarter ends. Single Touch Payroll Phase 2 reporting is mandatory for all employers at or before each pay event, with end-of-year finalisation due by 14 July 2026.

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    Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact ATO. Read our editorial scope →

    Employer registration

    Before making your first payment to an employee, you must register for PAYG withholding with the ATO (usually via Online services for business or through a tax or BAS agent). The obligation arises as soon as you have an employee or other payee you are required to withhold from, under Division 12 of Schedule 1 to the Tax Administration Act 1953. You must also hold workers' compensation (or WorkCover) insurance in the relevant state or territory, with thresholds and premium rules varying by jurisdiction.

    PAYG withholding

    Employers must withhold from salary and wages using current ATO tax tables or compliant payroll software. New employees should complete a Tax file number declaration, lodged electronically. Without a TFN, withholding occurs at the top marginal rate plus Medicare Levy.

    BAS labels W1 to W5

    W1: total salary, wages, and other payments. W2: amount withheld from W1 payments. W3: other amounts withheld (for example, payments to suppliers without ABN). W4: amounts withheld from investment distributions. W5: total amounts withheld (sum of W2 to W4).

    Superannuation Guarantee

    From 1 July 2025, the SG rate is 12% of Ordinary Time Earnings for eligible employees under s 19 of SGAA 1992. OTE generally covers regular earnings for ordinary hours, including hourly rates, over-award payments, commissions, and shift loadings. Certain overtime, reimbursements, and some allowances are excluded.

    Choice of fund and stapling

    Employers must offer eligible employees a choice of super fund and, if none is chosen, request the worker's stapled fund details from the ATO before defaulting into the employer's nominated default fund.

    Maximum contribution base

    For 2025-26, the maximum contribution base is $62,500 per quarter. SG is only required on OTE up to this cap, translating to a maximum SG contribution of $7,500 per quarter per employee at the 12% rate.

    Single Touch Payroll (STP)

    STP is mandatory for all employers, including those with a single employee. It requires digital reporting of payroll information to the ATO at or before each pay event. Under Phase 2, figures are disaggregated into paid leave (by type), allowances (by type), overtime, bonuses, directors' fees, and lump sums. STP has replaced annual payment summaries (group certificates); employees see an income statement in myGov once the employer marks data as final.

    End-of-year finalisation

    Employers must make an STP finalisation declaration by 14 July 2026 for arm's length employees and by 31 July 2026 for closely held payees, confirming that year-to-date figures are complete and correct.

    Fair Work obligations

    The Fair Work Act 2009 sets out 10 minimum National Employment Standards (NES): maximum weekly hours, requests for flexible work, parental leave, annual leave, personal and carer's leave, compassionate leave, community service leave, long service leave (via state or award), public holidays, and notice of termination and redundancy pay. Modern awards overlay the NES with industry-specific minimum pay rates, penalty rates, loadings, and other conditions. Paying above award does not waive other award conditions. Tax compliance does not automatically equal Fair Work compliance.

    Fringe Benefits Tax overview

    FBT potentially applies where an employer (or associate) provides certain non-cash benefits to employees or their associates in respect of employment: cars, entertainment, low-interest loans, and some housing assistance. The FBT year runs from 1 April to 31 March (separate from the income tax year). The FBT rate is 47% (top marginal rate plus Medicare Levy). Certain fringe benefits above the reportable threshold must be shown as reportable fringe benefits amounts on the employee's income statement, which can affect income-tested benefits but are not directly taxed again in the employee's hands.

    Worker entitlements on termination

    The Fair Work Act 2009 requires minimum notice of termination and, for eligible employees in larger businesses, statutory redundancy pay. On termination, accrued unused annual leave and long service leave must be paid out. Tax is withheld at specific ATO rates depending on whether the leave relates to pre- or post-August 1993 service and whether it is paid as a genuine redundancy or otherwise. Certain termination amounts (golden handshakes, payments in lieu of notice, some redundancy payments beyond tax-free amounts) are taxed as Employment Termination Payments, with concessional caps and rates based on the recipient's age and the ETP cap thresholds. The final pay run must be correctly coded and reported via STP.

    Payday Super from 1 July 2026

    From 1 July 2026, the quarterly superannuation system ends with the Q4 2025-26 payment due 28 July 2026. Under Payday Super, employers must pay super at the same time as wages, with contributions reaching the employee's fund within 7 business days of pay day. First super contribution to a new employee must reach the fund within 20 business days of wages being paid. The SG rate remains 12% for 2026-27. Late payments trigger SGC with daily compounding interest and administrative uplift based on compliance history. SGC remains not tax deductible.

    Statute references

    • TAA 1953 Schedule 1, Division 12 (PAYG withholding)
    • SGAA 1992 (Superannuation Guarantee framework)
    • SGAA 1992 s 19 (SG charge percentage schedule)
    • SGAA 1992 Part 7 (Super Guarantee Charge)
    • Fringe Benefits Tax Assessment Act 1986
    • Fair Work Act 2009 (NES, awards, termination)
    • SGAA ss 19, 23 (12% SG from 1 July 2025) and s 15 (maximum contribution base)
    • TAA Sch 1 Part 2-5 (PAYG withholding — Division 12)
    • TAA Sch 1 Division 389 (Single Touch Payroll reporting — STP Phase 2 mandatory from 1 January 2022)
    • Fair Work Act 2009 (Cth) (employer vs contractor characterisation — interacts with SG obligations after Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1)

    Frequently asked questions

    Is there a minimum earnings threshold for superannuation?+
    No. Since 1 July 2022, the $450 monthly minimum earnings threshold was removed. If a worker is an employee for SG purposes under SGAA 1992, superannuation must be paid from the first dollar of OTE. This includes part-time, casual, and junior employees.
    What happens if I pay super late?+
    Late or underpaid superannuation triggers the Super Guarantee Charge (SGC) under Part 7 of SGAA 1992. The SGC is not tax deductible and comprises the shortfall calculated on a broader base (salary and wages, not just OTE), nominal interest, and an administration component per employee per quarter. You must lodge an SGC statement with the ATO.
    Do I need to pay super for contractors?+
    SGAA 1992 extends the definition of employee to certain contractors paid mainly for their personal labour. Where a contractor provides personal labour and skills, is paid for time worked, and cannot delegate freely, SG is generally required even if they hold an ABN. The substance of the arrangement matters, not the label on the contract.
    What is Payday Super and when does it start?+
    From 1 July 2026, Payday Super replaces the quarterly payment system. Employers must pay super at the same time as wages, with contributions reaching the employee's fund within 7 business days of pay day. First super contribution to a new employee must reach the fund within 20 business days. Late payments trigger SGC with daily compounding interest and administrative uplift. The SG rate remains 12% for 2026-27.

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