End-to-end payroll processing for Australian employers: onboard employees via TFN declaration, calculate PAYG withholding using ATO Schedule 1 (NAT 1004) tax tables, report each pay event via Single Touch Payroll (STP) Phase 2, remit super contributions by quarterly deadlines, and reconcile the annual payroll summary at year-end.
Confirm the employer holds an ABN and is registered for PAYG withholding with the ATO. Establish the payroll frequency (weekly, fortnightly, or monthly) and ensure STP Phase 2-enabled payroll software is configured, as all employers must report via STP Phase 2. Identify any applicable modern award or enterprise agreement that sets minimum pay rates.
Each new employee must complete a Tax File Number (TFN) Declaration before or on their first payment. Capture the employee's residency status, tax offset claims (e.g., tax-free threshold), HELP/STSL debt, and Medicare levy exemptions. If no TFN is provided, withhold at the top marginal rate of 47% (45% + 2% Medicare levy) from the first dollar.
Calculate gross pay including ordinary hours, overtime, allowances, and any salary sacrifice amounts. Apply the correct PAYG withholding amount using the ATO's Statement of Formulas (NAT 3539) or published tax tables (Schedule 1 — NAT 1004), taking into account the employee's withholding category, STSL debt, and Medicare levy. Salary sacrifice contributions reduce the PAYG withholding base but must be reported as a separate STP income type.
Report each pay event to the ATO on or before the employee's pay date via STP Phase 2. STP Phase 2 requires disaggregated reporting of income types (gross, salary sacrifice, allowances, overtime, etc.) and replaces both the payment summary and the annual PAYG payment summary report. The employer must also declare superannuation liability each pay run even though payment remains quarterly.
Calculate the SG contribution for each employee at 12% of ordinary time earnings (OTE) for 2025–26, capped at the maximum contribution base of $65,070 per quarter. Contributions must be paid to the employee's nominated super fund (or the ATO Small Business Super Clearing House for businesses with fewer than 20 employees) by the quarterly deadline: 28 October, 28 January, 28 April, and 28 July. Late payment triggers the non-deductible Super Guarantee Charge (SGC).
Remit PAYG withholding to the ATO according to the employer's assigned remittance cycle: small withholders (annual withheld under $25,000) remit quarterly via the BAS; medium withholders ($25,001–$1 million) remit monthly via the IAS; large withholders (over $1 million) remit within one or two business days of each payday. Failure to remit on time attracts the general interest charge (GIC) and may trigger penalties.
At 30 June, finalise the STP lodgement for all employees via a 'finalisation declaration' in the payroll software — this replaces the old payment summary (group certificate). Reconcile total PAYG withholding, SG contributions, and reportable fringe benefits and employer super contributions (RFBCA/RESC) to ensure STP year-to-date figures match payroll records and ATO records. Prepare Fringe Benefits Tax (FBT) return if applicable (FBT year ends 31 March).
Run this workflow in your AI agent
Install the MCP connector once — your agent loads the right skills, works through each phase, and routes to a licensed Australia accountant for review.
au-super-guarantee
Use this skill whenever asked about Australian Superannuation Guarantee (SG) obligations,
australia-payroll
Use this skill whenever asked about Australian payroll, PAYG withholding, superannuation g
au-payg-instalments
Use this skill whenever asked about Australian PAYG Instalments for sole traders. Trigger
au-medicare-levy
Use this skill whenever asked about the Australian Medicare Levy, Medicare Levy Surcharge