Employer Payroll Compliance in Australia: Complete Guide to ATO PAYG Withholding, Super, and STP
Emmanuel Amegah
May 8, 2026
Australia's payroll compliance framework runs through a single authority, the Australian Taxation Office (ATO), and is structured around three core obligations: PAYG (Pay As You Go) withholding on employment income, Superannuation Guarantee (SG) contributions into employee retirement funds, and Single Touch Payroll (STP) reporting, which transmits payroll data to the ATO in real time on every pay run.
STP Phase 2, which expanded the granularity of data reported per employee, has been mandatory since 2022. Any employer still on legacy payroll software that has not completed the STP2 transition is filing incomplete returns on every pay cycle.
Australian Payroll Authorities at a Glance
| Authority | Obligation | System |
|---|---|---|
| Australian Taxation Office (ATO) | PAYG withholding, STP reporting | ATO Online / STP-enabled software |
| ATO (Superannuation) | Super Guarantee compliance oversight | SuperStream |
| Fair Work Commission | National Minimum Wage, Modern Awards | Fair Work online |
PAYG Withholding
Employers withhold PAYG tax from each employee's gross pay each period and remit to the ATO. The withholding amount is determined by the employee's TFN declaration and any Withholding Declaration.
2025/26 individual income tax rates
Australia's financial year runs 1 July to 30 June.
| Annual taxable income | Rate |
|---|---|
| Up to AUD 18,200 | 0% |
| AUD 18,201 to 45,000 | 16% |
| AUD 45,001 to 135,000 | 30% |
| AUD 135,001 to 190,000 | 37% |
| Over AUD 190,000 | 45% |
These rates reflect the Stage 3 tax cuts from 1 July 2024. Verify no further changes were announced in the May 2025 Federal Budget.
A 2% Medicare Levy applies to most employees and is incorporated into PAYG withholding via the ATO's Schedule 1 tables.
PAYG remittance frequency
| Annual withholding | Frequency | Deadline |
|---|---|---|
| Under AUD 25,000 | Quarterly | 28th of month after quarter-end |
| AUD 25,000 to 1,000,000 | Monthly | 21st of following month |
| Over AUD 1,000,000 | Weekly/fortnightly | 7 days after each pay period |
Single Touch Payroll (STP) Phase 2
STP requires employers to report payroll information, including gross wages, PAYG withheld, and superannuation liability, to the ATO electronically on or before each pay day. STP Phase 2 expanded reporting to include disaggregated income types (salary, overtime, bonuses, leave, and commissions reported separately), child support deductions, employment basis, and cessation reason on termination.
By 14 July following the financial year, employers must submit a finalisation declaration confirming all year-to-date payroll data is complete. This triggers pre-population of employee tax returns in myGov.
Superannuation Guarantee (SG)
| Party | Rate | Base |
|---|---|---|
| Employer | 11.5% (verify; 12% from 1 July 2025) | Ordinary time earnings (OTE) |
| Employee | 0% mandatory |
The SG rate has been on a legislated increase schedule: 11.5% in 2024/25, 12% from 2025/26 onwards. Confirm the exact applicable rate via the ATO.
Ordinary time earnings (OTE)
OTE includes base salary, over-award payments, commissions, shift loadings, and casual loadings. It generally excludes overtime payments and unused leave paid out on termination.
Employee fund choice and stapled funds
Employees choose their own super fund. If an employee does not nominate a fund, the employer must query the ATO for the employee's "stapled super fund" — an existing super account the employee already holds — before defaulting to the company's nominated default fund.
All contributions must be paid via SuperStream, a standardised electronic data and payment system.
Quarterly payment deadlines
| Quarter | Deadline |
|---|---|
| 1 July to 30 September | 28 October |
| 1 October to 31 December | 28 January |
| 1 January to 31 March | 28 April |
| 1 April to 30 June | 28 July |
Super Guarantee Charge (SGC)
If super is not paid in full and on time, the employer owes the SGC: the shortfall plus 10% nominal interest per year plus AUD 20 per employee per quarter. The SGC is not deductible for corporate tax purposes, making late super materially more expensive than on-time compliance.
Consolidated Compliance Calendar
| Deadline | Obligation |
|---|---|
| On or before each pay day | STP Phase 2 report via payroll software |
| 21st of following month | Monthly PAYG remittance (medium withholders) |
| 28th after quarter-end | PAYG remittance (small withholders) + super contributions |
| 14 July | STP finalisation declaration for prior financial year |
Penalties
| Failure | Penalty |
|---|---|
| Late PAYG remittance | General Interest Charge (approx. 11% p.a.) |
| STP non-lodgement | AUD 222 per 28-day period |
| Super Guarantee shortfall | SGC: shortfall + 10% interest + AUD 20 admin fee; non-deductible |
| Failure to use SuperStream | Super treated as unpaid; SGC applies |
| Failure to query stapled fund | ATO can direct payment of SGC |
Common Mistakes
Australia's compliance failures for international operators concentrate on super rate errors, OTE base miscalculations, and STP Phase 2 incomplete implementation. Cadana's global payroll tax engine handles STP Phase 2 reporting, OTE calculation logic, stapled fund queries, and SuperStream payments at the API layer, but understanding where the errors occur is the starting point.
1. Using the wrong SG rate. The SG rate increases each 1 July. Payroll engines not updated at the start of each financial year underpay super for the entire year. The non-deductible SGC and 10% nominal interest make this one of the most expensive recurring errors in Australian payroll.
2. Including overtime in the OTE base. Overtime payments are generally excluded from OTE. Operators who calculate super on total gross pay (including overtime) over-contribute.
3. Not querying the stapled fund for new employees. Defaulting a new employee to the company default fund without first checking for a stapled fund is non-compliant. The ATO's stapled fund query is a required step, not optional.
4. Submitting STP Phase 1 reports. Phase 2 has been mandatory since 2022. Software that has not completed the Phase 2 upgrade produces non-compliant STP files and incomplete pre-fills in employee tax returns.
5. Treating super as a year-end task. Super is due quarterly: 28 October, 28 January, 28 April, and 28 July. Operators who align their super payment cycle to the December calendar year-end miss three of the four quarterly deadlines.
2027 Outlook
SG rate at 12%: The SG is at 12% from 1 July 2025 under current legislation. No further increases are scheduled; 12% is the legislated endpoint.
STP and ATO data matching: The ATO is expanding its use of STP data for automated compliance activity. Payroll data is matched against employer tax returns and super fund records in real time.
Super on government parental leave pay: The government announced SG contributions on government-funded Parental Leave Pay from 1 July 2025. Verify whether this has been implemented and how it interacts with employer super obligations.
How Cadana Handles Australian Payroll Compliance
Submitting STP Phase 2 reports on every pay day, calculating super on OTE at the correct rate, querying stapled funds for new employees, routing contributions via SuperStream, and managing quarterly super deadlines — Cadana handles the full Australian payroll compliance stack via its global payroll tax engine.
Book a demo at cadanapay.com/book-demo to see how Cadana's Australian compliance rails work in practice.
Sources and References
- Australian Taxation Office — STP Phase 2 employer guide
- ATO — PAYG withholding schedules
- ATO — Super Guarantee rate and SGC
- ATO — Stapled super fund queries
- Superannuation Guarantee (Administration) Act 1992
Rates current as of April 2026. Verify the 2025/26 SG rate and Stage 3 tax cut thresholds against ATO guidance for the current financial year.
Emmanuel Amegah