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.
· 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 each quarter.
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 ordinary time earnings. There is no earnings ceiling and 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% | No ceiling on ordinary time earnings | 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 a shortfall plus a Superannuation Guarantee Charge, which includes an interest component and is not tax-deductible.
Quarterly payment cycle
Super contributions are due by the 28th day after each quarter end: 28 January, 28 April, 28 July, and 28 October. Late payment triggers the SGC. Employers who miss a quarter cannot recover the SGC administration levy even if they subsequently pay the super. Teamed runs super on every cycle to eliminate quarterly deadline risk.
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 2025 to 2026
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. The rates in force for FY 2025 to 2026 are lower than the pre-2024 rates for most income levels.
| Income band (FY 2025 to 2026) | Rate |
|---|---|
| A$ 0 to A$ 18,200 | 0% (tax-free threshold) |
| A$ 18,200 to A$ 45,000 | 16% |
| 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 Stage 3 tax cut rates confirmed by the ATO for FY 2025 to 2026 (Tax Laws Amendment (Tax Cuts for Working Australians) Act 2024). The 16% rate on the second band is legislated to reduce 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%. These amounts are applied through PAYG withholding automatically.
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 witholders (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) remit within seven days of the payroll date. Teamed manages remittance on behalf of every client entity.
Super payment timing
Super contributions must be paid to the fund by the quarterly due dates: 28 October, 28 January, 28 April, and 28 July. Failure to meet the quarterly deadline triggers the Superannuation Guarantee Charge, which adds penalties and interest and is not tax-deductible to the employer.
-
Collect pay data
Gather ordinary time earnings, overtime, allowances, and any salary-sacrifice arrangements for the pay period. Confirm whether each component counts as ordinary time earnings for super.
-
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.
-
Record super liability
Apply the Superannuation Guarantee rate to each employee's ordinary time earnings for the period. Record the liability; payment goes to the fund separately on the quarterly cycle.
-
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.
-
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 near-real-time for large withholders.
-
Pay super to the fund by the quarterly deadline
Transfer super contributions to each employee's fund by the quarterly due date. Late payment triggers the Superannuation Guarantee Charge, which includes interest and is not tax-deductible.
Superannuation in the Australian payroll stack
Superannuation is Australia's retirement savings system. The employer must pay 12% of ordinary time earnings to a super fund each quarter.
Employee contributions are voluntary. Employees can salary-sacrifice additional amounts to reduce their taxable income, but they are not required to contribute anything.
Ordinary time earnings
Super is calculated on ordinary time earnings, not total remuneration. Ordinary time earnings exclude overtime, most one-off termination payments, and certain allowances. Getting the base right matters: super calculated on total pay where only ordinary time earnings apply creates an overpayment; calculating on ordinary time earnings only where total remuneration is agreed creates an underpayment 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 is not paid by the quarterly deadline, the SGC applies. It covers the unpaid amount plus 10% interest per year, plus an administration charge. The SGC is not tax-deductible. Late super is materially more expensive than on-time super.
How does Teamed handle Australian payroll for you?
Teamed becomes your legal employer of record in Australia for from $599 per employee per month, with zero FX mark-up in any currency.
Payroll, PAYG withholding, STP filing, quarterly super payments, and the full Fair Work Act employment stack run on one platform.
Real HR and legal experts handle your Australian hires, from the first Fair Work Information Statement through every STP submission and quarterly super payment. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice.
EOR payroll, contractor onboarding, and entity setup all live on one platform. An Australian contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own Australian entity without switching systems. Run the Employer Cost Calculator to see the full picture. EOR is the right model for a first Australian hire, until it isn't. Start from the Australia hiring overview.
Key sources: ATO: Super guarantee, ATO: Tax rates for Australian residents, and Fair Work Ombudsman: Workplace laws.
Frequently asked questions
What is the Superannuation Guarantee rate in Australia in 2026?
The Superannuation Guarantee rate is 12% from 1 July 2025. Employers must pay this on top of the employee's salary into a registered super fund each quarter. It applies to ordinary time earnings with no upper ceiling. Late payment triggers the Superannuation Guarantee Charge, which is not tax-deductible.
Do employees have to contribute to superannuation in Australia?
No. Employee super contributions are voluntary. The law only mandates an employer contribution of 12%. Employees can salary-sacrifice additional amounts into super if they choose, which reduces their taxable income. There is no mandatory employee contribution rate.
What are the Australian income tax bands for FY 2025 to 2026?
The five bands are: 0% on the first A$ 18,200 (tax-free threshold); 16% 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 is legislated to fall to 15% from 1 July 2026. 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?
Super must be paid to the fund by the quarterly due dates: 28 October, 28 January, 28 April, and 28 July. If contributions are late, the Superannuation Guarantee Charge applies. The SGC adds 10% interest per year on the unpaid amount plus an administration charge, and is not tax-deductible. Late super costs far more than on-time payment.
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%, quarterly super deadlines with no grace, and state payroll taxes that vary by territory.
Get the cost right before the offer goes out. Run the numbers first.
