Australian Employment Tax


Australian income tax rates

Many international businesses are setting up operations in Australia as they have long recognised it is an attractive place to do business thanks to its stability, economic strength and laws protecting business and employees.

Australia's business governance is, however, complex. There are many different levels of tax and levies that are applicable to business owners. We've summarised the main areas you need to comply with when taking on employees in Australia. 

This is not a exhaustive list: we strongly urge any company considering an Australian branch or wholly owned subsidiary to get proper advice from an accountant or Australian business advisor. 

Pay As You Go (PAYG)
All Australian businesses are required to withhold tax from their employee's wages and remit this to the Australian Tax Office. 

This information is reported (and paid) via a Business Activity Statement on a monthly or quarterly basis. 

Business are also required to prepare an annual statement and PAYG payment summaries for the ATO and their employees. Information about tax tables, and progressive tax rates can be obtained from your accountant.

All Australian companies are required to make contributions to an employee's chosen superannuation fund at a rate of at least 9.25% of their salary or wage. 

The contributions must be paid into their accounts within 28 days of the end of each financial quarter of the Australian financial year. If a payment isn't made, the ATO can impose severe penalties, so it is important to pay on time. 

Payroll Tax
Each state in Australia requires a payroll tax to be levied on the value of wages paid by an employer. The amount of tax varies from state-to-state at different thresholds and is influenced by a range of factors such as: 
  • where the employee is located
  • the state the business ABN is registered
  • where wages are paid and
  • where services are performed.
Payments to independent contractors can also be included within wages subject to payroll tax. 

The table below shows the annual rates and thresholds that are applicable to each state (current as at 01 February 2014):

Fringe Benefits Tax
Australian companies are liable for a fringe benefits tax at an effective tax rate of 46.5% when some non-cash benefits are provided to employees in lieu of wages or salary but which are relevant to their employment. 

It is possible to structure some benefits, such as motor vehicles and superannuation contributions to ensure they are not subject to the maximum marginal tax rate, however you should work with your accountant to do so. 

If you second foreign employees to Australia, there might be some significant tax exemptions you can provide, however you should discuss this with your accountant first. 

Workcover is a state-by-state scheme that provides protections to workers in the event they are injured in their workplace. Each state manages its own Workers Rehabilitation & Compensation Scheme, however it is funded by a levy that is relative to the type of industry your business operates in. 

As an employer, you are required to pay the levy and each year, reconciliation is done to determine whether you are paying the correct amount. 

Public Liability Insurance
As with any business venture, managing risk is essential. Public Liability Insurance is an important part of protecting your business against the financial risks of a range of issues that could occur to third parties involved in your business - injury or death, loss or damage to property and economic loss that may result from business negligence.  

If you have any doubts about what is and isn't covered, it is essential to get advice, particularly if you are required to have public liability insurance for specific trades or you're in a specialist industry. 

More information
Bates Cosgrave has an extensive knowledge and library of matters relating to setting up in Australia and the implications of International and cross-border tax. Please visit our International tax page and website resources sections for more information. 

However we strongly recommend speaking to one of our experienced consultants about employment related tax matters so that you can get the right advice for your business. 

Contact us on 02 9957 4033 for a confidential discussion or email our team with your query.

Download PDF version: Australian Employment Tax

Last updated February 2014. This factsheet is provided for information purposes only and is correct at the time of publishing. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances. 
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