Getting your payroll right is one of the most essential things you can do as an employer in Australia. However, with constantly changing rules, it almost feels impossible to catch up. Also, missing deadlines leads to penalties, audits, and disputes with the Fair Work Ombudsman or ATO.
This guide, created by experts at Prowess Business Advisor,s is an essential checklist and mistakes to avoid for 2026 highlights to streamline your payroll process.
Additionally, we’ll also share some crucial information about a growing business, get the support of the right bookkeeper in Castle Hill and make your business journey stress-free.
Single Touch Payroll (STP) Reporting
Employers must report every employee payment, including wages, bonuses, allowances, and superannuation, through STP to the ATO right away. Moreover, businesses need to upgrade payroll software for STP Phase 2 requirements, such as adding super liability details and tying payments to exact pay runs.
Fair Work Compliance
Meanwhile, follow Modern Awards, Enterprise Agreements, and the Fair Work Act closely. Apply correct rates for overtime, penalties, shift loadings, and leave entitlements.
Superannuation Obligations
Pay super contributions with each payday and transfer those funds to employee-chosen super accounts within seven business days without fail.
Payslip Requirements
Furthermore, issue payslips on or before each payday. These must clearly show employer and employee names, ABN, pay period, payment date, gross and net pay, hours worked, rates, deductions, and super details.
Tax and Deductions
On top of that, withhold PAYG tax precisely and lodge returns promptly via STP. Similarly, monitor state-based payroll tax thresholds and handle deductions like child support or salary sacrifice correctly. Thus, this step minimises errors and supports financial accuracy.
Leave and Records
At the same time, keep detailed records of annual, personal, long service, and other leave for at least seven years. Before processing pay, verify timesheets, overtime hours, and approvals thoroughly. Consequently, this builds a strong audit trail.
Most common payroll compliance mistakes To Avoid
- Treating employees as independent contractors
- Making errors while doing manual calculations.
- Not keeping records for seven years invites audits.
- Super annotation shortfalls, like late payments and wrong calculations.
Simplify Payroll With Expert Guidance At Prowess Business Advisors
Prowess Business Advisors is one of the most trusted and reliable business advisors and tax accountants in Merrylands.
We offer tailored taxation and payroll services to Australian businesses and handle the details seamlessly, helping you avoid penalties.
Our client-centric approach ensures that you receive personalised, expert-driven solutions tailored to your needs.
Whether you want strategic financial guidance or tailored payroll services, we’re your best partner.
Contact Prowess Business Advisors today and save big on taxes and focus more on your business growth!
Frequently Asked Questions
What are the payroll compliance requirements in Australia?
The payroll compliance in Australia includes correct wage calculation, timely reporting via Single Touch Payroll(STP) to the ATO, withholding PAYG tax accurately, providing detailed payslips, tracking leave entitlements, and keeping all records for seven years.
What is STP Phase 2, and what do employers need to do?
STP Phase 2 builds on Phase 1 by requiring detailed breakdowns of income types, employee payment and employment information to the Australian Taxation Office(ATO). Employers have to update their software to ATO-approved STP2 versions, remap pay codes, test runs, train staff, and report all payments.
How do I check I’m paying the correct super and reporting it correctly?
Confirm the 12% super guarantee rate applies to ordinary time earnings, pay it on each payday and deposit into nominated funds within seven business days. Report via STP Phase 2, reconcile payments monthly, and issue annual statements using ATO’s super calculator.