Guide to becoming an Employer in Australia

Despite its stringent approach to tackling the COVID-19 pandemic via an insular approach, Australia remains one of the most attractive places in the Asia-Pacific region for incoming businesses.

The reasons for this are many: having English as its main language eases trade with other developed countries such as the US and UK, as does it’s highly educated and skilled workforce; which is backed only by its strong immigration policy. The geographical position of Australia and its proximity to south-east Asia, China and Japan also allow it to forge strong links with some of the world’s power-house markets. All these factors explain why Australia has the 13th-largest economy in the world by GDP, and while mining of raw materials dominates large areas of its vast landscape, its economy is dominated by the service industry.

But what do you need to know about doing business in Australia from a payroll perspective? This blog sets out the key facts.

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Establishing your business in Australia

Companies wanting to do business in Australia benefit from a reasonable amount of choice and flexibility. In particular, they can set themselves up as foreign branches, or as subsidiary companies, with varying consequences from a tax perspective. Some branch offices, for example, may not be subject to tax on their income in Australia.

What all companies do have to do, however, is to complete the registration processes with the Australian Securities and Investments Commission. By doing so, a business can gain all the key identifications, including an Australian Business Number, a Tax File Number, and registration for the Goods & Services Tax (GST).

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Employment Law in Australia

All businesses should avail themselves of Australia’s Fair Work Act, which defines the basic standards of employment. Alongside this, it’s important to note that Australian workers always get priority over foreign workers, and that collective bargaining can lead to further rules and regulations in support of employee conditions.

Employers are expected to provide workers’ compensation insurance to cover any accidents that may occur, and this coverage must extend to all the states and territories of Australia in which they operate.

The standard working week in Australia is a maximum of 38 hours, although it is possible for employers to apply this limit as a rolling average so that employees can work longer on occasion. Overtime rates are a minimum of 1.5 times the normal rate for the first three hours per week and double beyond that (including any overtime on Sundays).

Notice periods start at a week for those with less than a year’s service, gradually increasing to four weeks for those with at least five years’ service. Employees over 45 with at least two years’ service are entitled to an extra week. Probation periods are a minimum of six months.

What is the Minimum Wage in Australia?

Australia’s federal minimum wage is reviewed annually, and any changes are normally introduced on 1st July each year. As of July 2021, the rate is AU$20.33 per hour or AU$772.60 per week (presuming full-time employment). Different rates apply to younger employees, apprentices, trainees, and employees with certain disabilities. Employees can be paid at any frequency, although monthly, twice a month, or once every two weeks are the most common.

Severance pay rates vary significantly, depending on the length of service, starting at four weeks’ pay after one year of service, eventually reaching 16 weeks after nine years of service or more.

Bonuses can be awarded to employees in Australia, but it should be noted that for tax purposes, they are generally counted as wages.

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What are the Social Taxes in Australia?

Australian tax and social security requirements can be complex. For starters, different rates apply to residents and foreign residents: residents’ rates rise progressively from 19% to 45% (the first AU$18,200 is exempt), while foreign resident rates start at 32.5% with no exemption. Income tax is withheld on a ‘pay as you go’ basis, from which employers should then file the funds with the Australian Tax Office.

Employers should also watch out for state payroll taxes, the Fringe Benefits Tax (FBT) that targets car allowances and other perks, and the Goods & Services Tax of 10% on most things sold in Australia.

Social security contributions include Medicare (1% employer, 1% employee), and the Superannuation retirement fund (10% employer, 10% employee, up to a maximum of around AU$21,0000 per year).

Corporate tax is levied at 30%, reduced to 25% for small and medium-sized businesses.

Maternity Leave in Australia

Maternity leave is up to 12 months but payment of maternity leave is at the discretion of the employer. There is a scheme run by the federal government to provide up to 18 weeks of paid maternity leave for those who need it. Paternity leave entitlement is five days, unpaid. On top of this, parents can apply for further periods of unpaid parental leave.

Australian National Holidays & Annual Leave

Australian public holidays vary from state to state. There are dozens of holidays observed in most, some or one state or territory, but only seven observed by the whole country:

  • New Year’s Day
  • New Year Holiday (first working day of the year, if 1 January is at the weekend)
  • Australia Day (26 January)
  • Good Friday
  • Easter Monday
  • Anzac Day (25 April)
  • Christmas Day

Paid leave entitlement is four weeks, rising to five weeks for employees doing shift work. However, Australia also provides a Long Service Leave for those who serve their employers for ten years, receiving paid leave of 2-3 months, depending on the state they work in.

Paid sick leave entitlement is ten days per year, and can also be used by an employee to care for a family member who is ill.

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Why become an Employer in Australia

There’s much to like about expanding into Australia – but there’s much to be aware of, too. In particular, the in-built biases in the job market and tax regulations that favour Australians over other workers means that companies intending to use foreign labour need to tread very carefully.

But despite this, the Australian country to a large extent is an untapped, 26 million populace market, which has always proven to be embracing new services, technologies and products. The high disposable income in households and the prosperous 2.4m trading businesses make it a keen market to expand into.

TopSource Worldwide’s experience in helping businesses operate in Australia and other countries all over the world and software is unparalleled and makes international payroll easy. Reach out to our team and we can help you make the most of your potential opportunities ‘Down Under’.

Are you also exploring growth opportunities in North America? Learn more about how payroll works in the United States and Canada too.

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