Everything to know about small business payroll

Small business payroll may seem simple at first, but as your payroll needs grow, the process becomes more complex. That complexity is a sign your business is growing.

You’ll need more staff and with that come more payroll tasks and responsibilities. Many small businesses and SMEs outsource payroll services to save time. Understanding how small business payroll works and what you need to do helps you get started, and when it’s time to outsource, you’ll know what to look for in a payroll provider.

Getting started with payroll

If your business has hired employees before, you’re probably familiar with payroll. However, payroll also involves a lot of moving parts and compliance standards.

Payroll can become complicated for growing businesses. You have to consider tax withholding, superannuation, award rates, salary sacrifice and more to get it right.

Here are a few core responsibilities and considerations you have when managing payroll.

• Hiring staff as an employee or a contractor: you run payroll for employees, while genuine contractors invoice for their work. Some contractors paid mainly for their labour are still owed super, so check the ATO’s guidance before you decide.
• Records you need to keep: you’ll need to record personal information, award rates, hours worked, leave and more.
• Withholding and super: are you withholding the right tax (including study and training loan repayments) and paying super on time?
• Type of payroll software to use: the right software helps you automate time tracking, report through Single Touch Payroll and integrate with your accounting software.
• Payroll services: outsourcing payroll to a trusted third party can save you time and help you meet your obligations. You remain the employer and stay responsible for them.

In addition to these basic requirements, you’ll also need to be aware of payroll compliance.

Requirements for payroll compliance

To operate a business in Australia, you need to comply with workplace and payroll laws. For example, the National Employment Standards (NES) set minimum entitlements that an award, agreement or contract can’t reduce.

They include:

• Flexible working arrangements: employees in certain circumstances (for example, carers, parents of school-age children or employees with a disability) may request flexible working arrangements after working with the same employer for at least 12 months.
• Maximum hours: full-time employees work 38 hours a week plus reasonable additional hours.
• Parental leave: eligible employees with a newborn or adopted child can take up to 12 months of unpaid leave, and can request up to 12 more months.
• Annual leave: full-time and part-time employees get at least four weeks of annual leave a year (pro rata for part-time), and some shift workers get five weeks. Casual employees don’t get annual leave.
• Personal or carer’s leave and compassionate leave: full-time employees get 10 days of paid personal or carer’s leave a year (pro rata for part-time), and two days of compassionate leave per permissible occasion. Two days of unpaid carer’s leave are available per permissible occasion when the employee has no paid personal/carer’s leave available for it. Casual employees can take unpaid carer’s and unpaid compassionate leave.
• Family and domestic violence leave: all employees, including casuals, can take 10 days of paid family and domestic violence leave a year.
• Public holidays: employees have a right to be absent, although employers can make a reasonable request to work. Full-time and part-time employees absent because of the holiday receive their base rate for the ordinary hours they would normally work that day. Casuals do not receive paid public-holiday absence. See the Fair Work rules.

Along with the NES, you must keep employee time and wages records for seven years and give each employee a payslip within one working day of payday. Check the Fair Work Ombudsman’s record-keeping rules for what the records must include.

Payroll withholding and taxes

Employers must withhold tax from their employees’ pay under the pay as you go (PAYG) withholding system and pay it to the ATO. How much you withhold depends on what each employee earns and the claims on their tax file number declaration. Use the ATO tax withholding tables for the year, or STP-enabled payroll software, to work it out.

Payroll tax is a separate tax, set and collected by each state and territory, not the ATO. You only pay it once your total Australian wages pass the threshold set by the state or territory, and thresholds and rates differ. For example, in New South Wales for 2026–27 the rate is 5.45% on wages above $1.2 million. Check your state or territory revenue office for your threshold and rate.

Income taxes

Australian resident income tax rates range from 0% to 45%, depending on the employee’s taxable income. Here are the resident rates for 2026–27 (from 1 July 2026), not including the 2% Medicare levy:

Taxable income	Tax rate
Up to $18,200	0%
$18,201 to $45,000	15%
$45,001 to $135,000	30%
$135,001 to $190,000	37%
$190,001 and over	45%

The 15% rate falls to 14% from 1 July 2027. The ATO publishes the current rates.

How to pay payroll taxes

To pay the tax you withhold from wages, you need to register for PAYG withholding with the ATO. Small withholders (up to $25,000 withheld a year) generally pay quarterly with their business activity statement, and medium withholders pay monthly. Payroll tax, if it applies to you, is registered for, lodged and paid with your state or territory revenue office.

Other tax considerations

There are other considerations to think about when handling your small business payroll. Income tax isn’t the only thing to get right.

You must also pay superannuation guarantee for your employees, on top of their wages. The rate has been 12% since 1 July 2025. From 1 July 2026, under Payday Super, it is 12% of each employee’s qualifying earnings and must reach their super fund within seven business days of each payday, instead of quarterly. Super is more complex than a single rate, and mistakes are common, so it can be worth seeking an expert.

Tips for setting up and managing payroll

Your business is growing and you’re ready to make your first hire. Before you do, you’ll need to set up your payroll. Here’s what you’ll need to get started:

• ABN: as an employer, you’ll need an Australian business number (ABN). If you already have one, you’re one step ahead.
• PAYG withholding: next, register for pay as you go (PAYG) withholding.
• Gather employee information: you’ll need your employee’s tax file number (TFN) declaration as well as their super and bank details.

1. Register your ABN and PAYG withholding

Before you pay your first employee, register for PAYG withholding. You report and pay the amounts you withhold to the Australian Taxation Office (ATO).

2. Collect employee information

Next, collect your employee’s information and check it for accuracy. You’ll need:

• Identification and work rights: confirm your employee’s identity and that they are allowed to work in Australia.
• TFN declaration: your employee completes a TFN declaration. Keep it on file; under Single Touch Payroll Phase 2 you no longer send it to the ATO.
• Super and bank details: get your employee’s choice of super fund (or request their stapled fund from the ATO) and their bank details.
• Withholding declaration: employees can use this to change their claims, such as the tax-free threshold or a study and training loan, which changes how much you withhold.
• Medicare levy variation declaration: if an employee lodges one, it changes how much tax you withhold for the Medicare levy.

3. Use single-touch payroll

Single Touch Payroll (STP) started on 1 July 2018 for employers with 20 or more employees and on 1 July 2019 for employers with 19 or fewer. It is mandatory: you report each employee’s pay, tax withheld and super information to the ATO each time you pay them.

To use STP, you need STP-enabled payroll or accounting software, which sends the report to the ATO when you run payroll. From 1 July 2026 your STP reports also include each employee’s qualifying earnings and super liability for Payday Super.

4. Choose the right payroll software

There are several different types of payroll software available. The software you choose will determine if payroll is a simple process or a constant source of headaches. When you choose your software, consider award interpretation, the tools the software has to make your life easier, STP and Payday Super support, and other integrations.

Visory works with a range of major payroll and accounting software. Software is only one part of doing payroll. It makes the job easier, but it doesn’t remove the need for review. Someone who knows payroll should still check your pay runs are accurate.

5. Leverage payroll services

To get payroll done on time and accurately, consider working with an outsourced payroll service provider. A good provider runs your pay cycle, checks it and reports it, while you approve pay runs and stay responsible as the employer. That frees up time for you to focus on other areas of your business and lowers the risk of costly mistakes.

Visory runs bookkeeping, payroll, accounts payable and receivable for growing businesses, with a dedicated team and its AI, Delphi, overseen by that team. If you’re ready to get help managing your payroll, book a discovery call.