Australian Payroll: Every Question SMBs Ask
About STP, Super, and Fair Work, Answered.
STP Phase 2, super 12%, PAYG withholding, Award rates, payslip requirements, ABA files, casual loading, termination pay — the complete guide.
What is STP Phase 2 and is my business required to use it?
Single Touch Payroll (STP) Phase 2 is the Australian Taxation Office's expanded payroll reporting system that requires employers to report additional payroll data each pay run. This includes income types, disaggregated gross components (salary sacrifice, salary and wages, overtime, etc.), and child support deductions. STP Phase 2 was mandatory for most businesses from 1 January 2022, with some deferrals to 2023 for smaller employers. All businesses with employees are now required to be STP Phase 2 compliant.
What is the Superannuation Guarantee rate in 2026?
The Super Guarantee (SG) rate in 2026 is 12% of ordinary time earnings (OTE). The rate increased from 11.5% to 12% on 1 July 2025 and remains at 12% for the 2025–26 financial year. Note: the SG rate is legislated to increase to 12.5% from 1 July 2027 — verify the current rate at the ATO website each financial year. Most Australian employers calculate super on base salary and regular wages — check with your payroll system and accountant for specific award-based obligations, particularly for casual employees with irregular hours.
When do superannuation contributions need to be paid?
Super contributions must be paid at least quarterly by the following due dates: Q1 (Jul–Sep) by 28 Oct, Q2 (Oct–Dec) by 28 Jan, Q3 (Jan–Mar) by 28 Apr, Q4 (Apr–Jun) by 28 Jul. Note: the SGC penalty is not tax-deductible. Late super payments must be reported using a Superannuation Guarantee Charge (SGC) statement — the ATO charges interest on late payments.
What is PAYG withholding and how is it calculated?
Pay As You Go (PAYG) withholding is the tax employers withhold from employee wages and remit to the ATO. The withholding amount depends on the employee's income, tax offsets, and any additional withholding requested. Use the ATO Tax Withheld Calculator or ATO's weekly tax tables to determine the correct withholding. XIntelliSync's payroll agent calculates PAYG withholding automatically from employee records and reports it via STP Phase 2.
What is a payslip and what must it include under Fair Work?
Under the Fair Work Act 2009, employers must provide each employee with a payslip within one working day of payday. The payslip must include: employer name and ABN, employee name, pay period dates, gross and net pay, each separate rate of pay (if applicable), loadings, penalty rates, and allowances, super fund name and contributions, any deductions, leave accruals (for permanent employees), and the OTE amount for super purposes. Failure to provide compliant payslips attracts Fair Work penalties. XIntelliSync generates fully compliant payslips automatically each pay run — no manual formatting required.
What payroll frequency options are available for Australian businesses?
Australian employers can pay weekly, fortnightly, monthly, or at any regular agreed frequency. There is no legal requirement to pay monthly — the Fair Work Act requires payment at a frequency specified in the applicable Modern Award or enterprise agreement. Most service businesses pay fortnightly. Retail and hospitality awards often allow weekly pay.
How does annual leave accrue in Australia?
Full-time permanent employees accrue 4 weeks (20 days) of annual leave per year of ordinary hours worked. Part-time employees accrue on a pro-rata basis. Casual employees do not accrue annual leave (their casual loading compensates for this). Unused annual leave accumulates and must be paid out on termination at the current pay rate (not the rate at accrual). Some awards allow cashing out leave — check the applicable award.
What are Award rates and how do I know which Award applies?
Modern Awards are industry or occupation-based pay and conditions standards set by the Fair Work Commission. Most Australian employees are covered by a Modern Award. To find the applicable Award, use the Fair Work Commission's Award Finder at fairwork.gov.au or search by industry/job title. Awards set minimum rates — you can pay above Award but never below. Award rates are updated annually (usually from the first full pay period on or after 1 July).
What casual loading must be paid and why?
The minimum casual loading is 25% on top of the base rate of pay, as set by the Fair Work Act 2009 (Section 67A). Some Modern Awards specify higher loadings. The casual loading compensates for the absence of entitlements (annual leave, sick leave, notice of dismissal). Casual employees do still accrue long service leave entitlements under state and territory legislation.
What are the requirements for termination pay in Australia?
On termination, employers must pay: all accrued annual leave at the current rate, pro-rata long service leave (after 7–10 years depending on state), unpaid wages, and any redundancy pay if applicable. If the employer terminates without providing the required notice (under Fair Work Act s.117), payment in lieu of notice must be made. Genuine redundancy entitlements depend on length of service and are specified in the NES (National Employment Standards). Notice periods range from 1–4 weeks based on tenure.
What is an ABA file and how is it used for payroll?
An ABA (Australian Banking Association) file is a standard bank direct credit file format used to batch-upload payroll payments into most Australian bank accounts. You generate the ABA file from your payroll system, upload it to your bank's internet banking portal, and authorise the bulk payment. XIntelliSync generates STP Phase 2 compliant ABA files ready for bank upload. The ABA file itself does not initiate payment — you authorise it through your bank portal.
What is a superannuation fund choice obligation?
Under Choice of Fund rules, employers must give new employees a Standard Choice Form to nominate their preferred superannuation fund. If an employee does not nominate, you must use their nominated Stapled Super Fund (requested via ATO Online Services) or your employer's default fund. Since 1 November 2021, employers must request the stapled fund from the ATO before defaulting. Failure to comply results in the super guarantee charge.
What is salary sacrifice and how does it appear on STP Phase 2?
Salary sacrifice is an arrangement where an employee gives up part of their gross salary in exchange for employer contributions (e.g., to super or a novated lease). Under STP Phase 2, salary-sacrificed super is reported separately as "salary sacrifice — superannuation" and salary-sacrificed other benefits as "salary sacrifice — other". These must be disaggregated from gross wages. This is a key STP Phase 2 change — pre-Phase 2, both were often included in gross.
What are Reportable Fringe Benefits Amounts (RFBA)?
Reportable Fringe Benefits Amounts (RFBA) are fringe benefits with a taxable value exceeding $2,000 in a fringe benefits tax (FBT) year (1 April – 31 March). Employers must report the grossed-up taxable value on the employee's income statement (previously payment summary). RFBA affects the employee's Medicare levy surcharge, private health rebate, and HECS repayment assessments — even though it is not included in taxable income for income tax purposes.
What is payroll tax and at what threshold does it apply?
Payroll tax is a state and territory tax on wages paid by employers. Each state has a different threshold and rate: NSW $1.2M (5.45%), VIC $900K (4.85%), QLD $1.3M (4.75%), WA $1M (5.5%), SA $1.5M (4.95%), TAS $1.25M (6.1%), ACT $2M (6.85%), NT $1.5M (5.5%). Threshold figures as of 2025-26. Payroll tax is lodged monthly or annually with the relevant state revenue office — it is separate from ATO PAYG withholding.
What are the penalties for late or incorrect STP reporting?
The ATO can apply Failure to Lodge (FTL) penalties for late STP reports. Penalties are assessed in penalty units (1 penalty unit = $313 as of 2026, indexed annually). For small withholders (under $25K annually), the maximum is 5 units ($1,565 as of 2026). For medium to large withholders, penalties are higher. The ATO also charges shortfall interest charge and administrative penalties for incorrect reports. XIntelliSync prepares payroll data in STP Phase 2 format with each pay run, ready for employer submission — no manual data re-entry required. Final ATO lodgement is authorised and transmitted by the employer or their registered tax agent.
How does XIntelliSync handle STP Phase 2 reporting?
XIntelliSync's Payroll Agent is STP Phase 2 compliant. Each pay run, the agent calculates PAYG withholding, disaggregates gross pay components, calculates super at 12%, generates payslips, and prepares STP Phase 2 data ready for employer submission via the ATO Business Portal. The agent generates ABA files for bank upload. End-of-financial-year (EOFY) finalisation is completed within the platform. Final STP submission and super fund payments are authorised and actioned by the employer — XIntelliSync prepares everything.
Can I switch payroll systems mid-year without losing STP history?
Yes. When switching payroll systems mid-year, you import year-to-date (YTD) figures from the old system into the new one. The new system prepares an STP update event including all YTD figures — you submit it to the ATO via the Business Portal, ensuring the ATO has correct YTD data on employee income statements. XIntelliSync's Migration Agent handles YTD import from Xero, MYOB, KeyPay, and other major platforms.
What is long service leave and how is it calculated in Australia?
Long service leave entitlement varies by state. In most states, employees are entitled to long service leave after 10 years of continuous employment (with pro-rata entitlement at 7 years in some states). The standard entitlement is approximately 8.667 weeks (65 days) after 10 years. NSW, VIC, QLD, WA, SA, TAS, ACT, and NT each have separate Long Service Leave Acts with variations — check the relevant state legislation for your employees' location.
What happens to employee entitlements if my business is sold?
If a business is sold as a going concern (assets + employees transfer), employees' entitlements (annual leave, long service leave, notice periods) generally transfer to the new employer. The Fair Work Act and Corporations Act govern this. The new employer takes on existing employee entitlement obligations — this is a key due diligence item in any business acquisition. If the business is sold as just assets (not a going concern), the original employer must pay out all accrued entitlements on termination.
Does XIntelliSync handle overtime, allowances, and penalty rates?
Yes. XIntelliSync's Payroll Agent supports configurable pay rate rules including overtime multipliers, allowances (meal, travel, uniform), and penalty rates (weekend, public holiday). Rules are set once based on the applicable Modern Award or enterprise agreement, and the agent applies them automatically each pay run. Under STP Phase 2, overtime is reported as a separate income type — the agent disaggregates this correctly.
What records must employers keep for payroll under Fair Work?
Under Fair Work Regulations 3.33–3.41, employers must keep the following records for 7 years: employee details (name, start date, employment type), pay records (gross/net pay, each component), leave records, superannuation contribution records, payslips, individual flexibility arrangements, and termination records. Records must be legible, accessible, and not altered in a way that makes them misleading. XIntelliSync maintains all payroll records in compliant format with audit trail.
Payroll processing takes 4–8 hours per pay run. XIntelliSync automates it end-to-end.
STP Phase 2 compliant. ABA file generation. Super calculation at 12%. Payslips auto-generated. Growth plan $297/mo, first month $148.50.