- Overview: Australia
- Global PEO and Payroll
- Global HR Compliance
- Work Permit for Hiring Foreign Talent with Global EOR
- Expand without a company set up
- Contractor vs. employee: which is better?
- Global Payroll Calculator
Global HR Compliance in Australia
The economy of Australia is the twelfth-largest in the world by nominal GDP and a highly developed mixed economy. Australia is a member of the G20, OECD, and WTO, home to a highly skilled local and expat workforce. It continues to attract global talent, and one in four Australian residents was born overseas. The country offers excellent work-life balance, and its main cities are considered some of the most desirable destinations globally.
If you or your international clients are considering expanding to Australia, you may opt to set up a company there. However, setting up a business in Australia can be challenging and risky, and it is not necessary, especially if your main goal is to run smooth and risk-free operations. Acumen offers a viable alternative to help you get your business up and running by employing your best-selected talent in the country.
Our Global Employer of Record (EOR) solution is designed to offer your international business or agency an efficient way to expand their operations without establishing a legal business entity in Australia.
Borderless Expansion, No Entity Needed
Launch your workforce in 190 countries without the burden of establishing local entities. Our all-in-one global employment solution allows quick, compliant onboarding and talent management. You can immediately scale up your operations and seize international opportunities with Express Global Employment as your guide.
Express Global Employment – Your Global Employer of Record in Australia
Whether you are an agency representing international clients or are taking your own business operations abroad, Acumen International’s Global PEO and Payroll service allow you to hire and payroll local and expat employees in Australia on behalf of your business or agency clients. We take care of the entire employee journey, from onboarding to payroll, including benefits provision and offboarding.
International Global Payroll and Taxation in Australia
The federal government levies taxation in Australia. The Australian Taxation Office (ATO) collects all taxes. The key taxes in Australia are personal income tax, Goods and Services Tax (GST), company tax, payroll tax and capital gains tax.
Managing federal and state tax regimes can take a considerable amount of company time. The Australian Taxation Office (ATO) is a non-corporate Commonwealth entity within the Treasury portfolio serving the Treasurer.
Tax audits are a regular in Australia. These are conducted by the Australian Taxation Office (ATO) to ensure compliance with Australian tax laws.
The 2021 TMF Global Business Index rates Australia at number 62 for complexity in accounting and taxation, and the labour regulations not only favour employees over employers but are constantly evolving. In Australia, accounting practices are often difficult and local tax authorities do not offer much flexibility, especially concerning foreign organizations.
Employment related taxes in Australia
Social security contributions in Australia apply to all employers.
Employers are subject to Medicare contributions of 1% of gross salaries and Superannuation contributions of 10%, capped at 21,002.06 AUD per year.
Australian payroll tax and thresholds vary between states and territories and are based on the total wages paid by an employer.
New South Wales has a payroll tax rate of 5.45%, Victoria’s payroll tax rate is 4.85% and in Queensland it is 4.75%. In South Australia, the tax rate varies between 0% and 4.95%. In Western Australia, the tax rate is 5.5% for most businesses; the same rate applies to all businesses in Northern Australia. Tasmanian employers must pay a payroll tax rate of 4% if they exceed the $1.25 million threshold, and the payroll tax rate for employers in the Australian Capital Territory is 6.85%, the highest in the country.
Employees are subject to a progressive income tax between 0% and 45%.
Personal income tax in Australia for Australian Tax residents is as follows (in (AUD):
Taxable income Tax on this income
0 – $18,200 AUD Nil
$18,201 – $45,000 19 cents for each $1 over $18,200
$45,001 – $120,000 $5,092 plus 32.5 cents for each $1 over $45,000 $120,001 – $180,000 $29,467 plus 37 cents for each $1 over $120,000 $180,001 and over $51,667 plus 45 cents for each $1 over $180,000
Payroll Cycle in Australia
Employees in Australia must be paid at least on a monthly basis. For most workers their industry awards, enterprise agreements or registered agreements will set out when they must be paid (weekly, fortnightly or monthly). Fortnightly salary payments are common in Australia.
Salaries in Australia are paid in the local currency, the Australian Dollar (AUD).
13th salary in Australia
The 13th monthly salary payment is not mandatory by law in Australia and is also not a common practice. Employers may, however, decide to pay an end-of-year bonus.
Non-payroll taxes in Australia
The Australian Value Added tax is called Goods and services tax (GST). 10% GST applies to the sales of most goods and services sold or consumed in the country. Most basic foods, education courses, and medical, health, and care products and services are exempt from GST.
The federal corporate tax rate in Australia is 30%, except for small or medium businesses below a turnover threshold of 50 million AUD, which are subject to a reduced tax rate of 25% for the 2021/22 income year.
Off-Payroll Rules in Australia
Australian legal practice has developed various criteria to determine whether a contractual relationship should be regarded as an independent contractor relationship or as an employment relationship.
Contractors working in Australia are subject to a set of well-developed tests to determine if a contractor’s business generates personal services income (PSI). The PSI tests, enforced by Australia’s Taxation Office (ATO), are less ambiguous than the UK’s employment tests, mostly based on fixed performance measures.
Income is classified as PSI when more than 50% of the income is a reward for an individual’s efforts and skills rather than using assets, selling goods, or buying a business.
If a contractor working in Australia fails the PSI tests, they will need to pay Australian income taxes and employment insurance as if they were an employee. The Independent Contractors Australia (ICA) association is currently campaigning against proposed changes to the rules that could result in an even tougher regime.
Under the impression that their employer is incorrectly treating them as a contractor, employees in Australia can contact the Fair Work Ombudsman or the Australian Building and Construction Commission if they work in the construction industry.
Misclassification issues in Australia can have serious and costly consequences for businesses. Should a contractor turn out to be an employee, the employer will be confronted with several risks concerning protection against dismissal, social security, tax issues, and even legal penalties and fines under the Fair Work Act.
Permanent establishment risk in Australia
Once you establish a legal business entity in Australia, you become liable for all corporate taxes under Australian law. Your organization will be taxed for profits generated within the country, and subject to charges for interest and late fees on any outstanding taxes.
A permanent establishment is commonly defined in Australia’s Double Tax Agreements (DTA) as a fixed place of business through which the business of the enterprise is carried on in whole or part.
This includes a branch, office, workshop or even the furnishing of services for limited periods. An overseas enterprise may still be considered a permanent establishment in Australia if any activity carried out by it in Australia generates revenue or value is created.
Avoiding establishing a legal entity in Australia by hiring independent contractors still puts your business at risk of being considered a “permanent establishment” based on the activities of these independent contractors.
Tax residence in Australia
Australian residents need to pay taxes in Australia for their worldwide income, tax non-residents only pay taxes on their Australian source of income.
The Australian Tax Office (ATO) does not use the same rules as the Department of Home affairs. An individual could therefore be an Australian resident for tax purposes without being an Australian citizen or permanent resident. On the other hand, they may have a visa to enter Australia but are not an Australian resident for tax purposes.
The primary test of tax residence, the resides test, determines that individuals residing in Australia are considered Australian residents for tax purposes.
Factors determining tax residence include:
- physical presence
- intention and purpose
- family presence
- business or employment ties
- maintenance and location of assets
- social and living arrangements
The domicile test considers the domicile as an individual’s permanent home by law. An individual will be considered an Australian resident unless the ATO is satisfied that their permanent place of abode is outside Australia.
The 183-day test applies to new arrivals to Australia. Individuals will be considered Australian tax residents if they are present in Australia for more than half the income year, whether continuously or with breaks.
Where an international employee resides in two or more countries, they are deemed, for application of a double tax treaty (DTT), to be a resident of the contracting state in which the employee has a centre of vital (personal and economical) interests and/or resides for more than 183 days. Australia currently has 45 bilateral double tax treaties set to significantly expand soon.
Disclaimer: Any of the above information is subject to changes imposed by Australian laws. To get the latest updates on taxation in Australia and 190 countries worldwide, contact Acumen’s team of global employment experts.
Hiring and Firing Workforce in Australia Guide
Employment Agreements
Permanent employment contracts (all options including any limitations, such as max duration or number of fixed-term agreements)
Generally speaking, there are two types of industrial instruments: awards; and workplace agreements, which include enterprise agreements, collective agreements made under the previous legislation, and greenfields agreements.
Awards are legal documents that outline the minimum employment standards (e.g., pay rates and conditions of employment), and which are industry-, occupation-, or industry-and-occupation-specific.
Enterprise agreements are agreements negotiated between a collective group of employees and an employer(s). Such agreements must specify a nominal expiry date, which is important if and when the parties want to attempt to negotiate new terms because it will trigger relevant time periods in which employees are able to take protected industrial action.
Permanent employment is the most common employment type in Australia. The term ‘permanent employment’ covers both full-time and part-time employees.
Fixed-term employees have some of the same as their equivalent permanent employees.
The biggest difference from permanent employees regards the fixed-term, as opposed to ongoing, nature of employment. The contract for a fixed-term employee states directly when the term of employment will end.
Under Australian law, a written signature is not necessarily required for a valid contract – contracts are generally valid if legally competent parties reach an agreement, whether they agree verbally, electronically or in a physical paper document.
Employment Termination and Severance Pay (Dismissal)
Termination notice may be given to an employee by:
- delivering it personally;
- leaving it at the employee’s last known address;
- sending it by prepaid post to the employee’s last known address.
When an employment relationship ends, employees should receive the following entitlements in their final pay:
- any outstanding wages or other remuneration still owing
- any pay in lieu of notice of termination
- any accrued annual leave and long service leave entitlements
- the balance of any time off instead of overtime that the employee has accrued but has not yet taken any redundancy pay or entitlements if the employee has been made redundant and is eligible.
Unfair Dismissal
The General Protections laws protect employees from dismissal for an unlawful reason, including race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or career responsibilities, pregnancy, religion, political opinion, national extraction, social origin, temporary absence due to illness or injury (of a kind prescribed by the Fair Work Regulations), holding office or membership of a trade union, and engaging in industrial activities.
Dismissed employees may also explore common law actions for breach of contract based on a failure to provide “reasonable notice” and/or failure by an employer to follow its own performance management/disciplinary policy.
Notice Period
The minimum notice period that must be provided is as follows:
- Not more than one year — one week
- More than one year, but less than three years — two weeks
- More than three years, but less than five years — three weeks
- More than five years — four weeks
Employee Benefits and Contributions in Australia
Employers are obligated to provide employees with minimum rates of pay (including any applicable overtime rates, loadings or penalty rates) in accordance with the federal minimum wage or an industrial instrument, whichever applies to the employee.
Probationary Period
Employers can put their employees on a probation period (also known as a probationary period) to assess if employees are suitable for the role and business.
The employer decides on the length of the probation period. It can range from a few weeks to a few months at the start of employment.
If hired on a full-time or part-time basis, an employee on probation is entitled to: accrue and access their paid leave entitlements such as annual and sick leave.
If an employee doesn’t pass their probation, they are still entitled to receive notice when employment ends and have their unused accumulated annual leave hours paid out.
Overtime in Australia
An employee may refuse to work additional hours if they are unreasonable. In determining whether additional hours are reasonable or unreasonable, the following must be taken into account:
- any risk to employee health and safety;
- the employee’s personal circumstances, including family responsibilities;
- the needs of the workplace or enterprise;
- whether the employee is entitled to receive overtime payments, penalty rates or other compensation for (or a level of remuneration that reflects an expectation of ) working additional hours;
- any notice given by the employer to work the additional hours;
- any notice given by the employee of his or her intention to refuse to work the additional hours;
- the usual patterns of work in the industry;
- the nature of the employee’s role and the employee’s level of responsibility;
- whether the additional hours are in accordance with averaging provisions included in an award or agreement that is applicable to the employee or an averaging arrangement agreed to by an employer and an award/agreement-free employee;
Sick Leave in Australia
The leave is considered personal if taken for a personal illness or injury, whereas the leave is considered carer’s if taken to provide care or support to a member of the employee’s immediate family or household due to personal illness, injury, or unexpected emergency.
An employee is entitled to 10 days of paid personal/carer’s leave time for each year of service with his/her employer, which accrues on a pro-rata basis, and the employer must pay the employee at the employee’s base rate of pay
Parental Leave in Australia
In order to receive unpaid parental leave, an employee must:
- give birth, have a spouse or de facto partner give birth or adopt a child under the age of 16
- have worked for his/her employer for at least 12 months:
- before the date or expected date of birth (if the employee is pregnant);
- before the date of adoption; or
- when the leave starts (if the leave is taken after another person cares for the child or takes parental leave); and
- have or will have responsibility for the care of a child.
If eligible, employees are entitled to 12 months of unpaid parental leave. Employees may also request an additional 12 months of leave, which may only be denied by the employer on reasonable business grounds.
Employees with another child are not required to work for another 12 months before taking another leave of unpaid parental leave if working for the same employer. For employees who started work with a new employer after having or adopting a child, another 12 months must be worked with the new employer before entitlement to unpaid parental leave.
Acumen International can help you fast-track your possibilities of entering and expanding your business in Australia by providing you with an Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations immediately, cost-effectively and compliantly without any requirement to set up a legal entity first or thereafter.