Australian payroll for foreign employers: STP, super, and PAYG in 2026

The Stage-3 PAYG brackets that took effect on 1 July 2024 remain in force for 2025-26 and 2026-27. The ATO’s tax withheld calculator applies these rates.

A proposed reduction of the 16 % rate to 15 % from 1 July 2026 (and to 14 % from 1 July 2027) had not been enacted as of May 2026. Payroll systems should monitor for ATO table updates ahead of 30 June 2026.

All resident employees pay a 2 % Medicare Levy on taxable income above low-income thresholds. The Medicare Levy Surcharge applies to high earners without private hospital cover at 1.0 % / 1.25 % / 1.5 % across three tiers. For 2026-27, the single thresholds rise to AUD 105,000 / 123,000 / 164,000.

Before any payment is made to a new employee, the employer must collect a completed TFN declaration. Where a payee has not provided a TFN within 28 days of commencement, the employer must withhold at 47 % for resident payees and 45 % for foreign-resident payees, with no offsets or Medicare adjustments. The TFN declaration also records HELP/SFSS debt status, residency, and tax-free threshold claim, all of which feed into the Schedule 8 withholding tables.

For 2025-26, HELP repayments moved to a marginal-rate system with a minimum threshold of AUD 67,000. Repayment rates scale progressively, reaching 10% of total repayment income above AUD 179,285. The 2026-27 thresholds remain indexed to Average Weekly Earnings and had not yet been published as at May 2026.

Foreign residents are taxed from the first dollar under Schedule 7, with no tax-free threshold, LITO, or Medicare levy applying. Working Holiday Makers on Subclass 417 or 462 visas fall under Schedule 15, requiring employers to register with the ATO before making payments. Registered employers withhold 15% on earnings up to AUD 45,000 before the foreign-resident rates apply above that threshold. WHMs must also be reported under income type code WHM in STP Phase 2 using the employee’s ISO country code.

The Superannuation Guarantee rate reached its final legislated level of 12% of Ordinary Time Earnings (OTE) on 1 July 2025 under the Superannuation Guarantee (Administration) Act 1992. OTE includes ordinary salary and wages, commissions, non-overtime allowances, shift loadings, bonuses tied to ordinary hours, and paid leave. It excludes overtime payments and overtime-recovery leave loading.

For foreign employers, the key distinction is that annual-leave loading under a Modern Award is generally treated as OTE, while pure overtime penalties are not.

The Maximum Super Contribution Base (MSCB) caps the OTE amount on which SG must be paid. For 2025-26, the MSCB is AUD 62,500 per quarter, producing a maximum quarterly SG obligation of AUD 7,500 per employee. For 2026-27, the ATO has published the MSCB at AUD 270,830 annually.

The concessional contributions cap remains AUD 30,000 for 2025-26 and is expected to increase to AUD 32,500 for 2026-27

Since 1 November 2021, employers must pay super contributions into an employee’s stapled fund where one exists. If no stapled fund is linked through ATO systems, contributions may be paid into the employer’s default fund. The rule applies equally to foreign employers operating with an Australian ABN.

From 1 July 2026, SG contributions must be paid alongside wages and reach the employee’s super account within seven business days of payday. The quarterly settlement model ends completely on 30 June 2026.

The transition materially changes payroll cash flow and clearing-house operations. Employers using international payroll platforms must confirm Payday Super readiness and SuperStream connectivity before the effective date.

The Building a Stronger and Fairer Super System legislation, passed in March 2026, introduced Division 296 from 1 July 2026. Individuals with Total Superannuation Balances above AUD 3 million face additional tax on super earnings, with combined effective rates reaching 30% above AUD 3 million and 40% above AUD 10 million.

Division 296 is assessed at the individual level rather than the employer level, but payroll and finance teams advising senior executives still need visibility into the regime.

STP Phase 2 requires gross earnings to be broken down by component:

• Gross: base salary or wages
• Paid leave: separated by type (annual, sick, long service, workers’ compensation)
• Allowances: separated by type (cents per km, award transport, laundry, tool, meals, travel, other)
• Overtime: separated from ordinary earnings
• Bonuses and commissions: separately identified
• Directors’ fees
• Lump sum W: return-to-work payments
• Salary sacrifice: pre-tax amounts (super and other)

Employment details required include employment basis (full-time, part-time, casual), tax treatment code, cessation date and reason, and income type code. ISO country codes apply where the income type involves a foreign jurisdiction (WHM, foreign employment, inbound assignees).

The STP finalisation declaration is due by 14 July following each financial year, replacing the old payment summary and group certificate system. Failure to lodge STP pay events or finalisation declarations triggers the Failure to Lodge penalty regime under TAA Schedule 1 s 286-75.

The Commonwealth penalty unit increased to AUD 330 from 8 November 2024, with further CPI indexation scheduled from 1 July 2026. For large withholders with annual PAYG above AUD 1 million, penalties scale to 5 penalty units per 28-day period of non-compliance.

SGC returns sit outside the standard Division 286 Failure to Lodge regime and instead fall under the separate Superannuation Guarantee Charge framework.

Part 2-2 of the Fair Work Act sets 11 minimum employment entitlements that cannot be contracted away, including a 38-hour ordinary-hours cap, annual leave, personal and carer’s leave, parental leave, public-holiday entitlements, and redundancy pay. Alongside the NES sit 121 Modern Awards covering most industries and occupations, with award coverage applying automatically where no enterprise agreement or contract overrides the award minimums.

For foreign employers and EOR providers, award identification remains the dominant payroll-compliance risk. Misclassification affects overtime, penalty rates, allowances, leave loading, and ordinary-hours calculations, and sits directly inside Australia’s post-2025 wage-theft enforcement regime.

The 2025-26 National Minimum Wage is AUD 24.95 per hour (AUD 948 per week). The Fair Work Commission’s Annual Wage Review 2026 decision is expected in June 2026 and will apply from the first full pay period on or after 1 July 2026. Any percentage increase to the National Minimum Wage flows directly through all Modern Award classification levels.

Section 333M of the Fair Work Act gives employees the right to refuse unreasonable work-related contact outside ordinary working hours. Large employers have been covered since 26 August 2024, while small employers became subject to the rule from 26 August 2025.

Whether refusal is “unreasonable” depends on factors such as the reason for contact, compensation for out-of-hours availability, the employee’s role and responsibilities, and personal circumstances. Disputes are handled through the Fair Work Commission, and all Modern Awards now incorporate right-to-disconnect provisions.

The s 15A casual definition, in force from 26 August 2024, assesses casual status based on the real substance and practical reality of the relationship rather than contract wording alone. An employee is casual where there is no firm advance commitment to continuing and indefinite work, and the employee receives a casual loading or specific casual pay rate.

The reform reverses the High Court approach in WorkPac v Rossato [2021] HCA 23. Casual employees with at least 6 months’ service (12 months for small businesses) can also access the employee-choice pathway to convert to permanent employment.

From 1 January 2025, intentional underpayment of wages or entitlements is a federal criminal offence under ss 327A-D, inserted by the Closing Loopholes Act 2023. The offence covers wages, allowances, super contributions, leave entitlements, and penalty rates under a modern award or enterprise agreement. Maximum penalties are:

• Individuals: 10 years’ imprisonment, or fines of the greater of three times the underpayment or AUD 1.565 million (5,000 penalty units at AUD 313 as at enactment).
• Body corporates: fines of the greater of three times the underpayment or AUD 7.825 million (25,000 penalty units).

Some commentary cites the maximum penalties at roughly AUD 1.65 million for individuals and AUD 8.25 million for corporations using the post-8 November 2024 penalty-unit value of AUD 330. The statutory maxima are expressed in penalty units, so the AUD equivalent depends on the offence date.

The offence requires intent under Criminal Code s 5.2, meaning genuine mistakes and honest payroll errors are excluded. Once an underpayment becomes known, however, failing to remediate within a reasonable period can create separate exposure. The Fair Work Ombudsman investigates matters and refers serious cases to the CDPP or AFP for prosecution, with proceedings able to commence within six years.

The Voluntary Small Business Wage Compliance Code protects cooperating small businesses from criminal prosecution while still leaving civil penalties and back-pay obligations in place.

Foreign employers directly engaging Australian-based employees without a local entity can create permanent-establishment exposure under Article 5 of Australia’s bilateral tax treaties and the OECD framework. The November 2025 OECD update introduced a remote-work PE framework tied to both time thresholds and commercial-purpose tests.

An EOR materially reduces dependent-agent and fixed-place-of-business PE exposure because the EOR, rather than the foreign company, becomes the legal employer. The structure does not eliminate PE risk entirely, but it substantially changes the operational and tax position.

Typical Australian employer on-costs include:

• Superannuation Guarantee at 12% of OTE
• Workers’ compensation premiums
• State payroll tax above local thresholds
• Annual-leave loading under applicable Modern Awards
• Long-service-leave accruals
• Paid Parental Leave administration obligations