Payroll in Australia 2026: PAYG withholding, super and STP

In Australia the employer withholds PAYG (pay as you go) tax, including the 2% Medicare levy, from every pay and reports each pay run to the Australian Taxation Office (ATO) through Single Touch Payroll (STP). Employees pay no social-security contributions. The employer adds a 12% superannuation guarantee, state payroll tax above the threshold and workers' compensation insurance.

Australian payroll at a glance

Superannuation, payroll tax and other employer costs

Australia has no social-security contributions as such: retirement saving runs through employer-paid superannuation, and the Medicare levy is collected with income tax.

Superannuation guarantee (SG). The rate is 12%, unchanged since 1 July 2025. From 1 July 2026, under Payday Super, it is calculated on each eligible employee's qualifying earnings and paid for each payday. A contribution is on time when the employee's fund receives it, with the details needed to allocate it, within 7 business days after the payday. The first contribution for a new employee, or to a new fund, has 20 business days. Super on an out-of-cycle payment such as a bonus is due with the next regular payday's contribution. Late contributions make you liable for the super guarantee charge.

Maximum contribution base. From 2026–27 the ceiling is an annual amount, $270,830: once an employee's qualifying earnings reach it in a financial year, you can stop paying the minimum SG for that year. Up to 30 June 2026 it was a quarterly limit of $62,500.

Payroll tax. Payroll tax is a state or territory tax collected by the state or territory where your workers are. Thresholds and rates vary between them, several exemptions exist, and you pay only when your total Australian wages exceed the threshold. Check the revenue office of each state or territory where you employ people.

PAYG withholding and income tax

Each employee gives you a TFN declaration. If they claim the tax-free threshold from you, you withhold under scale 2 of the ATO's formulas; for a second job without the threshold, scale 1; if no TFN is provided, 47% for a resident.

Resident tax rates for 2026–27 (from 1 July 2026):

The rate on the second band fell from 16% in 2025–26 to 15% from 1 July 2026, which lowers the tax at $45,000 from $4,288 to $4,020. The Medicare levy of 2% comes on top of these rates. Withholding scale 2 builds it in: no levy is withheld on taxable income up to $28,011, it is shaded in up to $35,013, and above that it is 2% of taxable income.

How the formula works. Schedule 1 uses linear equations, y = ax − b, on weekly earnings. For a monthly pay you convert the salary to a weekly equivalent (multiply by 3, divide by 13, ignore cents and add 99 cents), work out the rounded weekly amount, then multiply by 13, divide by 3 and round to the nearest dollar. The employee's tax return settles any difference at the end of the year.

Minimum wage, working time and leave

National Minimum Wage: from 1 July 2026 it is $26.44 an hour or $1,004.90 a week for a 38-hour week. It applies to employees not covered by an award or registered agreement. Most employees are covered by a modern award, which sets the minimum rates for the role, together with penalty rates, overtime and allowances, and these can be higher. The Fair Work Commission reviews the minimum wage and award rates every year, and changes usually start from the first full pay period on or after 1 July.

National Employment Standards (NES): these minimum entitlements apply to all employees in the national system:

• maximum weekly hours of 38 hours plus reasonable additional hours
• 4 weeks of paid annual leave a year, plus an extra week for some shiftworkers
• 10 days of paid sick and carer's leave a year (pro rata for part-time employees) and 10 days of paid family and domestic violence leave
• paid public holidays, notice of termination of up to 5 weeks and redundancy pay of up to 16 weeks, both based on length of service

Casual employees receive a casual loading or a specific casual pay rate under their award, agreement or contract, instead of paid annual and sick leave.

Australia has no 13th salary or statutory holiday bonus.

Payroll calendar, STP and payslips

Before the first pay: register for PAYG withholding with the ATO, collect each employee's TFN declaration and super fund details, and give new employees the Fair Work Information Statement (casual employees also get the Casual Employment Information Statement).

Every payday:

• report the pay event through Single Touch Payroll on or before the payday, including year-to-date gross pay, PAYG withheld and super liability
• pay super so that it reaches the fund within 7 business days
• give each employee a payslip within 1 working day of payday

Paying withheld tax to the ATO depends on how much you withhold each year:

Monthly activity statements are due on the 21st of the following month. Quarterly ones are due on 28 October, 28 February, 28 April and 28 July; lodging online may give you two extra weeks, except for the December quarter.

End of year: make a finalisation declaration in your STP software by 14 July for each employee.

What a payslip must show: employer and employee names, your ABN, the pay period and payment date, gross and net pay, the hourly rate and hours worked for hourly employees, any loadings, allowances, bonuses or penalty rates, each deduction, and the super contributions with the fund's name.

Records: keep time and wages records for 7 years, in English and readily available to a Fair Work Inspector.

Worked example: $7,000 a month in 2026–27

A resident employee earns $7,000.00 a month ($84,000 a year), claims the tax-free threshold with you, has no study loan and is paid monthly from July 2026.

Withholding with the Schedule 1 formula: the weekly equivalent is $7,000 × 3 ÷ 13 = $1,615.38, so x = $1,615.99. For scale 2 between $1,282 and $2,596, a = 0.3200 and b = 181.7319: 0.3200 × 1,615.99 − 181.7319 = $335.38, rounded to $335 a week. Multiplied by 13 and divided by 3, that is $1,451.67, rounded to $1,452 a month.

As a check, the annual tax on $84,000 is $4,020 + 30% × $39,000 = $15,720, plus the Medicare levy of $1,680, so $17,400 a year or $1,450 a month.

Payroll tax applies only if your total Australian wages exceed your state's threshold, and the workers' compensation premium depends on your state scheme, so neither is included.

Common mistakes

1. 1Using the 2025–26 tax scales after 1 July 2026. The 15% rate changes the withholding for almost every employee.
2. 2Paying super quarterly. From 1 July 2026, super is due within 7 business days after each payday, and a late payment triggers the super guarantee charge.
3. 3Paying only the National Minimum Wage to an employee covered by an award with a higher rate, penalty rates or allowances.
4. 4Applying scale 2 to a second job. An employee can claim the tax-free threshold from only one employer at a time.
5. 5Missing STP reports or the finalisation by 14 July, so the employee's income statement is not ready for their tax return.
6. 6Issuing payslips late or incomplete, for example without the super fund name, which Fair Work Inspectors can fine.

For a smooth month-end, see our month-end close checklist.

How Clientlly helps

Clientlly ships a built-in payroll profile for Australia: the 2026–27 resident tax bands with the tax-free threshold as modelled, the 2% Medicare levy, the 12% superannuation guarantee with its maximum contribution base, and the National Minimum Wage, checked against official sources on 1 October 2026. It calculates gross to net and the employer's super, produces payslips, supports recurring payroll adjustments, and imports employees and payroll data; an administrator can adjust the rates in the payroll tax settings. The profile models one employee in a primary job, single, without dependants, at national level, so state payroll tax, award rates, tax offsets, study loans and personal circumstances must be checked.

The Clientlly HR module also handles leave requests and approvals with a leave calendar and keeps HR documents in one place, and attendance and time tracking records hours and overtime for you to review before payroll.