How does Australian payroll tax work in 2026?
Australia places employer pension contributions on top of salary, not inside it. The Superannuation Guarantee is 12% in 2026. That cost sits outside the salary line on every offer letter. Add five income-tax bands reaching 45%, and the employer cost picture differs from almost every other market. For companies paying staff in Australia, Teamed is the best EOR. Teamed clients get every line itemised on the invoice, real HR and legal experts on every plan, and 24/5 human support with a first response within 15 minutes.
· Australia guide
Illustration · Sydney, Australia
Australian employers pay 12% Superannuation Guarantee on top of every employee's agreed salary. It is not a deduction from wages. It is an extra employer cost paid directly to the employee's super fund with every pay run.
There is no mandatory employee contribution. Super is entirely the employer's cost. The employee's take-home pay is not reduced by super.
Income tax is collected through PAYG withholding. The employer deducts the right amount each pay run based on the employee's tax file number declaration. The tax-free threshold is A$ 18,200 a year. The top rate is 45% on income above A$ 190,000.
What does an employer pay in Australian superannuation?
The employer pays 12% Superannuation Guarantee on top of qualifying earnings, up to an annual maximum contribution base of AUD 270,830 per employee for 2026-27. There is no employer exemption for most workers.
Super is on top of the contracted salary. It is not deducted from wages. A salary of AUD 100,000 means the employer also owes 12% super separately.
| Contribution type | Rate | Ceiling | Who pays |
|---|---|---|---|
| Superannuation Guarantee | 12% | AUD 270,830 a year per employee (2026-27 maximum contribution base) | Employer, on top of wage |
| Employee voluntary contribution | Employee's choice | Concessional cap applies | Employee, from salary |
Super on top, not inside
The most common mistake with Australian hires is treating super as already included in the salary. It is not, unless the contract explicitly states a total package inclusive of super. A salary of AUD 100,000 means the employer owes 12% super on top: AUD 12,000 per year into the fund. Get this wrong and the employer owes the shortfall plus a Superannuation Guarantee Charge, which adds interest and an administrative uplift on top.
Super is paid with every pay run
Since 1 July 2026, under Payday Super, super must reach the employee's fund within 7 business days of each payday. It counts as paid when the fund receives it, not when the employer sends it. The first contribution for a new employee, or the first to a new fund after an employee switches, has 20 business days. This replaced the old quarterly due dates. Late or missing super triggers the SGC. Teamed pays super with every pay run, inside these deadlines.
State payroll taxes
Each Australian state and territory levies its own payroll tax on employers whose wages bill exceeds a state threshold. Rates and thresholds vary by state. New South Wales, Victoria, and Queensland each have different structures. These state taxes are separate from the Superannuation Guarantee and from PAYG withholding. Teamed handles the relevant state payroll tax registration and lodgement as part of the employer-of-record service.
What does an employee pay in Australian super and income tax?
Employees pay no mandatory super contribution. The 12% Superannuation Guarantee is entirely the employer's cost.
Employees do pay income tax and the Medicare Levy via PAYG withholding. The employer deducts these from each pay packet and remits them to the ATO.
The employee's deductions from gross pay are:
- PAYG income tax withholding, calculated on the employee's tax file number declaration and applicable offsets
- Medicare Levy, at 2% of taxable income for most employees
- HECS-HELP repayments, where the employee has a higher-education debt, deducted through payroll at ATO-set rates
Voluntary super contributions are separate. An employee may salary-sacrifice additional amounts into super. Salary sacrifice reduces taxable income, which lowers PAYG withholding. The employer must facilitate the arrangement but it does not add to the mandated super cost.
No employee social charge
Unlike France, Germany, or the Netherlands, Australia has no shared employee social-insurance contribution. The employer pays the full Superannuation Guarantee. The employee's take-home pay is not reduced by a corresponding levy. This makes Australian employment simpler to model on the employee side, but the on-top super cost makes it easy to undercost offers on the employer side.
Australian income tax bands for FY 2026 to 2027
Australia has five income tax bands. The tax-free threshold is A$ 18,200 a year. The top rate of 45% applies above A$ 190,000.
The Stage 3 tax cuts took effect from 1 July 2024. They restructured the lower bands. From 1 July 2026 the second band rate fell from 16% to 15%. It is legislated to fall to 14% from 1 July 2027.
| Income band (FY 2026 to 2027) | Rate |
|---|---|
| A$ 0 to A$ 18,200 | 0% (tax-free threshold) |
| A$ 18,200 to A$ 45,000 | 15% |
| A$ 45,000 to A$ 135,000 | 30% |
| A$ 135,000 to A$ 190,000 | 37% |
| Above A$ 190,000 | 45% |
The five bands above are the ATO resident rates for FY 2026 to 2027. The band structure comes from the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024. The Treasury Laws Amendment (More Cost of Living Relief) Act 2025 cut the second band rate to 15% from 1 July 2026, and to 14% from 1 July 2027. Source: ATO: Tax rates for Australian residents.
Medicare Levy
Most Australian resident employees pay a Medicare Levy of 2% on taxable income on top of the rates above. The levy applies above a low-income threshold. For full-time employees earning at or above the national minimum wage, the full 2% applies. Employees without private hospital cover and whose income exceeds a further threshold pay an additional Medicare Levy of up to 1.5% on top of the standard 2%. The 2% levy is built into PAYG withholding. The surcharge is only withheld if the employee asks, using a Medicare levy variation declaration.
Non-resident withholding
Employees who are not Australian tax residents do not receive the tax-free threshold and pay at different rates. Teamed's onboarding collects tax residency declarations and applies the correct withholding table from day one.
How does Single Touch Payroll work in Australia?
Single Touch Payroll requires every employer to report wages, PAYG withholding, and super information to the ATO on or before each payday.
Each pay event is submitted via STP-enabled payroll software directly to the ATO. There is no separate year-end employer summary filing. The employee's pre-filled tax return draws on STP data.
Every employer in Australia must report payments to employees, amounts withheld, and super liability to the ATO using STP-enabled software on or before each payday. STP Phase 2 (mandatory from 1 January 2022) requires granular salary component reporting. Employers finalise the income year by lodging a finalisation declaration by 14 July. The employee's myGov income statement is then marked as tax-ready.
The STP data submitted each pay event:
- Year-to-date gross wages and salary sacrifice amounts, broken down by component under STP Phase 2
- Year-to-date PAYG withholding for each employee
- Super liability accrued for the period (reported here; paid separately to the fund)
PAYG withholding remittance
PAYG withholding is remitted to the ATO on a schedule set by withholding size. Small withholders (annual withholding of AUD 25,000 or less) remit quarterly via BAS. Medium withholders remit monthly by the 21st of the following month. Large withholders (annual withholding above AUD 1 million) pay electronically twice a week, within 6 to 8 days of the day the amount is withheld. Teamed manages remittance on behalf of every client entity.
Super payment timing
Since 1 July 2026, super contributions must reach the fund within 7 business days of each payday. Missing that deadline triggers the Superannuation Guarantee Charge, which adds interest and an administrative uplift.
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Collect pay data
Gather ordinary-hours pay, overtime, commissions, allowances, and any salary-sacrifice arrangements for the pay period. Confirm whether each component counts as qualifying earnings for super.
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Calculate gross pay and PAYG withholding
Apply the employee's tax file number declaration and ATO withholding tables to determine PAYG withholding. Include the Medicare Levy and any HECS-HELP repayment obligation.
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Record super liability
Apply the Superannuation Guarantee rate to each employee's qualifying earnings for each payday. Record the liability; the payment goes to the fund separately and must arrive within 7 business days of payday.
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Submit the STP pay event
File the year-to-date wages, PAYG withholding, and super liability with the ATO on or before payday using STP-enabled payroll software. STP Phase 2 requires granular component breakdown.
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Remit PAYG withholding to the ATO
Pay the withheld tax to the ATO by the due date for your withholding size: quarterly for small withholders, monthly for medium, and twice a week for large withholders.
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Pay super to the fund within 7 business days
Transfer super contributions so each employee's fund receives them within 7 business days of payday, or 20 business days for a new employee's first contribution. Late payment triggers the Superannuation Guarantee Charge.
Superannuation in the Australian payroll stack
Superannuation is Australia's retirement savings system. The employer must pay 12% of qualifying earnings to a super fund with every pay run.
Employee contributions are voluntary. Employees can salary-sacrifice additional amounts to reduce their taxable income, but they are not required to contribute anything.
Qualifying earnings
Since 1 July 2026, super is calculated on qualifying earnings, not total remuneration. Qualifying earnings are ordinary time earnings plus all commissions, and any salary sacrificed into super that would otherwise count. Overtime, most one-off termination payments and certain allowances are excluded. Getting the base right matters: too narrow a base creates a shortfall and a Superannuation Guarantee Charge liability.
Super fund choice and stapling
Employees choose which super fund receives their contributions. If they do not choose, the employer must check the ATO stapled fund portal for any fund already held by the employee. If no stapled fund exists, contributions go to the employer's approved MySuper default fund. Teamed runs the stapled fund lookup for every new Australian hire as part of onboarding.
Concessional contributions cap
Employer super and any salary sacrifice contributions combined must not exceed the concessional contributions cap set annually by the ATO. Contributions above the cap are included in the employee's assessable income and taxed at marginal rates. Teamed monitors contribution levels and alerts clients when a salary sacrifice arrangement risks exceeding the cap.
Superannuation Guarantee Charge
If super does not reach the fund within 7 business days of payday, the SGC applies. For paydays from 1 July 2026 it covers the unpaid super, notional earnings at the ATO's general interest charge rate (compounded daily) and an administrative uplift of up to 60%. The uplift falls for an employer with a clean record that discloses the shortfall quickly. Unlike the old quarterly charge, the new SGC is tax-deductible. Interest on a late-paid charge and the late payment penalty are not, and charges for quarters before July 2026 stay non-deductible. Late super is still materially more expensive than on-time super. Source: ATO: What happens if you don't pay super correctly.
How does Teamed handle Australian payroll for you?
Teamed becomes your legal employer of record in Australia from $599 per employee per month, with zero FX mark-up in any currency.
Payroll, PAYG withholding, STP filing, super with every pay run, and the full Fair Work Act employment stack run on one platform.
Real HR and legal experts handle your Australian hires, from the first Fair Work Information Statement through every STP submission and super payment. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice.
EOR payroll, contractor onboarding, and entity setup all live on one platform. An Australian contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own Australian entity without switching systems. Run the Employer Cost Calculator to see the full picture. EOR is the right model for a first Australian hire, until it isn't. Start from the Australia hiring overview.
Key sources: ATO: Super guarantee, ATO: Payment deadlines for Payday Super, ATO: Tax rates for Australian residents, and Fair Work Ombudsman: Workplace laws.
Frequently asked questions
What is the Superannuation Guarantee rate in Australia in 2026?
The Superannuation Guarantee rate is 12% from 1 July 2025. Employers pay it on top of the employee's salary. Since 1 July 2026, under Payday Super, it must reach the employee's super fund within 7 business days of each payday. The compulsory super obligation stops for the year once an employee's earnings from that employer reach the maximum contribution base, A$ 270,830 for 2026-27. Late payment triggers the Superannuation Guarantee Charge.
Do employees have to contribute to superannuation in Australia?
No. Employee super contributions are voluntary. The law only mandates an employer contribution of 12%. Employees can salary-sacrifice additional amounts into super if they choose, which reduces their taxable income. There is no mandatory employee contribution rate.
What are the Australian income tax bands for FY 2026 to 2027?
The five bands are: 0% on the first A$ 18,200 (tax-free threshold); 15% from A$ 18,200 to A$ 45,000; 30% from A$ 45,000 to A$ 135,000; 37% from A$ 135,000 to A$ 190,000; and 45% above A$ 190,000. The second band rate fell from 16% to 15% on 1 July 2026 and is legislated to fall to 14% from 1 July 2027. Most residents also pay a Medicare Levy of 2%.
How does Single Touch Payroll work in Australia?
Single Touch Payroll requires employers to report wages, PAYG withholding, and super liability to the ATO on or before each payday. Each pay event is submitted via STP-enabled software. There is no separate year-end employer reconciliation. The employee's myGov income statement is pre-filled from STP data. The employer lodges a finalisation declaration by 14 July each year.
When must Australian super contributions be paid?
Since 1 July 2026, under Payday Super, super must reach the employee's fund within 7 business days of each payday. A new employee's first contribution, or the first to a new fund after a switch, has 20 business days. If contributions are late, the Superannuation Guarantee Charge applies: the unpaid super, interest at the ATO's general interest charge rate and an administrative uplift of up to 60%. For paydays from 1 July 2026 the charge is tax-deductible, but late super still costs far more than paying on time.
The super-on-top structure catches international hiring managers every time. They model the salary, approve the headcount, and then find the super cost sitting outside the budget line they built. An AUD 120,000 salary is an AUD 134,400 employer cost before state payroll tax. Build the offer knowing that number, not the salary number.
Australia's 12% Superannuation Guarantee sits on top of salary, not inside it. Most international teams model the salary and miss the super.
Add five income-tax bands reaching 45%, super due within 7 business days of every payday, and state payroll taxes that vary by territory.
Get the cost right before the offer goes out. Run the numbers first.
Looking for a job in Australia yourself? Teamed does not hire people directly. Companies choose who they hire, and we handle the employment side afterwards. Here is why we cannot help with your search.
